ESGR 10-Q Quarter ended June 30, 2020

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1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

These unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these financial statements reflect all adjustments consisting of normal recurring items considered necessary for a fair presentation under U.S. GAAP. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019. All significant inter-company transactions and balances have been eliminated. In these notes, the terms "we," "us," "our," "Enstar," or "the Company" refer to Enstar Group Limited and its consolidated subsidiaries. Certain prior period amounts have been reclassified to conform to the current period presentation as described in further detail in Note 4 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations." These reclassifications had no impact on net earnings.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results may differ materially from these estimates. Results of changes in estimates are reflected in earnings in the period in which the change is made. Accounting policies that we believe are most dependent on assumptions and estimates are considered to be our critical accounting policies and are related to the determination of:

• liability for losses and loss adjustment expenses ("LAE");

• reinsurance balances recoverable on paid and unpaid losses;

• defendant asbestos and environmental liabilities and related insurance balances recoverable;

• valuation allowances on reinsurance balances recoverable and deferred tax assets;

• impairment charges, including credit allowances on investment securities classified as available-for-sale ("AFS"), and impairments on goodwill, intangible assets and deferred charge assets;

• gross and net premiums written and net premiums earned;

• fair value measurements of investments;

• fair value estimates associated with accounting for acquisitions;

• fair value estimates associated with loss portfolio transfer reinsurance agreements for which we have elected the fair value option; and

• redeemable noncontrolling interests.

Updated Accounting Policies

The following accounting policies have been updated to reflect our adoption of Accounting Standards Update ("ASU") 2016-13 - Financial Instruments - Credit losses - Measurement of Credit Losses on Financial Instruments, effective January 1, 2020 as described in detail below under "New Accounting Standards Adopted in 2020."

Short-term investments and fixed maturity investments

We perform a detailed analysis every reporting period to identify any credit losses on our investment portfolios not measured at fair value through net earnings.

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Some of the factors that we consider when assessing whether an allowance for credit losses is required on our debt securities include: (1) the extent to which the fair value has been less than the amortized cost; (2) the financial condition, near-term and long-term prospects of the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices; (3) the likelihood of the recoverability of principal and interest; and (4) whether it is more likely than not that we will be required to sell the security prior to an anticipated recovery in value.

With effect from January 1, 2020, credit losses on our AFS debt securities are recognized through an allowance account which is deducted from the amortized cost basis of the security, with the net carrying value of the security presented on the consolidated balance sheet at the amount expected to be collected. To calculate the amount of the credit loss, we compare the present value of the expected future cash flows with the amortized cost basis of the AFS debt security, with the amount of the credit loss recognized being limited to the excess of the amortized cost basis over the fair value of the AFS debt security, effectively creating a “fair value floor”. See "New Accounting Standards Adopted in 2020" below for the discussion on our adoption of the credit losses standard.

For our AFS debt securities that we do not intend to sell or for which it is more likely than not that we will not be required to sell before an anticipated recovery in value, we separate the credit loss component of any unrealized losses from the amount related to all other factors and report the credit loss component in net realized investment gains (losses) in our consolidated statements of earnings. The unrealized losses related to non-credit factors is reported in other comprehensive income. The allowance for credit losses account is adjusted for any additional credit losses, write-offs and subsequent recoveries.

For our AFS debt securities where we record a credit loss, a determination is made as to the cause of the credit loss and whether we expect a recovery in the fair value of the security. For our AFS debt securities where we expect a recovery in fair value, the constant effective yield method is utilized, and the investment is amortized to par.

For our AFS debt securities that we intend to sell or for which it is more likely than not that we will be required to sell before an anticipated recovery in fair value, the full amount of the unrealized loss is included in net realized investment gains (losses). The new cost basis of the investment is the previous amortized cost basis less the credit loss recognized in net realized investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value.

We report the investment income accrued on our AFS debt securities within other assets and therefore separately from the underlying AFS debt securities. In addition, due to the short-term period during which accrued investment income remains unpaid, which is typically six months, since the coupon on our AFS debt securities is paid semi-annually, we have elected not to establish an allowance for credit losses on our accrued investment income balances. Accrued investment income is written off through net realized investment gains (losses) at the time the issuer of the debt security defaults or is expected to default on payments.

Uncollectible debt securities are written off when we determine that no additional payments of principal or interest will be received.

Reinsurance Balances Recoverable on Paid and Unpaid Losses

Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liability for losses and loss adjustment expenses. We report our reinsurance balances recoverable on paid and unpaid losses net of an allowance for estimated uncollectible amounts. The allowance is based upon our ongoing review of the outstanding balances and reflects factors such as the duration of the collection period, credit quality, changes in reinsurer credit standing, default rates specific to the individual reinsurer, the geographical location of the reinsurer, contractual disputes with reinsurers over individual contentious claims, contract language or coverage issues, industry analyst reports and consensus economic forecasts.

A probability-of-default methodology that reflects current and forecasted economic conditions is used to estimate the allowance for uncollectible reinsurance due to credit-related factors. See "New Accounting Standards Adopted in 2020" below for the discussion on our adoption of the credit losses standard.

The allowance also includes estimated uncollectible amounts related to dispute risk with reinsurers. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance.

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Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of the net incurred losses and loss adjustment expenses in our consolidated statements of earnings.

On an ongoing basis, we also evaluate and monitor the financial condition of our reinsurers under voluntary schemes of arrangement to minimize our exposure to significant losses from potential insolvencies.

Premiums Receivable and Unearned Premium Reserves

Premiums are recognized as revenues on a pro-rata basis over the coverage period. Unearned premium reserves represent the unexpired portion of policy premiums. For retrospectively rated contracts as well as those whose written premium amounts are recorded based on premium estimates at inception, accrued premiums arising from changes to these estimates are included in premium balances receivable where appropriate. Premium balances receivable are reported net of an allowance for expected credit losses as appropriate. The allowance is based upon our ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. However, the credit risk on our premiums receivable balances is substantially reduced where we have the ability to cancel the underlying policy if the policyholder does not pay the related premium.

New Accounting Standards Adopted in 2020

ASU 2020-04 – Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04 – Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which is codified in Accounting Standards Codification ("ASC") 848 and which provides entities with temporary optional expedients and exceptions to the existing US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Inter-bank Offered Rate ("LIBOR") and other inter-bank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ("SOFR").

Under the provisions of this guidance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. In addition, entities can make a one-time election to sell, transfer or both sell and transfer debt securities classified as held-to-maturity (“HTM”) that refer to a rate affected by reference rate reform, to AFS or to trading. However, such debt securities must have been classified as HTM before January 1, 2020. Once elected, the amendments in this guidance must be applied prospectively for all eligible contract modifications.

The ASU was effective upon issuance and can be applied through to December 31, 2022. We adopted the ASU upon its issuance and as we transition from LIBOR to alternative reference rates, we will elect the temporary optional expedients and exceptions to the existing US GAAP guidance on contract modifications and hedge accounting permitted by the ASU, as appropriate. The adoption of this standard did not have any impact on our consolidated financial statements and disclosures.

ASU 2020-03 – Codification Improvements to Financial Instruments

In March 2020, the FASB issued ASU 2020-03, which makes narrow-scope improvements to various topics within the codification relating to financial instruments, including the new credit losses standard. The amendments related to certain specific issues covered by the ASU were effective immediately upon the issuance of the ASU, while certain specific issues covered by the ASU and affecting the credit losses standard in ASU 2016-13 are effective in 2020 for those entities that have already adopted ASU 2016-13. We adopted the amendments in this ASU upon its issuance and that adoption did not have a material impact on our consolidated financial statements and the related disclosures.

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ASUs 2016-13, 2018-19, 2019-04, 2019-05, 2019-10 and 2019-11, Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, which is codified in ASC 326 - Financial Instruments - Credit Losses , amending the guidance on the impairment of financial instruments and significantly changing how entities measure credit losses for most financial assets and certain other financial instruments, including reinsurance balances recoverable on paid and unpaid losses that are not measured at fair value through net earnings. The ASU replaced the “incurred loss” approach that was previously applied to determine credit losses with an “expected loss” model for financial instruments measured at amortized cost. Under the "expected loss" model, the estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses and subsequent adjustments to such losses are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

ASU 2016-13 also amends the other-than-temporary impairment ("OTTI") model that was previously applicable to AFS debt securities, with the new approach now requiring the recognition of impairments relating to credit losses through an allowance account and limiting the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. This revised approach records the full effect of reversals of any credit losses in current period earnings, compared to previous guidance where this reversal was amortized over the lifetime of the security. Under this revised approach, the length of time a security has been in an unrealized loss position will no longer be considered in determining whether to record a credit loss. In addition, the historical and implied volatility of the fair value of a security and recoveries or declines in fair value after the balance sheet date will no longer be considered when making a determination of whether a credit loss exists.

We adopted ASU 2016-13 and all the related amendments on January 1, 2020 using the modified retrospective approach for our financial instruments carried at amortized cost, and prospectively for our AFS debt securities as required by the standard, resulting in an overall reduction in retained earnings of $ 6.1 million as summarized below:

• A cumulative effect adjustment of $ 3.0 million relating to our financial instruments carried at amortized cost, which primarily relates to our insurance balances recoverable on paid and unpaid losses. We already carried significant specific allowances for credit losses of $ 147.6 million on our reinsurance balances recoverable on paid and unpaid losses, relating primarily to our Non-life Run-off segment and therefore the adoption of this standard did not have a material impact on our balance sheet; and

• $ 3.1 million related to our AFS debt securities whose fair values were less than their amortized cost basis.

Recently Issued Accounting Pronouncements Not Yet Adopted

Note 2 - "Significant Accounting Policies" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 describes accounting pronouncements that were not adopted as of December 31, 2019. Those pronouncements have not yet been adopted unless discussed above in "New Accounting Standards Adopted in 2020."

2. ACQUISITIONS

On October 30, 2019, we completed the acquisition of Morse TEC LLC ("Morse TEC"). For further details, refer to Note 3 - "Acquisitions" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

Hannover Re

On August 6, 2020, we completed a novation agreement with Hannover Reück SE and an affiliate (“Hannover Re”), pursuant to which we assumed certain legacy asbestos, environmental and workers' compensation exposures. In the transaction, we assumed gross loss reserves of approximately $ 200.0 million, which was equal to the net reinsurance premium consideration received in the transaction.

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Munich Re

On July 1, 2020, we completed a business transfer transaction with Great Lakes Insurance SE and HSB Engineering Insurance Limited, both subsidiaries of Munich Reinsurance Company ("Munich Re"), pursuant to which we acquired certain portfolios from their Australian branches. In the transaction, we received total assets of approximately AUD$ 144.8 million (approximately $ 99.8 million) for assuming the associated net insurance reserves, which primarily relate to long tail insurance business.

AXA Group

On June 1, 2020, we completed a loss portfolio transfer reinsurance agreement with AXA XL, a division of AXA SA, to reinsure specified legacy construction general liability multi-year policies. We assumed gross loss reserves of $ 179.7 million, which was equal to the net reinsurance premium consideration received in the transaction. In addition, we provided additional collateral of $ 24.5 million to support our obligations to AXA XL per the terms of the reinsurance agreement.

Aspen

On June 1, 2020, we completed an adverse development cover reinsurance agreement with Aspen Insurance Holdings Limited. In the transaction, we assumed $ 781.6 million of gross reserves for losses incurred on or prior to December 31, 2019 on a diversified mix of property, liability and specialty lines of business across the U.S., U.K. and Europe, in exchange for reinsurance premium consideration of $ 770.0 million and recorded a deferred charge asset of $ 11.7 million. Pursuant to the agreement, we provide $ 770.0 million of cover in excess of a $ 3.8 billion retention, and an additional $ 250.0 million of cover in excess of a $ 4.8 billion retention.

Lyft

On March 31, 2020, we entered into a novation agreement with affiliates of Lyft, Inc. (“Lyft”) and certain underwriting companies of Zurich North America (“Zurich”). In the transaction, in exchange for premium consideration of $ 465.0 million, we reinsured legacy automobile business underwritten by Zurich between October 1, 2015 and September 30, 2018 and which previously had been reinsured by Lyft’s wholly owned subsidiary, Pacific Valley Insurance Company ("PVIC"). Under a separate but related agreement, PVIC provides retrocession reinsurance coverage to us in excess of an $ 816.0 million limit. The transaction was effective on March 31, 2020.

Recapitalization of StarStone U.S.

On June 10, 2020, we announced an agreement to recapitalize StarStone US Holdings, Inc. and its subsidiaries ("StarStone U.S.") and appoint a new management team and Board. As part of the recapitalization, we entered into a definitive agreement to sell StarStone U.S. to Core Specialty Insurance Holdings, Inc. ("Core Specialty"), a newly formed entity with equity backing from funds managed by SkyKnight Capital, L.P., Dragoneer Investment Group and Aquiline Capital Partners LLC. We currently have a 59.0 % interest in StarStone U.S. The purchase price will be based on a $ 30.0 million premium to the GAAP tangible book value of StarStone U.S. to be determined on the month end prior to the closing date and will consist of $ 235.0 million of common shares of Core Specialty and cash. The $ 235.0 million of common shares of Core Specialty is expected to represent an estimated 26.1 % interest in Core Specialty after certain co-investments and management equity awards. Our investment in Core Specialty will be accounted for as an equity method investment. Given the proposed transaction, we have classified the StarStone U.S. results as discontinued operations for the periods presented.

In connection with the sale, one of our Non-life Run-off subsidiaries will enter into a loss portfolio transfer reinsurance agreement with StarStone U.S. pursuant to which we will reinsure all of the net loss reserves of StarStone U.S. in respect of premium earned prior to the calendar month end prior to the closing date. We will receive a reinsurance premium equal to the assumed reserves, plus approximately $ 16.0 million. The reinsurance agreement will contain an aggregate limit on our liability equal to $ 130.0 million in excess of the assumed reserves, and our subsidiary's obligations under the reinsurance agreement will be guaranteed by Enstar.

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The closing of the transaction is subject to regulatory approvals and other closing conditions and is expected to occur in the second half of 2020.

StarStone U.S. comprises a substantial portion of the StarStone segment. We have classified the assets and liabilities of StarStone U.S. as held-for-sale at June 30, 2020. The following table summarizes the components of assets and liabilities held-for-sale on our consolidated balance sheets as at June 30, 2020 and December 31, 2019:

			June 30, 2020						December 31, 2019
ASSETS
Fixed maturities, trading, at fair value			$	156,366					$	202,994
Fixed maturities, available-for-sale, at fair value			482,758						375,337
Equities, at fair value			4,500						3,000
Other investments, at fair value			7,097						6,389
Total investments			650,721						587,720
Cash and cash equivalents			75,900						78,613
Restricted cash and cash equivalents			9,683						5,815
Premiums receivable			110,034						99,367
Deferred tax assets			14,890						15,191
Reinsurance balances recoverable on paid and unpaid losses			484,583						530,604
Funds held by reinsured companies			30,818						35,861
Deferred acquisition costs			33,615						36,992
Goodwill and intangible assets			24,900						24,900
Other assets			79,758						59,707
TOTAL ASSETS HELD FOR SALE			$	1,514,902					$	1,474,770
LIABILITIES
Losses and loss adjustment expenses			$	838,682					$	836,761
Unearned premiums			221,243						218,166
Insurance and reinsurance balances payable			60,155						22,453
Other liabilities			117,515						131,151
TOTAL LIABILITIES HELD FOR SALE			$	1,237,595					$	1,208,531
NET ASSETS HELD FOR SALE			$	277,307					$	266,239

As of June 30, 2020 and December 31, 2019, included in the table above were restricted investments of $ 137.4 million and $ 131.0 million, respectively.

The unrealized gains (losses) on AFS investments balance in accumulated other comprehensive income (loss) ("AOCI"), a component of shareholders' equity, included $ 14.2 million and $( 1.0 ) million as at June 30, 2020 and December 31, 2019, respectively, related to StarStone U.S. Upon completion of the sale, this balance will be included in earnings as a component of the gain on sale.

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The StarStone U.S. business qualifies as a discontinued operation. The following table summarizes the components of net earnings (loss) from discontinued operations, net of income taxes on the consolidated statements of earnings for the three and six months ended June 30, 2020 and 2019:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
INCOME
Net premiums earned			$	65,403					$	85,601					$	165,949					$	168,941
Fees and commission income			—						161						—						365
Net investment income			3,699						4,106						7,414						7,861
Net realized and unrealized gains			6,262						9,042						847						17,073
Other income			24						5						25						6
			75,388						98,915						174,235						194,246
EXPENSES
Net incurred losses and loss adjustment expenses			48,115						69,784						112,709						125,889
Acquisition costs			12,251						15,774						32,794						31,761
General and administrative expenses			15,645						16,845						30,729						30,655
Interest expense			591						645						1,180						1,355
Net foreign exchange (gains) losses			( 11 )						( 9 )						( 2 )						( 5 )
			76,591						103,039						177,410						189,655
EARNINGS (LOSS) BEFORE INCOME TAXES			( 1,203 )						( 4,124 )						( 3,175 )						4,591
Income tax benefit (expense)			51						181						( 46 )						( 466 )
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES			$	( 1,152 )					$	( 3,943 )					$	( 3,221 )					$	4,125
Net loss (earnings) from discontinued operations attributable to noncontrolling interest			473						1,617						1,321						( 1,692 )
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS			$	( 679 )					$	( 2,326 )					$	( 1,900 )					$	2,433

The following table presents the cash flows of StarStone U.S. for the six months ended June 30, 2020 and 2019:

			Six Months Ended June 30,
			2020						2019
Operating activities			$	95,096					$	( 26,171 )
Investing activities			( 93,940 )						( 4,972 )
Change in cash and restricted cash of business held for sale			$	1,156					$	( 31,143 )

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Intercompany transactions between StarStone U.S. (Discontinued Operations) and Continuing Operations

The table below presents a summary of the total income and expenses recognized in continuing operations for the three and six months ended June 30, 2020 and 2019, relating to intercompany transactions, primarily intragroup reinsurances, between StarStone U.S. and our other subsidiaries:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Total Income			$	3,650					$	1,915					$	7,363					$	4,709
Total Expenses			( 7,239 )						30,235						( 14,899 )						46,466
Net Earnings (Loss)			10,889						( 28,320 )						22,262						( 41,757 )

Run-off of StarStone International (non-U.S.)

On June 10, 2020, we also announced that we are placing the StarStone non-U.S. international operations ("StarStone International") into an orderly run-off (the "StarStone International Run-Off"). The liabilities associated with the StarStone International Run-Off vary in duration, and the run-off is expected to occur over a number of years. Steps to reduce the size of StarStone International's operations have begun and will involve several phases to occur over time. As a result, we cannot anticipate with certainty the expected completion date of the StarStone International Run-Off.

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5. INVESTMENTS

We hold: (i) trading portfolios of short-term and fixed maturity investments and equities, carried at fair value; (ii) AFS portfolios of short-term and fixed maturity investments, carried at fair value; (iii) other investments, carried at fair value; (iv) equity method investments; and (v) funds held - directly managed.

Asset Types

The fair values of the underlying asset categories comprising our short-term and fixed maturity investments classified as trading and AFS and the fixed maturity investments included within our funds held - directly managed balance were as follows:

			June 30, 2020
			Short-term investments, trading						Short-term investments, AFS						Fixed maturities, trading						Fixed maturities, AFS						Fixed maturities, funds held - directly managed						Total
U.S. government and agency			$	5,924					$	60,225					$	166,673					$	203,972					$	109,677					$	546,471
U.K. government			186						155						64,549						42,790						—						107,680
Other government			3,338						331						376,956						98,852						23,835						503,312
Corporate			768						27,059						3,684,722						1,251,847						600,704						5,565,100
Municipal			—						—						86,301						28,606						50,813						165,720
Residential mortgage-backed			—						—						176,347						180,138						80,347						436,832
Commercial mortgage-backed			—						—						431,610						179,932						228,825						840,367
Asset-backed			—						—						377,999						229,074						59,279						666,352
Total fixed maturity and short-term investments			$	10,216					$	87,770					$	5,365,157					$	2,215,211					$	1,153,480					$	8,831,834

			December 31, 2019
			Short-term investments, trading						Short-term investments, AFS						Fixed maturities, trading						Fixed maturities, AFS						Fixed maturities, funds held - directly managed						Total
U.S. government and agency			$	—					$	111,583					$	208,296					$	269,661					$	106,537					$	696,077
U.K. government			24,411						1,069						122,012						14,280						—						161,772
Other government			21,958						387						575,017						84,760						20,734						702,856
Corporate			5,121						13,915						3,959,288						866,557						603,389						5,448,270
Municipal			—						1,381						87,451						2,399						49,456						140,687
Residential mortgage-backed			—						—						215,521						99,188						86,205						400,914
Commercial mortgage-backed			—						—						534,357						49,046						230,343						813,746
Asset-backed			—						—						441,393						152,161						76,681						670,235
Total fixed maturity and short-term investments			$	51,490					$	128,335					$	6,143,335					$	1,538,052					$	1,173,345					$	9,034,557

Included within residential and commercial mortgage-backed securities as of June 30, 2020 were securities issued by U.S. governmental agencies with a fair value of $ 371.1 million (December 31, 2019: $ 333.3 million). Included within corporate securities as of June 30, 2020 were senior secured loans of $ nil (December 31, 2019: $ 31.4 million).

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Contractual Maturities

The contractual maturities of our short-term and fixed maturity investments, classified as trading and AFS and the fixed maturity investments included within our funds held - directly managed balance are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

As of June 30, 2020						Amortized Cost						Fair Value						% of Total Fair Value
One year or less						$	411,022					$	411,903					4.7		%
More than one year through two years						642,622						650,200						7.4		%
More than two years through five years						2,084,605						2,146,660						24.3		%
More than five years through ten years						1,931,647						2,048,533						23.2		%
More than ten years						1,466,809						1,630,987						18.5		%
Residential mortgage-backed						430,201						436,832						4.9		%
Commercial mortgage-backed						825,225						840,367						9.5		%
Asset-backed						695,528						666,352						7.5		%
						$	8,487,659					$	8,831,834					100.0		%

Credit Ratings

The following table sets forth the credit ratings of our short-term and fixed maturity investments classified as trading and AFS and the fixed maturity investments included within our funds held - directly managed balance as of June 30, 2020:

			Amortized Cost						Fair Value						% of Total						AAA Rated						AA Rated						A Rated						BBB Rated						Non- Investment Grade						Not Rated
U.S. government and agency			$	522,106					$	546,471					6.2		%				$	546,471					$	—					$	—					$	—					$	—					$	—
U.K. government			107,185						107,680						1.2		%				2,271						94,987						10,422						—						—						—
Other government			488,650						503,312						5.7		%				250,552						144,733						53,101						45,147						9,779						—
Corporate			5,268,218						5,565,100						63.0		%				194,895						593,964						2,840,810						1,663,136						262,385						9,910
Municipal			150,546						165,720						1.9		%				10,078						82,087						53,458						20,097						—						—
Residential mortgage-backed			430,201						436,832						5.0		%				430,300						31						1,807						1,881						450						2,363
Commercial mortgage-backed			825,225						840,367						9.5		%				575,005						103,238						89,254						60,203						5,625						7,042
Asset-backed			695,528						666,352						7.5		%				291,013						97,699						149,673						117,217						9,045						1,705
Total			$	8,487,659					$	8,831,834					100.0		%				$	2,300,585					$	1,116,739					$	3,198,525					$	1,907,681					$	287,284					$	21,020
% of total fair value																					26.0		%				12.6		%				36.2		%				21.6		%				3.3		%				0.3		%

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Unrealized Gains and Losses on AFS Short-term and Fixed Maturity Investments

The amortized cost, unrealized gains and losses, allowance for credit losses and fair values of our short-term and fixed maturity investments classified as AFS as of June 30, 2020 were as follows:

																		Gross Unrealized Losses
As of June 30, 2020						Amortized Cost						Gross Unrealized Gains						Non-Credit Related Losses						Allowance for Credit Losses (1)						Fair Value
U.S. government and agency						$	258,996					$	5,505					$	( 304 )					$	—					$	264,197
U.K. government						43,654						38						( 747 )						—						42,945
Other government						96,774						2,645						( 236 )						—						99,183
Corporate						1,248,862						37,470						( 4,336 )						( 3,090 )						1,278,906
Municipal						27,766						840						—						—						28,606
Residential mortgage-backed						178,981						2,085						( 928 )						—						180,138
Commercial mortgage-backed						179,412						3,631						( 2,617 )						( 494 )						179,932
Asset-backed						234,216						592						( 5,645 )						( 89 )						229,074
						$	2,268,661					$	52,806					$	( 14,813 )					$	( 3,673 )					$	2,302,981

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.

The amortized cost, unrealized gains and losses and fair values of our short-term and fixed maturity investments classified as AFS as of December 31, 2019 were as follows:

As of December 31, 2019						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses (Non-OTTI)												Fair Value
U.S. government and agency						$	381,488					$	78					$	( 322 )											$	381,244
U.K. government						15,067						282						—												15,349
Other government						84,116						1,119						( 88 )												85,147
Corporate						880,667						3,739						( 3,934 )												880,472
Municipal						3,770						12						( 2 )												3,780
Residential mortgage-backed						99,646						221						( 679 )												99,188
Commercial mortgage-backed						49,219						30						( 203 )												49,046
Asset-backed						152,153						127						( 119 )												152,161
						$	1,666,126					$	5,608					$	( 5,347 )											$	1,666,387

Gross Unrealized Losses on AFS Short-term and Fixed Maturity Investments

The following table summarizes our short-term and fixed maturity investments classified as AFS that were in a gross unrealized loss position, for which an allowance for credit losses has not been recorded, as of June 30, 2020, aggregated by major security type and length of time in continuous unrealized loss position:

						12 Months or Greater																		Less Than 12 Months																		Total
As of June 30, 2020						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
U.S. government and agency						$	—					$	—					$	264,197					$	( 304 )					$	264,197					$	( 304 )
U.K. government						—						—						42,945						( 747 )						42,945						( 747 )
Other government						169						( 11 )						99,014						( 225 )						99,183						( 236 )
Corporate						1,798						( 267 )						1,175,077						( 2,283 )						1,176,875						( 2,550 )
Residential mortgage-backed						—						—						180,138						( 928 )						180,138						( 928 )
Commercial mortgage-backed						—						—						164,704						( 1,345 )						164,704						( 1,345 )
Asset-backed						—						—						218,538						( 5,171 )						218,538						( 5,171 )
Total fixed maturity and short-term investments						$	1,967					$	( 278 )					$	2,144,613					$	( 11,003 )					$	2,146,580					$	( 11,281 )

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The following table summarizes our short-term and fixed maturity investments classified as AFS that are in a gross unrealized loss position as of December 31, 2019, aggregated by major security type and length of time in continuous unrealized loss position:

						12 Months or Greater																		Less Than 12 Months																		Total
As of December 31, 2019						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
U.S. government and agency						$	—					$	—					$	193,574					$	( 322 )					$	193,574					$	( 322 )
Other government						1,080						( 23 )						37,796						( 65 )						38,876						( 88 )
Corporate						2,754						( 306 )						338,965						( 3,628 )						341,719						( 3,934 )
Municipal						128						—						761						( 2 )						889						( 2 )
Residential mortgage-backed						—						—						52,005						( 679 )						52,005						( 679 )
Commercial mortgage-backed						—						—						35,777						( 203 )						35,777						( 203 )
Asset-backed						—						—						101,591						( 119 )						101,591						( 119 )
Total fixed maturity and short-term investments						$	3,962					$	( 329 )					$	760,469					$	( 5,018 )					$	764,431					$	( 5,347 )

As of June 30, 2020 and December 31, 2019, the number of securities classified as AFS in an unrealized loss position for which an allowance for credit loss is not recorded was 474 and 479 , respectively. Of these securities, the number of securities that had been in an unrealized loss position for twelve months or longer was 7 and 12 , respectively.

Allowance for Credit Losses on AFS Fixed Maturity Investments

We adopted ASU 2016-13 and the related amendments on January 1, 2020 prospectively, and recognized an allowance for credit losses of $ 3.1 million on initial adoption of the guidance. Our allowance for credit losses is derived based on various data sources, multiple key inputs and forecast scenarios. These include default rates specific to the individual security, vintage of the security, geography of the issuer of the security, industry analyst reports, credit ratings and consensus economic forecasts.

To determine the credit losses on our AFS securities, we use the probability of default ("PD") and loss given default ("LGD") methodology through a third-party proprietary tool which calculates the expected credit losses based on a discounted cash flow method. The tool uses effective interest rates to discount the expected cash flows associated with each AFS security to determine its fair value, which is then compared with its amortized cost basis to derive the credit loss on the security.

The methodology and inputs used to determine the credit loss by security type are as follows:

• Corporate and Government: Expected cashflows are derived that are specific to each security. The PD is based on a quantitative model that converts agency ratings to term structures that vary by country, industry and the state of the credit cycle. This is used along with macroeconomic forecasts to produce scenario conditioned PDs. The LGD is based on default studies provided by a third party which we use along with macroeconomic forecasts to produce scenario conditioned LGDs.

• Municipals : Expected cash flows are derived that are specific to each security. The PD model produces scenario conditioned PD output over the lifetime of the municipal security. These PDs are based on key macroeconomic and instrument specific risk factors. The LGD is derived based on a model which uses assumptions specific to the municipal securities.

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For corporates, government and municipal securities, we use an explicit reversion and a three year forecast period, which we consider to be a reasonable duration during which an economic forecast could continue to be reliable.

• Asset backed, Commercial and Residential mortgaged-backed: Expected cash flows are derived that are specific to each security. The PD and LGD for each security is based on a quantitative model that generates scenario conditioned PD and LGD term structures based on the underlying collateral type, waterfall and other trustee information. This model also considers prepayments. For these security types, there is no explicit reversion and the forecasts are deemed reasonable and supportable over the life of the portfolio.

Due to the short-term period during which accrued investment income remains unpaid, which is typically six months since the coupon on our debt securities is paid semi-annually, we elected not to establish an allowance for credit losses on our accrued investment income balances. Accrued investment income is written off through net realized investment gains (losses) at the time the issuer of the debt security defaults or is expected to default on payments.

The following tables provide a reconciliation of the beginning and ending allowance for credit losses on our AFS debt securities:

															Three Months Ended June 30, 2020
															Other government						Corporate												Commercial mortgage backed												Asset-backed						Total
Allowance for credit losses, beginning of period															$	—					$	( 14,323 )											$	( 1 )											$	—					$	( 14,324 )
Allowances for credit losses on securities for which credit losses were not previously recorded															—						( 149 )												( 493 )												( 89 )						( 731 )
Reductions for securities sold during the period															—						1,388												—												—						1,388
Reductions in the allowance for credit losses on securities we either intend to sell or more likely than not, we will be required to sell before the recovery of their amortized cost basis															—						—												—												—						—
(Increase) decrease to the allowance for credit losses on securities that had an allowance recorded in the previous period															—						9,994												—												—						9,994
Allowance for credit losses, end of period															$	—					$	( 3,090 )											$	( 494 )											$	( 89 )					$	( 3,673 )

															Six Months Ended June 30, 2020
															Other government						Corporate												Commercial mortgage backed												Asset-backed						Total
Allowance for credit losses, beginning of period															$	—					$	—											$	—											$	—					$	—
Cumulative effect of change in accounting principle															( 22 )						( 2,987 )												( 50 )												—						( 3,059 )
Allowances for credit losses on securities for which credit losses were not previously recorded															—						( 1,876 )												( 444 )												( 89 )						( 2,409 )
Reductions for securities sold during the period															—						1,773												—												—						1,773
Reductions in the allowance for credit losses on securities we either intend to sell or more likely than not, we will be required to sell before the recovery of their amortized cost basis															22						—												—												—						22
Allowance for credit losses, end of period															$	—					$	( 3,090 )											$	( 494 )											$	( 89 )					$	( 3,673 )

During the three and six months ended June 30, 2020 we did not have any write-offs charged against the allowance for credit losses or any recoveries of amounts previously written-off.

Our allowance for credit losses decreased during the three months ended June 30, 2020 primarily due to low interest rates and tightening credit spreads as the markets rebounded from the recent disruption in global financial markets associated with the COVID-19 pandemic. Our modeling process for determining credit losses remained the same as the prior quarter and took into account the adverse impact that the COVID-19 pandemic still has on capital markets and the global economy in general.

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Other-Than-Temporary Impairment on AFS Fixed Maturity Investments

For the three and six months ended June 30, 2019, we did no t recognize any other-than-temporary impairment losses on our AFS securities. We determined that no other-than-temporary credit losses existed as of December 31, 2019. A description of our other-than-temporary impairment process is included in Note 2 - "Significant Accounting Policies" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

As discussed in detail in Note 1 - "Significant Accounting Policies" above, we adopted ASU 2016-13 and the related amendments on January 1, 2020 with this new guidance replacing the OTTI model that was previously applicable to our AFS debt securities. The new approach now requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.

Equity Investments

The following table summarizes our equity investments classified as trading:

			June 30, 2020						December 31, 2019
Publicly traded equity investments in common and preferred stocks			$	274,382					$	327,875
Exchange-traded funds			95,389						133,047
Privately held equity investments in common and preferred stocks			271,000						265,799
			$	640,771					$	726,721

Equity investments include publicly traded common and preferred stocks, exchange-traded funds and privately held common and preferred stocks. Our publicly traded equity investments in common and preferred stocks predominantly trade on major exchanges and are managed by our external advisors. Our investments in exchange-traded funds also trade on major exchanges.

Our privately held equity investments in common and preferred stocks are direct investments in companies that we believe offer attractive risk adjusted returns and/or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. Included within the above balance as of June 30, 2020 and December 31, 2019 is an investment in the parent company of AmTrust Financial Services, Inc. ("AmTrust"), with a fair value of $ 245.3 million and $ 240.1 million, respectively. Refer to Note 20 - "Related Party Transactions" for further information.

Other Investments, at fair value

The following table summarizes our other investments carried at fair value:

						June 30, 2020						December 31, 2019
Hedge funds						$	1,757,982					$	1,121,904
Fixed income funds						584,607						481,039
Equity funds						368,314						410,149
Private equity funds						315,070						323,496
CLO equities						84,188						87,555
CLO equity funds						123,299						87,509
Private credit funds						38,094						—
Other						7,231						6,379
						$	3,278,785					$	2,518,031

The valuation of our other investments is described in Note 11 - "Fair Value Measurements." Due to a lag in the valuations of certain funds reported by the managers, we may record changes in valuation with up to a three-month lag. We regularly review and discuss fund performance with the fund managers to corroborate the reasonableness of the reported net asset values and to assess whether any events have occurred within the lag

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period that would affect the valuation of the investments. The following is a description of the nature of each of these investment categories:

• Hedge funds may invest in a wide range of instruments, including debt and equity securities, and utilize various sophisticated strategies, including derivatives, to achieve their objectives. We invest in a mixture of fixed income, equity and multi-strategy hedge funds.

• Fixed income funds comprise a number of positions in diversified fixed income funds that are managed by third-party managers. Underlying investments vary from high-grade corporate bonds to non-investment grade senior secured loans and bonds, in both liquid and illiquid markets. The liquid fixed income funds have regularly published prices.

• Equity funds invest in a diversified portfolio of U.S. and international publicly-traded equity securities.

• Private equity funds invest primarily in the financial services industry.

• CLO equities comprise investments in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.

• CLO equity funds invest primarily in the equity tranches of term-financed securitizations of diversified pools of corporate bank loans.

• Private credit funds invest in direct senior or collateralized loans.

• Others comprise various investments including real estate debt funds that invest primarily in European commercial real estate equity and a fund that provides loans to educational institutions throughout the U.S. and its territories.

The increase in our other investments carried at fair value between June 30, 2020 and December 31, 2019 was primarily attributable to unrealized gains of $ 250.5 million and net additional subscriptions of $ 520.2 million to hedge funds, fixed income funds, private credit funds, CLO equities, CLO equity funds and equity funds.

As of June 30, 2020, we had unfunded commitments of $ 544.7 million to private credit and private equity funds.

Certain of our other investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which limits our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes or side pockets, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request, whereas a side-pocket is a designated account for which the investor loses its redemption rights. Certain other investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments are not eligible for redemption or sales are restricted, we may still receive income distributions from those other investments. The table below details the estimated date by which proceeds would be received if we had provided notice of our intent to redeem or initiated a sales process as of June 30, 2020:

						Less than 1 Year						1-2 years						2-3 years						More than 3 years						Not Eligible/ Restricted						Total						Redemption Frequency
Hedge funds						$	700,346					$	895,057					$	—					$	102,600					$	59,979					$	1,757,982					Monthly to Bi-annually
Fixed income funds						574,617						—						—						—						9,990						584,607						Daily to Quarterly
Equity funds						368,314						—						—						—						—						368,314						Daily to Quarterly
Private equity funds						—						—						—						—						315,070						315,070						N/A
CLO equities						84,188						—						—						—						—						84,188						Daily
CLO equity funds						92,180						23,549						7,570						—						—						123,299						Quarterly to Bi-annually
Private credit funds						—						—						—						—						38,094						38,094						N/A
Other						—						—						—						—						7,231						7,231						N/A
						$	1,819,645					$	918,606					$	7,570					$	102,600					$	430,364					$	3,278,785

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Refer to Note 20 - "Related Party Transactions" for further information regarding certain of our other investments.

Equity Method Investments

The following table summarizes our equity method investments:

						June 30, 2020																														December 31, 2019
						Investment						Ownership %						Carrying Value						Investment						Ownership %						Carrying Value
Enhanzed Re						$	154,050					47.4		%				$	188,868					$	154,050					47.4		%				$	182,856
Citco						50,000						31.9		%				51,815						50,000						31.9		%				51,742
Monument						59,600						26.6		%				92,117						26,600						26.6		%				60,598
Clear Spring						11,210						20.0		%				10,402						11,210						20.0		%				10,645
Other						24,963						~ 30 %						19,196						24,963						~ 30 %						20,436
						$	299,823											$	362,398					$	266,823											$	326,277

Refer to Note 20 - "Related Party Transactions" for further information regarding our investments in Enhanzed Re, Citco, Monument and Clear Spring.

As of June 30, 2020, we had unfunded commitments of $ 76.5 million related to equity method investments.

Funds Held

Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. We either have (i) funds held by reinsured companies, which are carried at amortized cost and on which we receive a fixed crediting rate, or (ii) funds held - directly managed, which are carried at fair value and on which we receive the underlying return on the portfolio. The investment returns on both categories of funds held are recognized in net investment income and net realized and unrealized gains (losses). The funds held balance is credited with investment income and losses payable are deducted.

Funds Held - Directly Managed

Funds held - directly managed, where we receive the underlying return on the investment portfolio, are carried at fair value, either because we elected the fair value option at the inception of the reinsurance contract, or because it represents the aggregate of funds held at amortized cost and the fair value of an embedded derivative. The embedded derivative relates to our contractual right to receive the return on the underlying investment portfolio supporting the reinsurance contract. We include the estimated fair value of these embedded derivatives in the consolidated balance sheets with the host contract in order to reflect the expected settlement of these features with the host contract. The change in the fair value of the embedded derivative is included in net unrealized gains (losses). The following table summarizes the components of the funds held - directly managed:

			June 30, 2020						December 31, 2019
Fixed maturity investments, trading			$	1,153,480					$	1,173,345
Cash and cash equivalents			8,648						10,296
Other assets			6,728						3,911
			$	1,168,856					$	1,187,552

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The following table summarizes the fixed maturity investment components of funds held - directly managed:

			June 30, 2020																														December 31, 2019
			Funds held - Directly Managed - Fair Value Option						Funds held - Directly Managed - Variable Return						Total						Funds held - Directly Managed - Fair Value Option						Funds held - Directly Managed - Variable Return						Total
Fixed maturity investments, at amortized cost			$	185,446					$	885,997					$	1,071,443					$	185,859					$	940,194					$	1,126,053
Net unrealized gains (losses):
Change in fair value - fair value option accounting			11,624						—						11,624						5,438						—						5,438
Change in fair value - embedded derivative accounting			—						70,413						70,413						—						41,854						41,854
Fixed maturity investments within funds held - directly managed, at fair value			$	197,070					$	956,410					$	1,153,480					$	191,297					$	982,048					$	1,173,345

Refer to the sections above for details of the fixed maturity investments within our funds held - directly managed portfolios.

Funds Held by Reinsured Companies

Funds held by reinsured companies, where we received a fixed crediting rate, are carried at cost on our consolidated balance sheets. As of June 30, 2020 and December 31, 2019, we had funds held by reinsured companies of $ 1,466.6 million and $ 475.7 million, respectively. The increase related to $ 770.0 million and $ 204.2 million of additional funds held balances related to the Aspen and AXA Group transactions, respectively.

Net Investment Income

Major categories of net investment income are summarized as follows:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Fixed maturity investments			$	52,837					$	54,835					$	106,279					$	109,161
Short-term investments and cash and cash equivalents			752						4,250						3,377						7,904
Funds held			24,099						2,304						24,369						8,810
Funds held - directly managed			10,685						9,611						19,501						19,361
Investment income from fixed maturities and cash and cash equivalents			88,373						71,000						153,526						145,236
Equity investments			3,762						3,422						9,725						6,802
Other investments			5,291						2,503						13,384						4,617
Investment income from equities and other investments			9,053						5,925						23,109						11,419
Gross investment income			97,426						76,925						176,635						156,655
Investment expenses			( 2,983 )						( 2,654 )						( 7,478 )						( 6,733 )
Net investment income			$	94,443					$	74,271					$	169,157					$	149,922

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Net Realized and Unrealized Gains

Components of net realized and unrealized gains were as follows:

						Three Months Ended																		Six Months Ended
						June 30,																		June 30,
						2020						2019						2020						2019
Net realized gains (losses) on sale:
Gross realized gains on fixed maturity securities, AFS						$	8,577					$	4,445					$	10,124					$	4,449
Gross realized losses on fixed maturity securities, AFS						( 4,567 )						( 227 )						( 6,593 )						( 292 )
Credit recoveries (losses) on fixed maturity securities, AFS						9,002						—						( 2,637 )						—
Net realized gains (losses) on fixed maturity securities, trading						41,556						21,113						57,380						20,391
Net realized gains (losses) on funds held - directly managed						1,741						244						2,253						( 1,362 )
Net realized gains (losses) on equity investments						1,886						120						879						2,668
Total net realized gains on sale						$	58,195					$	25,695					$	61,406					$	25,854
Net unrealized gains (losses):
Fixed maturity securities, trading						$	300,948					$	124,977					$	44,471					$	326,335
Fixed maturity securities in funds held - directly managed portfolios						60,107						35,267						34,805						74,229
Equity investments						37,334						13,826						( 52,619 )						21,209
Other Investments						511,024						60,904						250,484						265,802
Total net unrealized gains						909,413						234,974						277,141						687,575
Net realized and unrealized gains						$	967,608					$	260,669					$	338,547					$	713,429

The gross realized gains and losses on AFS investments included in the table above resulted from sales of $ 678.5 million and $ 82.4 million for the three months ended June 30, 2020 and 2019, respectively, and $ 1,046.3 million and $ 83.6 million for the six months ended June 30, 2020 and 2019, respectively.

Reconciliation to Consolidated Statements of Comprehensive Income

The following table provides a reconciliation of the gross realized gains and losses and credit recoveries (losses) on our AFS fixed maturity debt securities that arose during the three and six months ended June 30, 2020 within our continuing and discontinued operations and the offsetting reclassification adjustments included within our consolidated statements of comprehensive income:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Included within continuing operations:
Gross realized gains on fixed maturity securities, AFS			$	8,577					$	4,445					$	10,124					$	4,449
Gross realized losses on fixed maturity securities, AFS			( 4,567 )						( 227 )						( 6,593 )						( 292 )
Included within discontinued operations:
Gross realized gains on fixed maturity securities, AFS			269						—						536						—
Gross realized losses on fixed maturity securities, AFS			( 57 )						—						( 57 )						—
Total reclassification adjustment			$	4,222					$	4,218					$	4,010					$	4,157
Included within continuing operations:
Credit recoveries (losses) on fixed maturity securities, AFS			$	9,002					$	—					$	( 2,637 )					$	—
Included within discontinued operations:
Credit recoveries (losses) on fixed maturity securities, AFS			1,760						—						187						—
Total reclassification adjustment			$	10,762					$	—					$	( 2,450 )					$	—

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Restricted Assets

We utilize trust accounts to collateralize business with our insurance and reinsurance counterparties. We are also required to maintain investments and cash and cash equivalents on deposit with regulatory authorities and Lloyd's to support our insurance and reinsurance operations. The investments and cash and cash equivalents on deposit are available to settle insurance and reinsurance liabilities. Collateral generally takes the form of assets held in trust, letters of credit or funds held. The assets used as collateral are primarily highly rated fixed maturity securities. The carrying value of our restricted assets, including restricted cash of $ 336.7 million and $ 346.9 million, as of June 30, 2020 and December 31, 2019, respectively, was as follows:

						June 30, 2020						December 31, 2019
Collateral in trust for third party agreements						$	4,245,007					$	4,103,847
Assets on deposit with regulatory authorities						260,998						309,659
Collateral for secured letter of credit facilities						119,709						132,670
Funds at Lloyd's (1)						574,093						639,316
						$	5,199,807					$	5,185,492

Foreign Currency Hedging of Net Investments in Foreign Operations

We use foreign currency forward exchange rate contracts in qualifying hedging relationships to hedge the foreign currency exchange rate risk associated with certain of our net investments in foreign operations. As of June 30, 2020 and December 31, 2019, we had forward currency contracts in place which we had designated as hedges of our net investments in foreign operations.

The following table presents the gross notional amounts and estimated fair values recorded within other assets and other liabilities related to our qualifying foreign currency forward exchange rate contracts:

						June 30, 2020																														December 31, 2019
												Fair Value																								Fair Value
						Gross Notional Amount						Assets						Liabilities						Gross Notional Amount						Assets						Liabilities
Foreign currency forward - AUD						$	68,913					$	—					$	2,299					$	64,620					$	52					$	2,033
Foreign currency forward - EUR						130,425						84						2,890						112,284						246						1,635
Foreign currency forward - GBP						278,534						31						396						318,387						344						7,784
Total qualifying hedges						$	477,872					$	115					$	5,585					$	495,291					$	642					$	11,452

The following table presents the amounts of the net gains and losses deferred in the cumulative translation adjustment ("CTA") account, which is a component of AOCI, in shareholders' equity, relating to our foreign currency forward exchange rate contracts:

						Amount of Gains (Losses) Deferred in AOCI
						Three Months Ended June 30,																		Six Months Ended June 30,
						2020						2019						2020						2019
Foreign currency forward - AUD						$	( 7,435 )					$	473					$	1,036					$	146
Foreign currency forward - EUR						( 3,111 )						( 1,559 )						( 476 )						296
Foreign currency forward - GBP						505						( 1,591 )						21,317						( 1,591 )
Net gains (losses) on qualifying derivative hedges						$	( 10,041 )					$	( 2,677 )					$	21,877					$	( 1,149 )

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Derivatives Not Designated or Not Qualifying as Net Investments Hedging Instruments

From time to time, we may also utilize foreign currency forward contracts as part of our overall foreign currency risk management strategy or to obtain exposure to a particular financial market, as well as for yield enhancement in non-qualifying hedging relationships. We may also utilize equity call option instruments either to obtain exposure to a particular equity instrument or for yield enhancement in non-qualifying hedging relationships.

Foreign Currency Forward Contracts

The following table presents the gross notional amounts and estimated fair values recorded within other assets and other liabilities related to our non-qualifying foreign currency forward hedging relationships:

						June 30, 2020																														December 31, 2019
												Fair Value																								Fair Value
						Gross Notional Amount						Assets						Liabilities						Gross Notional Amount						Assets						Liabilities
Foreign currency forward - AUD						$	2,136					$	849					$	912					$	913					$	839					$	892
Foreign currency forward - CAD						50,309						—						936						66,266						10						1,482
Foreign currency forward - EUR						14,617						9						324						74,444						507						1,440
Foreign currency forward - GBP						48,898						5						70						11,940						13						292
Total non-qualifying hedges						$	115,960					$	863					$	2,242					$	153,563					$	1,369					$	4,106

The following table presents the amounts of the net gains (losses) included in earnings related to our non-qualifying foreign currency forward contracts:

						Gains (Losses) on non-qualifying-hedges included in net earnings
						Three Months Ended June 30,																		Six Months Ended June 30,
						2020						2019						2020						2019
Foreign currency forward - AUD						$	( 2,978 )					$	1,327					$	( 445 )					$	562
Foreign currency forward - CAD						( 2,225 )						( 2,493 )						2,771						( 2,492 )
Foreign currency forward - EUR						( 224 )						( 334 )						952						871
Foreign currency forward - GBP						924						6,370						1,500						$	2,311
Net gains (losses) on non-qualifying hedges						$	( 4,503 )					$	4,870					$	4,778					$	1,252

Credit Default Swaps, Futures and Currency Forward Contracts

From time to time we may also utilize (i) credit default swaps to both hedge and replicate credit exposure, (ii) government bond futures contracts for interest rate management, and (iii) foreign currency forward contracts for currency hedging, to collectively manage credit and duration risk, as well as for yield enhancement on some of our fixed income portfolios.

The following table presents the gross notional amounts and estimated fair values recorded within other assets and other liabilities related to our credit default swaps, government bond futures contracts and currency forward contracts:

						June 30, 2020
												Fair Value
						Gross Notional Amount						Assets						Liabilities
Credit default swaps						$	11					$	11					$	( 11 )
Futures contracts - long positions						39,147						30						—
Futures contracts - short positions						( 31,491 )						—						( 197 )
Currency forward contracts - long positions						3,377						8						( 3 )
Currency forward contracts - short positions						( 4,854 )						32						—
Total						$	6,190					$	81					$	( 211 )

We initially entered into these credit default swaps, government bond futures contracts and currency forward contracts during the three month period ended June 30, 2020 and therefore we did not have any of these contracts in place as of December 31, 2019.

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The following table presents the amounts of the net gains included in earnings related to our government bond futures contracts and currency forward contracts:

																		Three and Six Months Ended June 30, 2020
Futures contracts																		$	( 37 )
Currency forward contracts																		166
Total net gains																		$	129

There was no earnings impact arising from the credit default swap contracts during the three and six months ended June 30, 2020.

Investments in Call Options on Equities

During the three and six months ended June 30, 2020, we recorded unrealized losses of $ nil and less than $ 0.1 million, respectively, in net earnings on the call options on equities that we had purchased in 2018 at a cost of $ 10.0 million. During the three and six months ended June 30, 2019, we had recorded unrealized gains of $ 1.7 million and $ 1.3 million, respectively, in net earnings, on these call options on equities. These call options on equities had a fair value of less than $ 0.1 million as at December 31, 2019 and expired without being exercised during the six months ended June 30, 2020.

Other Derivatives

In October 2019, we entered into a forward interest rate swap, with a notional amount of AUD$ 120.0 million, to partially mitigate the risk associated with declining interest rates until the completion of the Munich Re transaction which closed on July 1, 2020, as described in Note 3 - "Significant New Business."

During the three and six months ended June 30, 2020, we recorded unrealized gains included within net earnings of less than $ 0.1 million and $ 0.8 million, respectively, on the forward interest rate swap. This forward interest rate swap was terminated on April 7, 2020, for an inception-to-date net realized gain of $ 0.5 million. The carrying value of the forward interest rate swap, recorded in other liabilities as of December 31, 2019, was $ 0.3 million.

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The following tables provide the total reinsurance balances recoverable on paid and unpaid losses:

						June 30, 2020
						Non-life Run-off						Atrium						StarStone												Total
Recoverable from reinsurers on unpaid:
Outstanding losses						$	932,734					$	9,497					$	264,302											$	1,206,533
IBNR						554,162						17,292						138,756												710,210
Fair value adjustments - acquired companies						( 12,977 )						461						( 1,636 )												( 14,152 )
Fair value adjustments - fair value option						( 52,186 )						—						—												( 52,186 )
ULAE						7,756						—						—												7,756
Total reinsurance reserves recoverable						1,429,489						27,250						401,422												1,858,161
Paid losses recoverable						151,355						1,478						83,060												235,893
Total						$	1,580,844					$	28,728					$	484,482											$	2,094,054
Reconciliation to Consolidated Balance Sheet:
Reinsurance balances recoverable on paid and unpaid losses						$	909,460					$	28,728					$	484,482											$	1,422,670
Reinsurance balances recoverable on paid and unpaid losses - fair value option						671,384						—						—												671,384
Total						$	1,580,844					$	28,728					$	484,482											$	2,094,054

						December 31, 2019
						Non-life Run-off						Atrium						StarStone												Total
Recoverable from reinsurers on unpaid:
Outstanding losses						$	972,293					$	9,011					$	264,131											$	1,245,435
IBNR						673,059						19,286						93,185												785,530
Fair value adjustments - acquired companies						( 13,652 )						519						( 2,122 )												( 15,255 )
Fair value adjustments - fair value option						( 88,086 )						—						—												( 88,086 )
Total reinsurance reserves recoverable						1,543,614						28,816						355,194												1,927,624
Paid losses recoverable						181,375						1,541						70,594												253,510
Total						$	1,724,989					$	30,357					$	425,788											$	2,181,134
Reconciliation to Consolidated Balance Sheet:
Reinsurance balances recoverable on paid and unpaid losses						$	1,029,471					$	30,357					$	425,788											$	1,485,616
Reinsurance balances recoverable on paid and unpaid losses - fair value option						695,518						—						—												695,518
Total						$	1,724,989					$	30,357					$	425,788											$	2,181,134

Our insurance and reinsurance run-off subsidiaries and assumed portfolios, prior to acquisition, used retrocessional agreements to reduce their exposure to the risk of insurance and reinsurance assumed. On an annual basis, both Atrium and StarStone purchase a tailored outwards reinsurance program designed to manage their risk profiles. The majority of Atrium’s and StarStone's third-party reinsurance cover is with highly rated reinsurers or is collateralized by pledged assets or letters of credit.

The fair value adjustments, determined on acquisition of insurance and reinsurance subsidiaries, are based on the estimated timing of loss and LAE recoveries and an assumed interest rate equivalent to a risk free rate for securities with similar duration to the acquired reinsurance balances recoverable on paid and unpaid losses plus a spread for credit risk, and are amortized over the estimated recovery period, as adjusted for accelerations in timing of payments as a result of commutation settlements. The determination of the fair value adjustments on the retroactive reinsurance contracts for which we have elected the fair value option is described in Note 11 - "Fair Value Measurements."

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Top Ten Reinsurers

			June 30, 2020
			Non-life Run-off						Atrium						StarStone												Total						% of Total
Top 10 reinsurers			$	1,031,132					$	21,180					$	351,639											$	1,403,951					67.0		%
Other reinsurers > $1 million			530,527						7,257						131,601												669,385						32.0		%
Other reinsurers < $1 million			19,185						291						1,242												20,718						1.0		%
Total			$	1,580,844					$	28,728					$	484,482											$	2,094,054					100.0		%

			December 31, 2019
			Non-life Run-off						Atrium						StarStone												Total						% of Total
Top 10 reinsurers			$	1,154,110					$	22,051					$	295,443											$	1,471,604					67.4		%
Other reinsurers > $1 million			551,636						7,761						129,335												688,732						31.6		%
Other reinsurers < $1 million			19,243						545						1,010												20,798						1.0		%
Total			$	1,724,989					$	30,357					$	425,788											$	2,181,134					100.0		%

			June 30, 2020						December 31, 2019
Information regarding top ten reinsurers:
Number of top 10 reinsurers rated A- or better			8						8
Number of top 10 non-rated reinsurers (1)			2						2
Reinsurers rated A- or better in top 10			$	1,138,740					$	1,292,207
Collateralized non-rated reinsurers in top 10 (1)			265,211						179,397
Total top 10 reinsurance recoverables			$	1,403,951					$	1,471,604
Single reinsurers that represent 10% or more of total reinsurance balance recoverables as of June 30, 2020:
Hannover Ruck SE (2)			$	257,980					$	259,077
Lloyd's Syndicates (3)			$	373,156					$	396,246

⁽¹⁾ For the two non-rated reinsurers as of June 30, 2020 and two non-rated reinsurers as of December 31, 2019, we hold security in the form of pledged assets in trust or letters of credit issued to us in the full amount of the recoverable.

⁽²⁾ Hannover Ruck SE is rated AA- by Standard & Poor’s and A+ by A.M. Best.

⁽³⁾ Lloyd's Syndicates are rated A+ by Standard & Poor's and A by A.M. Best.

Allowance for Estimated Uncollectible Reinsurance Balances Recoverable on Paid and Unpaid Losses

We evaluate and monitor the credit risk related to our reinsurers, and an allowance for estimated uncollectible reinsurance balances recoverable on paid and unpaid losses ("allowance for estimated uncollectible reinsurance") is established for amounts considered potentially uncollectible.

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With respect to our process for determining the allowances for estimated uncollectible reinsurance, we adopted ASU 2016-13 and the related amendments on January 1, 2020 and recorded a cumulative effect adjustment of $ 0.2 million to increase the opening retained earnings on the initial adoption of the guidance. Our allowance for estimated uncollectible reinsurance is derived based on various data sources, multiple key inputs and forecast scenarios. These include the duration of the collection period, credit quality, changes in reinsurer credit standing, default rates specific to the individual reinsurer, the geographical location of the reinsurer, contractual disputes with reinsurers over individual contentious claims, contract language or coverage issues, industry analyst reports and consensus economic forecasts.

To determine the allowance for estimated uncollectible reinsurance, we use the PD and LGD methodology whereby each reinsurer is allocated an appropriate PD percentage based on the expected payout duration by portfolio. This PD percentage is then multiplied by an appropriate LGD percentage to arrive at an overall credit allowance percentage which is then applied to the reinsurance balance recoverable for each reinsurer, net of any specific bad debt provisions, collateral or other contract related offsets, to arrive at the overall allowance for estimated uncollectible reinsurance by reinsurer.

The following tables show our gross and net balances recoverable from our reinsurers as well as the related allowance for estimated uncollectible reinsurance broken down by the credit ratings of our reinsurers. The majority of the allowance for estimated uncollectible reinsurance relates to the Non-life Run-off segment.

			June 30, 2020
			Gross						Allowance for estimated uncollectible reinsurance						Net						Provisions as a % of Gross
Reinsurers rated A- or above			$	1,621,395					$	41,077					$	1,580,318					2.5		%
Reinsurers rated below A-, secured			434,902						—						434,902						—		%
Reinsurers rated below A-, unsecured			181,410						102,576						78,834						56.5		%
Total			$	2,237,707					$	143,653					$	2,094,054					6.4		%

			December 31, 2019
			Gross						Allowance for estimated uncollectible reinsurance												Net						Provisions as a % of Gross
Reinsurers rated A- or above			$	1,731,270					$	43,427											$	1,687,843					2.5		%
Reinsurers rated below A-, secured			463,840						—												463,840						—		%
Reinsurers rated below A-, unsecured			133,663						104,212												29,451						78.0		%
Total			$	2,328,773					$	147,639											$	2,181,134					6.3		%

The table below provides a reconciliation of the beginning and ending allowance for estimated uncollectible reinsurance balances for the three and six months ended June 30, 2020:

			Three Months Ended						Six Months Ended
			June 30, 2020						June 30, 2020
Allowance for estimated uncollectible reinsurance, beginning of period			$	143,327					$	147,639
Cumulative effect of change in accounting principle			—						( 195 )
Effect of exchange rate movement			( 1,446 )						( 1,446 )
Current period change in the allowance			2,584						( 1,533 )
Write-offs charged against the allowance			( 600 )						( 600 )
Recoveries collected			( 212 )						( 212 )
Allowance for estimated uncollectible reinsurance, end of period			$	143,653					$	143,653

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8. DEFERRED CHARGE ASSETS

Deferred charge assets relate to retroactive reinsurance policies providing indemnification of losses and LAE with respect to past loss events in the Non-life Run-off segment. For insurance and reinsurance contracts for which we do not elect the fair value option, a deferred charge asset is recorded for the excess, if any, of the estimated ultimate losses payable over the premiums received at the initial measurement. The premium consideration that we charge the ceding companies may be lower than the undiscounted estimated ultimate losses payable due to the time value of money. After receiving the premium consideration in full from our cedents at the inception of the contract, we invest the premium received over an extended period of time thereby generating investment income. We expect to generate profits from these retroactive reinsurance policies when taking into account the premium received and expected investment income, less contractual obligations and expenses.

Deferred charge assets are included in other assets on our consolidated balance sheets. The following table presents a reconciliation of the deferred charge assets:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Beginning carrying value			$	257,832					$	100,154					$	272,462					$	86,585
Recorded during the period			11,746						2,874						11,746						23,506
Amortization			( 11,062 )						( 3,934 )						( 25,692 )						( 10,997 )
Ending carrying value			$	258,516					$	99,094					$	258,516					$	99,094

Deferred charge assets are amortized over the estimated claim payment period of the related contract with the periodic amortization reflected in earnings as a component of losses and LAE. Deferred charge assets amortization is adjusted at each reporting period to reflect new estimates of the amount and timing of remaining loss payments. Changes in the estimated amount and the timing of payments of unpaid losses may have an effect on the unamortized deferred charge assets and the amount of periodic amortization. Deferred charge assets are assessed at each reporting period for impairment. If the asset is determined to be impaired, it is written down in the period in which the determination is made. For the six months ended June 30, 2020, we completed our assessment for impairment of deferred charge assets and concluded that there had been no impairment of our carried deferred charge assets amount.

Further information on deferred charge assets recorded during the three and six months ended June 30, 2020 is included in Note 3 - "Significant New Business."

9. LOSSES AND LOSS ADJUSTMENT EXPENSES

The liability for losses and loss adjustment expenses ("LAE"), also referred to as loss reserves, represents our gross estimates before reinsurance for unpaid reported losses and includes losses that have been incurred but not reported ("IBNR") for our Non-life Run-off, Atrium and StarStone segments using a variety of actuarial methods. We recognize an asset for the portion of the liability that we expect to recover from reinsurers. LAE reserves include allocated loss adjustment expenses ("ALAE"), and unallocated loss adjustment expenses ("ULAE"). ALAE are linked to the settlement of an individual claim or loss, whereas ULAE are based on our estimates of future costs to administer the claims. IBNR represents reserves for loss and LAE that have been incurred but not yet reported to us. This includes amounts for unreported claims, development on known claims and reopened claims.

Our loss reserves cover multiple lines of business, which include asbestos, environmental, general casualty, workers' compensation/personal accident, marine, aviation and transit, construction defect, professional indemnity/directors and officers, motor, property and other non-life lines of business. Refer to Note 10 - "Losses and Loss Adjustment Expenses" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on establishing the liability for losses and LAE.

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The following tables summarize the liability for losses and LAE by segment and for our other activities:

			June 30, 2020
			Non-life Run-off						Atrium						StarStone						Other						Total
Outstanding losses			$	4,411,962					$	89,321					$	693,280					$	10,375					$	5,204,938
IBNR			4,500,500						144,404						610,632						14,333						5,269,869
Fair value adjustments - acquired companies			( 153,658 )						3,649						( 403 )						—						( 150,412 )
Fair value adjustments - fair value option			( 99,020 )						—						—						—						( 99,020 )
ULAE			319,450						2,357						46,254						—						368,061
Total			$	8,979,234					$	239,731					$	1,349,763					$	24,708					$	10,593,436
Reconciliation to Consolidated Balance Sheet:
Loss and loss adjustment expenses			$	6,524,695					$	239,731					$	1,349,763					$	24,708					$	8,138,897
Loss and loss adjustment expenses, at fair value			2,454,539						—						—						—						2,454,539
Total			$	8,979,234					$	239,731					$	1,349,763					$	24,708					$	10,593,436

			December 31, 2019
			Non-life Run-off						Atrium						StarStone						Other						Total
Outstanding losses			$	4,407,082					$	89,141					$	743,829					$	9,512					$	5,249,564
IBNR			3,945,407						136,543						556,135						13,565						4,651,650
Fair value adjustments - acquired companies			( 170,689 )						3,700						( 522 )						—						( 167,511 )
Fair value adjustments - fair value option			( 217,933 )						—						—						—						( 217,933 )
ULAE			331,494						2,288						18,852						—						352,634
Total			$	8,295,361					$	231,672					$	1,318,294					$	23,077					$	9,868,404
Reconciliation to Consolidated Balance Sheet:
Loss and loss adjustment expenses			$	5,674,239					$	231,672					$	1,318,294					$	23,077					$	7,247,282
Loss and loss adjustment expenses, at fair value			2,621,122						—						—						—						2,621,122
Total			$	8,295,361					$	231,672					$	1,318,294					$	23,077					$	9,868,404

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The table below provides a consolidated reconciliation of the beginning and ending liability for losses and LAE:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Balance as of beginning of period			$	9,836,797					$	9,679,681					$	9,868,404					$	9,048,796
Less: reinsurance reserves recoverable			1,902,749						1,905,329						1,927,624						1,708,272
Less: deferred charge assets on retroactive reinsurance			257,832						100,154						272,462						86,585
Less: cumulative effect of change in accounting principle on the determination of the allowance for estimated uncollectible reinsurance balances (1)			—						—						643						—
Net balance as of beginning of period			7,676,216						7,674,198						7,667,675						7,253,939
Net incurred losses and LAE:
Current period			119,613						139,455						235,118						301,376
Prior periods			67,079						7,099						( 5,126 )						101,477
Total net incurred losses and LAE			186,692						146,554						229,992						402,853
Net paid losses:
Current period			( 11,303 )						( 43,810 )						( 15,110 )						( 70,946 )
Prior periods			( 369,984 )						( 409,388 )						( 726,003 )						( 858,389 )
Total net paid losses			( 381,287 )						( 453,198 )						( 741,113 )						( 929,335 )
Effect of exchange rate movement			40,815						( 31,672 )						( 105,268 )						( 11,993 )
Acquired on purchase of subsidiaries			—						686						—						686
Assumed business			954,323						45,463						1,425,473						665,881
Net balance as of June 30			8,476,759						7,382,031						8,476,759						7,382,031
Plus: reinsurance reserves recoverable (2)			1,858,161						1,873,766						1,858,161						1,873,766
Plus: deferred charge assets on retroactive reinsurance			258,516						99,094						258,516						99,094
Balance as of June 30			$	10,593,436					$	9,354,891					$	10,593,436					$	9,354,891

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details. This amount excludes $ 0.4 million related to the adoption impact of ASU 2016-13 on StarStone US which has been classified as a discontinued operation with the related assets and liabilities disclosed as held-for-sale on our consolidated balance sheets.

⁽²⁾ Net of allowance for estimated uncollectible reinsurance.

The tables below provide the components of net incurred losses and LAE by segment and for our other activities:

			Three Months Ended June 30, 2020
			Non-life Run-off						Atrium						StarStone						Other						Total
Net losses paid			$	283,402					$	14,219					$	80,667					$	2,999					$	381,287
Net change in case and LAE reserves			( 76,106 )						795						( 30,764 )						610						( 105,465 )
Net change in IBNR reserves			( 255,782 )						710						( 3,323 )						1,584						( 256,811 )
Increase (reduction) in estimates of net ultimate losses			( 48,486 )						15,724						46,580						5,193						19,011
Increase (reduction) in provisions for unallocated LAE			( 12,425 )						—						27,885						—						15,460
Amortization of deferred charge assets			11,062						—						—						—						11,062
Amortization of fair value adjustments			7,280						( 132 )						( 32 )						—						7,116
Changes in fair value - fair value option			134,043						—						—						—						134,043
Net incurred losses and LAE			$	91,474					$	15,592					$	74,433					$	5,193					$	186,692

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			Six Months Ended June 30, 2020
			Non-life Run-off						Atrium						StarStone						Other						Total
Net losses paid			$	542,368					$	31,227					$	161,473					$	6,045					$	741,113
Net change in case and LAE reserves			( 250,686 )						934						( 66,343 )						862						( 315,233 )
Net change in IBNR reserves			( 360,179 )						11,841						25,611						768						( 321,959 )
Increase (reduction) in estimates of net ultimate losses			( 68,497 )						44,002						120,741						7,675						103,921
Increase (reduction) in provisions for unallocated LAE			( 19,904 )						—						28,495						—						8,591
Amortization of deferred charge assets			25,692						—						—						—						25,692
Amortization of fair value adjustments			16,343						6						( 367 )						—						15,982
Changes in fair value - fair value option			75,806						—						—						—						75,806
Net incurred losses and LAE			$	29,440					$	44,008					$	148,869					$	7,675					$	229,992

			Six Months Ended June 30, 2019
			Non-life Run-off						Atrium						StarStone						Other						Total
Net losses paid			$	678,172					$	40,090					$	206,417					$	4,656					$	929,335
Net change in case and LAE reserves			( 197,535 )						( 154 )						31,368						1,354						( 164,967 )
Net change in IBNR reserves			( 471,127 )						( 10,618 )						19,755						3,411						( 458,579 )
Increase (reduction) in estimates of net ultimate losses			9,510						29,318						257,540						9,421						305,789
Increase (reduction) in provisions for unallocated LAE			( 26,071 )						—						927						—						( 25,144 )
Amortization of deferred charge assets			10,997						—						—						—						10,997
Amortization of fair value adjustments			16,495						944						( 231 )						—						17,208
Changes in fair value - fair value option			94,003						—						—						—						94,003
Net incurred losses and LAE			$	104,934					$	30,262					$	258,236					$	9,421					$	402,853

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Non-life Run-off Segment

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the Non-life Run-off segment:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Balance as of beginning of period			$	8,216,850					$	8,154,974					$	8,295,361					$	7,540,662
Less: reinsurance reserves recoverable			1,461,008						1,579,646						1,543,614						1,366,123
Less: deferred charge assets on retroactive insurance			257,832						100,154						272,462						86,585
Plus: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)			—						—						703						—
Net balance as of beginning of period			6,498,010						6,475,174						6,479,988						6,087,954
Net incurred losses and LAE:
Current period			8,086						34,375						15,935						83,446
Prior periods			83,388						( 24,623 )						13,505						21,488
Total net incurred losses and LAE			91,474						9,752						29,440						104,934
Net paid losses:
Current period			202						( 20,877 )						( 1,038 )						( 38,891 )
Prior periods			( 283,604 )						( 308,226 )						( 541,330 )						( 639,281 )
Total net paid losses			( 283,402 )						( 329,103 )						( 542,368 )						( 678,172 )
Effect of exchange rate movement			30,824						( 31,830 )						( 101,304 )						( 11,141 )
Acquired on purchase of subsidiaries			—						686						—						686
Assumed business			954,323						45,463						1,425,473						665,881
Net balance as of June 30			7,291,229						6,170,142						7,291,229						6,170,142
Plus: reinsurance reserves recoverable (2)			1,429,489						1,534,427						1,429,489						1,534,427
Plus: deferred charge assets on retroactive reinsurance			258,516						99,094						258,516						99,094
Balance as of June 30			$	8,979,234					$	7,803,663					$	8,979,234					$	7,803,663

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.

⁽²⁾ Net of allowance for estimated uncollectible reinsurance.

Net incurred losses and LAE in the Non-life Run-off segment were as follows:

			Three Months Ended June 30,
			2020																														2019
			Prior Period						Current Period						Total						Prior Period						Current Period						Total
Net losses paid			$	283,604					$	( 202 )					$	283,402					$	308,226					$	20,877					$	329,103
Net change in case and LAE reserves			( 75,276 )						( 830 )						( 76,106 )						( 121,377 )						1,543						( 119,834 )
Net change in IBNR reserves			( 264,900 )						9,118						( 255,782 )						( 249,923 )						11,691						( 238,232 )
Increase (reduction) in estimates of net ultimate losses			( 56,572 )						8,086						( 48,486 )						( 63,074 )						34,111						( 28,963 )
Increase (reduction) in provisions for unallocated LAE			( 12,425 )						—						( 12,425 )						( 11,160 )						264						( 10,896 )
Amortization of deferred charge assets			11,062						—						11,062						3,934						—						3,934
Amortization of fair value adjustments			7,280						—						7,280						7,715						—						7,715
Changes in fair value - fair value option			134,043						—						134,043						37,962						—						37,962
Net incurred losses and LAE			$	83,388					$	8,086					$	91,474					$	( 24,623 )					$	34,375					$	9,752

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Net change in case and LAE reserves comprises the movement during the period in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

Three Months Ended June 30, 2020

The increase in net incurred losses and LAE for the three months ended June 30, 2020 of $ 91.5 million included net incurred losses and LAE of $ 8.1 million related to current period net earned premium, primarily in respect of the run-off business acquired with the AmTrust RITC transactions. Excluding current period net incurred losses and LAE of $ 8.1 million, the increase in net incurred losses and LAE relating to prior periods was $ 83.4 million, which was attributable to an increase in the fair value of liabilities of $ 134.0 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option primarily due to narrowing credit spreads on corporate bond yields in the period, amortization of the deferred charge assets of $ 11.1 million and amortization of fair value adjustments over the estimated payout period relating to companies acquired of $ 7.3 million, partially offset by a reduction in estimates of net ultimate losses of $ 56.6 million and a reduction in provisions for unallocated LAE of $ 12.4 million relating to 2020 run-off activity. The reduction in estimates of net ultimate losses relating to prior periods of $ 56.6 million for the three months ended June 30, 2020 included a net reduction in case and IBNR reserves of $ 340.2 million, partially offset by net losses paid of $ 283.6 million.

Three Months Ended June 30, 2019

Net incurred losses and LAE for the three months ended June 30, 2019 of $ 9.8 million included net incurred losses and LAE of $ 34.4 million related to current period net earned premium, primarily for the run-off business acquired with the AmTrust RITC transactions and the acquisition of Maiden Reinsurance North America, Inc. ("Maiden Re North America"). Excluding current period net incurred losses and LAE of $ 34.4 million, the reduction in net incurred losses and LAE relating to prior periods was $ 24.6 million, which was attributable to a reduction in estimates of net ultimate losses of $ 63.1 million and a reduction in provisions for unallocated LAE of $ 11.2 million relating to 2019 run-off activity, partially offset by an increase in the fair value of liabilities of $ 38.0 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option, amortization of fair value adjustments over the estimated payout period relating to companies acquired of $ 7.7 million and amortization of the deferred charge assets of $ 3.9 million. The reduction in estimates of net ultimate losses relating to prior periods of $ 63.1 million for the three months ended June 30, 2019 included a net reduction in case and IBNR reserves of $ 371.3 million, partially offset by net losses paid of $ 308.2 million.

Six Months Ended June 30, 2020

The increase in net incurred losses and LAE for the six months ended June 30, 2020 of $ 29.4 million included net incurred losses and LAE of $ 15.9 million related to current period net earned premium, primarily for the run-off business acquired with the AmTrust RITC transactions. Excluding current period net incurred losses and LAE of $ 15.9 million, the increase in net incurred losses and LAE liabilities relating to prior periods was $ 13.5 million, which was attributable to an increase in the fair value of liabilities of $ 75.8 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option primarily due to declining interest rates on

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corporate bond yields in the period, amortization of the deferred charge assets of $ 25.7 million and amortization of fair value adjustments over the estimated payout period relating to companies acquired of $ 16.3 million, partially offset by a reduction in estimates of net ultimate losses of $ 84.4 million and a reduction in provisions for unallocated LAE of $ 19.9 million relating to 2020 run-off activity. The reduction in estimates of net ultimate losses relating to prior periods of $ 84.4 million for the six months ended June 30, 2020 included a net change in case and IBNR reserves of $ 625.8 million, partially offset by net losses paid of $ 541.3 million.

Six Months Ended June 30, 2019

The increase in net incurred losses and LAE for the six months ended June 30, 2019 of $ 104.9 million included net incurred losses and LAE of $ 83.4 million related to current period net earned premium, primarily for the run-off business acquired with the AmTrust RITC transactions and the acquisition of Maiden Re North America. Excluding current period net incurred losses and LAE of $ 83.4 million, the increase in net incurred losses and LAE liabilities relating to prior periods was $ 21.5 million, which was attributable to an increase in the fair value of liabilities of $ 94.0 million related to our assumed retroactive reinsurance agreements for which we have elected the fair value option, amortization of fair value adjustments over the estimated payout period relating to companies acquired of $ 16.5 million and amortization of the deferred charge assets of $ 11.0 million, partially offset by a reduction in estimates of net ultimate losses of $ 73.4 million and a reduction in provisions for unallocated LAE of $ 26.6 million relating to 2019 run-off activity. The reduction in estimates of net ultimate losses of $ 73.4 million for the six months ended June 30, 2019 included a net change in case and IBNR reserves of $ 712.7 million, partially offset by net losses paid of $ 639.3 million.

Atrium

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for the Atrium segment:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Balance as of beginning of period			$	243,610					$	229,380					$	231,672					$	241,284
Less: reinsurance reserves recoverable			33,435						31,682						28,816						38,768
Less: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)			—						—						851						—
Net balance as of beginning of period			210,175						197,698						202,005						202,516
Net incurred losses and LAE:
Current period			19,042						17,859						46,946						36,096
Prior periods			( 3,450 )						( 4,811 )						( 2,938 )						( 5,834 )
Total net incurred losses and LAE			15,592						13,048						44,008						30,262
Net paid losses:
Current period			( 5,002 )						( 7,251 )						( 9,287 )						( 15,144 )
Prior periods			( 9,217 )						( 10,526 )						( 21,940 )						( 24,946 )
Total net paid losses			( 14,219 )						( 17,777 )						( 31,227 )						( 40,090 )
Effect of exchange rate movement			933						1						( 2,305 )						282
Net balance as of June 30			212,481						192,970						212,481						192,970
Plus: reinsurance reserves recoverable (2)			27,250						29,606						27,250						29,606
Balance as of June 30			$	239,731					$	222,576					$	239,731					$	222,576

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.

⁽²⁾ Net of allowance for estimated uncollectible reinsurance.

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Net incurred losses and LAE in the Atrium segment were as follows:

			Three Months Ended June 30,
			2020																														2019
			Prior Period						Current Period						Total						Prior Period						Current Period						Total
Net losses paid			$	9,217					$	5,002					$	14,219					$	10,526					$	7,251					$	17,777
Net change in case and LAE reserves			( 4,191 )						4,986						795						( 3,830 )						4,089						259
Net change in IBNR reserves			( 8,344 )						9,054						710						( 11,320 )						6,519						( 4,801 )
Increase (reduction) in estimates of net ultimate losses			( 3,318 )						19,042						15,724						( 4,624 )						17,859						13,235
Amortization of fair value adjustments			( 132 )						—						( 132 )						( 187 )						—						( 187 )
Net incurred losses and LAE			$	( 3,450 )					$	19,042					$	15,592					$	( 4,811 )					$	17,859					$	13,048

Net change in case and LAE reserves comprises the movement during the period in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

Three Months Ended June 30, 2020 and 2019

Net incurred losses and LAE for the three months ended June 30, 2020 and 2019 were $ 15.6 million and $ 13.0 million, respectively. Net favorable prior period loss development was $ 3.5 million for the three months ended June 30, 2020 compared to $ 4.8 million for the three months ended June 30, 2019. The current period net favorable prior period loss development was driven by favorable development across several lines of business; notably, the non-marine direct and facultative line. Excluding prior period loss development, net incurred losses and LAE for the three months ended June 30, 2020 were $ 19.0 million and included $ 4.3 million of losses related to the COVID-19 pandemic. Excluding prior period loss development, net incurred losses and LAE for the three months ended June 30, 2019 were $ 17.9 million.

			Six Months Ended June 30,
			2020																														2019
			Prior Period						Current Period						Total						Prior Period						Current Period						Total
Net losses paid			$	21,940					$	9,287					$	31,227					$	24,946					$	15,144					$	40,090
Net change in case and LAE reserves			( 7,225 )						8,159						934						( 10,172 )						10,018						( 154 )
Net change in IBNR reserves			( 17,659 )						29,500						11,841						( 21,552 )						10,934						( 10,618 )
Increase (reduction) in estimates of net ultimate losses			( 2,944 )						46,946						44,002						( 6,778 )						36,096						29,318
Amortization of fair value adjustments			6						—						6						944						—						944
Net incurred losses and LAE			$	( 2,938 )					$	46,946					$	44,008					$	( 5,834 )					$	36,096					$	30,262

Six Months Ended June 30, 2020 and 2019

Net incurred losses and LAE for the six months ended June 30, 2020 and 2019 were $ 44.0 million and $ 30.3 million, respectively. Net favorable prior year loss development was $ 2.9 million and $ 5.8 million for the six months ended June 30, 2020 and 2019, respectively. The current period net favorable prior period loss development was driven by favorable development across several lines of business; notably, the non-marine direct and facultative line. Excluding prior period loss development, net incurred losses and LAE for the three months ended June 30, 2020 were $ 46.9 million and included $ 12.8 million of losses related to the COVID-19 pandemic. Excluding prior period loss development, net incurred losses and LAE for the three months ended June 30, 2019 were $ 36.1 million.

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StarStone

The table below provides a reconciliation of the beginning and ending liability for losses and LAE for our StarStone segment:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Balance as of beginning of period			$	1,353,824					$	1,274,345					$	1,318,294					$	1,247,989
Less: reinsurance reserves recoverable			408,306						294,001						355,194						303,381
Less: cumulative effect of change in accounting principal on allowance for estimated uncollectible reinsurance (1)			—						—						495						—
Net balance as of beginning of period			945,518						980,344						962,605						944,608
Net incurred losses and LAE:
Current period			87,273						82,657						163,680						172,262
Prior periods			( 12,840 )						36,632						( 14,811 )						85,974
Total net incurred losses and LAE			74,433						119,289						148,869						258,236
Net paid losses:
Current period			( 6,135 )						( 15,072 )						( 4,387 )						( 15,971 )
Prior periods			( 74,532 )						( 89,425 )						( 157,086 )						( 190,446 )
Total net paid losses			( 80,667 )						( 104,497 )						( 161,473 )						( 206,417 )
Effect of exchange rate movement			9,057						157						( 1,660 )						( 1,134 )
Net balance as of June 30			948,341						995,293						948,341						995,293
Plus: reinsurance reserves recoverable (2)			401,422						309,733						401,422						309,733
Balance as of June 30			$	1,349,763					$	1,305,026					$	1,349,763					$	1,305,026

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details. This amount excludes $ 0.4 million related to the adoption impact of ASU 2016-13 on StarStone US which has been classified as a discontinued operation with the related assets and liabilities disclosed as held-for-sale on our consolidated balance sheets.

⁽²⁾ Net of allowance for estimated uncollectible reinsurance.

Net incurred losses and LAE in the StarStone segment were as follows:

			Three Months Ended June 30,
			2020																														2019
			Prior Period						Current Period						Total						Prior Period						Current Period						Total
Net losses paid			$	74,532					$	6,135					$	80,667					$	89,425					$	15,072					$	104,497
Net change in case and LAE reserves			( 25,402 )						( 5,362 )						( 30,764 )						2,648						35,440						38,088
Net change in IBNR reserves			( 62,212 )						58,889						( 3,323 )						( 56,130 )						32,332						( 23,798 )
Increase (reduction) in estimates of net ultimate losses			( 13,082 )						59,662						46,580						35,943						82,844						118,787
Increase (reduction) in provisions for unallocated LAE			274						27,611						27,885						727						( 187 )						540
Amortization of fair value adjustments			( 32 )						—						( 32 )						( 38 )						—						( 38 )
Net incurred losses and LAE			$	( 12,840 )					$	87,273					$	74,433					$	36,632					$	82,657					$	119,289

Net change in case and LAE reserves comprises the movement during the period in specific case reserve liabilities as a result of claims settlements or changes advised to us by our policyholders and attorneys, less changes in case reserves recoverable advised by us to our reinsurers as a result of the settlement or movement of assumed claims. Net change in IBNR represents the gross change in our actuarial estimates of IBNR, less amounts recoverable.

Three Months Ended June 30, 2020 and 2019

Net incurred losses and LAE for the three months ended June 30, 2020 and 2019 were $ 74.4 million and $ 119.3 million, respectively. Net favorable prior period loss development was $ 12.8 million for the three months ended June 30, 2020 compared to net unfavorable prior period loss development of $ 36.6 million for the three months ended June 30, 2019. Net favorable prior period loss development for the three months ended June 30,

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Six Months Ended June 30, 2020 and 2019

Net incurred losses and LAE for the six months ended June 30, 2020 and 2019 were $ 148.9 million and $ 258.2 million, respectively. Net favorable prior period loss development was $ 14.8 million for the six months ended June 30, 2020 compared to net unfavorable prior period loss development of $ 86.0 million for the six months ended June 30, 2019. Net favorable prior period loss development for the six months ended June 30, 2020 was driven by favorable development in the casualty lines of business. Net unfavorable prior period loss development for the six months ended June 30, 2020 was primarily related to development on lines of business that we had either exited or had been subject to remediation as part of our underwriting repositioning initiatives before our decision to place StarStone International into run-off. Excluding prior period loss development, net incurred losses and LAE for the six months ended June 30, 2020 were $ 163.7 million and included $ 28.1 million of exit costs associated with the StarStone International Run-Off and $ 21.5 million related to the COVID-19 pandemic. Excluding prior period loss development, net incurred losses and LAE for the six months ended June 30, 2019 were $ 172.3 million.

10. DEFENDANT ASBESTOS AND ENVIRONMENTAL LIABILITIES

We acquired DCo LLC ("DCo") on December 30, 2016, and Morse TEC on October 30, 2019, as described in Note 3 - "Acquisitions" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019. DCo and Morse TEC hold liabilities associated with personal injury asbestos claims and environmental claims arising from their legacy manufacturing operations. These companies continue to process asbestos personal injury claims in the normal course of business. Defendant asbestos liabilities on our consolidated balance sheets include amounts for loss payments and defense costs for pending and future asbestos-related claims, determined using standard actuarial techniques for asbestos exposures. Defendant environmental liabilities include estimated clean-up costs associated with the acquired companies' former operations based on engineering reports.

Insurance balances recoverable on our consolidated balance sheets include estimated insurance recoveries relating to these liabilities. The recorded asset represents our assessment of the capacity of the insurance agreements to indemnify our subsidiaries for the anticipated defense and loss payments for pending claims and projected future claims. The recognition of these recoveries is based on an assessment of the right to recover under the respective contracts and on the financial strength of the insurers. The recorded asset does not represent the limits of our insurance coverage, but rather the amount we would expect to recover if the accrued and projected loss and defense costs were paid in full.

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fair value adjustments that were initially recognized upon acquisition. These fair value adjustments are amortized in proportion to the actual payout of claims and recoveries. The carrying value of the asbestos and environmental liabilities, insurance recoveries, future estimated expenses and the fair value adjustments related to DCo and Morse TEC as of June 30, 2020 and December 31, 2019 were as follows:

			June 30, 2020						December 31, 2019
Defendant asbestos and environmental liabilities:
Defendant asbestos liabilities			$	1,050,279					$	1,100,593
Defendant environmental liabilities			9,483						10,279
Estimated future expenses			48,634						51,637
Fair value adjustments			( 300,334 )						( 314,824 )
Defendant asbestos and environmental liabilities			808,062						847,685
Insurance balances recoverable:
Insurance recoveries related to defendant asbestos and environmental liabilities			523,123						549,593
Fair value adjustments			( 94,846 )						( 100,738 )
Insurance balances recoverable			428,277						448,855
Net liabilities relating to defendant asbestos and environmental exposures			$	379,785					$	398,830

The table below provides a consolidated reconciliation of the beginning and ending liability for defendant asbestos and environmental exposures for the three and six months ended June 30, 2020 and 2019:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Balance as of beginning of period			$	822,716					$	197,511					$	847,685					$	203,320
Less: Insurance balances recoverable			435,613						130,431						448,855						135,808
Plus: Cumulative effect of change in accounting principle on the determination of the allowance for estimated uncollectible insurance balances (1)			—						—						3,167						—
Net balance as of beginning of period			387,103						67,080						401,997						67,512
Total net paid claims			( 7,495 )						( 1,873 )						( 914 )						878
Amounts recorded in other (income) expense:
Change in estimate of ultimate net liabilities			( 1,978 )						( 3,100 )						( 26,893 )						( 4,259 )
Increase (reduction) in estimated future expenses			( 975 )						( 179 )						( 3,003 )						( 2,304 )
Amortization of fair value adjustments			3,130						100						8,598						201
Total other expense (income)			177						( 3,179 )						( 21,298 )						( 6,362 )
Net balance as at June 30			379,785						62,028						379,785						62,028
Plus: Insurance balances recoverable (2)			428,277						122,236						428,277						122,236
Balance as at June 30			$	808,062					$	184,264					$	808,062					$	184,264

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.

⁽²⁾ Net of allowance for estimated uncollectible insurance balances.

For further details on the methodologies used for determining liabilities, refer to Note 11 - "Defendant Asbestos and Environmental Liabilities" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Allowance for Estimated Uncollectible Insurance Balances Recoverable on Defendant Asbestos Liabilities

We evaluate and monitor the credit risk related to our insurers and an allowance for estimated uncollectible insurance balances recoverable on our defendant asbestos liabilities ("allowance for estimated uncollectible insurance") is established for amounts considered potentially uncollectible.

With respect to our process for determining the allowances for estimated uncollectible insurance, we adopted ASU 2016-13 and the related amendments on January 1, 2020 and recorded a cumulative effect adjustment of $ 3.2 million to reduce the opening retained earnings on the initial adoption of the guidance. Our allowance for estimated uncollectible insurance is derived based on various data sources, multiple key inputs and forecast scenarios. These include the duration of the collection period, credit quality, changes in insurer credit standing, default rates specific to the individual insurer, the geographical location of the insurer, contractual disputes with insurers over individual contentious claims, contract language or coverage issues, industry analyst reports and consensus economic forecasts.

To determine the allowance for estimated uncollectible insurance, we similarly use the PD and LGD methodology as described in Note 7 - "Reinsurance Balances Recoverable on Paid and Unpaid Losses" above.

During the three and six months ended June 30, 2020, we did not have any write-offs charged against the allowance for estimated uncollectible insurance or any recoveries of amounts previously written off. The table below provides a reconciliation of the beginning and ending allowance for estimated uncollectible insurance balances related to our defendant asbestos liabilities, for the three and six months ended June 30, 2020:

			Three Months Ended						Six Months Ended
			June 30, 2020						June 30, 2020
Allowance for estimated uncollectible insurance balances, beginning of period			$	6,985					$	3,818
Cumulative effect of change in accounting principle			—						3,167
Current period change in the allowance			1,361						1,361
Allowance for estimated uncollectible insurance balances, end of period			$	8,346					$	8,346

Fair Value Hierarchy

Fair value is defined as the price at which to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The hierarchy is broken down into three levels as follows:

• Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments.

• Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

• Level 3 - Valuations based on unobservable inputs where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values.

In addition, certain of our other investments are measured at fair value using net asset value ("NAV") per share (or its equivalent) as a practical expedient and have not been classified within the fair value hierarchy above. We have categorized our assets and liabilities that are recorded at fair value on a recurring basis among levels based on the observability of inputs, or at fair value using NAV per share (or its equivalent) as follows:

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Short-term and Fixed Maturity Investments

The fair values for all securities in the short-term and fixed maturity investments and funds held - directly managed portfolios are independently provided by the investment accounting service providers, investment managers and investment custodians, each of which utilize internationally recognized independent pricing services. We record the unadjusted price provided by the investment accounting service providers, investment managers or investment custodians and validate this price through a process that includes, but is not limited to: (i) comparison of prices against alternative pricing sources; (ii) quantitative analysis (e.g. comparing the quarterly return for each managed portfolio to its target benchmark); (iii) evaluation of methodologies used by external parties to estimate fair value, including a review of the inputs used for pricing; and (iv) comparing the price to our knowledge of the current investment market. Our internal price validation procedures and review of fair value methodology documentation provided by independent pricing services have not historically resulted in adjustment in the prices obtained from the pricing service.

The independent pricing services used by the investment accounting service providers, investment managers and investment custodians obtain actual transaction prices for securities that have quoted prices in active markets. Where we utilize single unadjusted broker-dealer quotes, they are generally provided by market makers or broker-dealers who are recognized as market participants in the markets for which they are providing the quotes. For determining the fair value of securities that are not actively traded, in general, pricing services use "matrix pricing" in which the independent pricing service uses observable market inputs including, but not limited to, reported trades, benchmark yields, broker-dealer quotes, interest rates, prepayment speeds, default rates and other such inputs as are available from market sources to determine a reasonable fair value.

The following describes the techniques generally used to determine the fair value of our short-term and fixed maturity investments by asset class, including the investments underlying the funds held - directly managed.

• U.S. government and agency securities consist of securities issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Non-U.S. government securities consist of bonds issued by non-U.S. governments and agencies along with supranational organizations. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. These are considered to be observable market inputs and, therefore, the fair values of these securities are classified as Level 2.

• Corporate securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark yields, and industry and market indicators. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2. Where pricing is unavailable from pricing services, such as in periods of low trading activity or when transactions are not orderly, we obtain non-binding quotes from broker-dealers. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.

• Municipal securities consist primarily of bonds issued by U.S.-domiciled state and municipal entities. The fair values of these securities are determined using the spread above the risk-free yield curve, reported trades, broker-dealer quotes and benchmark yields. These are considered observable market inputs and, therefore, the fair values of these securities are classified as Level 2.

• Asset-backed securities consist primarily of investment-grade bonds backed by pools of loans with a variety of underlying collateral. Residential and commercial mortgage-backed securities include both agency and non-agency originated securities. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. The significant inputs used to determine the fair value of these securities include the spread above the risk-free yield curve, reported trades, benchmark yields, prepayment speeds and default rates. The fair values of these securities are classified as Level 2 if the significant inputs are market observable. Where significant inputs are unable to be corroborated with market observable information, we classify the securities as Level 3.

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Equities

Our investments in equities consist of a combination of publicly and privately traded investments. Our publicly traded equity investments in common and preferred stocks predominantly trade on major exchanges and are managed by our external advisors. Our exchange-traded funds also trade on major exchanges. Our publicly traded equities are widely diversified and there is no significant concentration in any specific industry. We use an internationally recognized pricing service to estimate the fair value of our publicly traded equities and exchange-traded funds. We have categorized the majority of our publicly traded equity investments, other than preferred stock, and our exchange-traded funds as Level 1 investments because the fair values of these investments are based on unadjusted quoted prices in active markets for identical assets. One equity security is trading in an inactive market and, as a result has been classified as Level 2. The fair value estimates of our investments in publicly traded preferred stock are based on observable market data and, as a result, have been categorized as Level 2.

Other investments, at fair value

We have ongoing due diligence processes with respect to the other investments carried at fair value in which we invest and their managers. These processes are designed to assist us in assessing the quality of information provided by, or on behalf of, each fund and in determining whether such information continues to be reliable or whether further review is warranted. Certain funds do not provide full transparency of their underlying holdings; however, we obtain the audited financial statements for funds annually, and regularly review and discuss the fund performance with the fund managers to corroborate the reasonableness of the reported net asset values ("NAV").

The use of NAV as an estimate of the fair value for investments in certain entities that calculate NAV is a permitted practical expedient. Due to the time lag in the NAV reported by certain fund managers we adjust the valuation for capital calls and distributions. Other investments measured at fair value using NAV as a practical expedient have not been classified in the fair value hierarchy. Other investments for which we do not use NAV as a practical expedient have been valued using prices from independent pricing services, investment managers and broker-dealers.

The following describes the techniques generally used to determine the fair value of our other investments.

• For our investments in hedge funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

• Our investments in fixed income funds and equity funds are valued based on a combination of prices from independent pricing services, external fund managers or third-party administrators. For the publicly available prices we have classified the investments as Level 2. For the non-publicly available prices we are using NAV as a practical expedient and therefore these have not been categorized within the fair value hierarchy.

• For our investments in private equity funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

• We measure the fair value of our direct investment in CLO equities based on valuations provided by independent pricing services, our external CLO equity manager, and valuations provided by the broker or lead underwriter of the investment (the "broker"). The fair values measured using prices provided by independent pricing services have been classified as Level 2 and fair values using prices from brokers have been classified as Level 3 due to the use of unobservable inputs in the valuation and the limited number of

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relevant trades in secondary markets.

• For our investments in the CLO equity funds, we measure fair value by obtaining the most recently available NAV as advised by the external fund manager or third party administrator. The fair value of these investments is measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

• For our investments in private credit funds, we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair values of these investments are measured using the NAV as a practical expedient and therefore have not been categorized within the fair value hierarchy.

• Included within other is an investment in a real estate debt fund, for which we measure fair value by obtaining the most recently available NAV from the external fund manager or third-party administrator. The fair value of this investment is measured using the NAV as a practical expedient and therefore has not been categorized within the fair value hierarchy.

Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value due to changes in interest rates. Included within cash and cash equivalents are money market funds, fixed interest deposits and highly liquid fixed maturity investments purchased with an original maturity of three months or less.

The majority of our cash and cash equivalents included within the fair value hierarchy are comprised of money market and liquid reserve funds which have been categorized as Level 1. Fixed interest deposits and highly liquid fixed maturity investments with an original maturity of three months or less have been categorized as Level 2. Operating cash balances are not subject to the recurring fair value measurement guidance and are therefore excluded from the fair value hierarchy.

Insurance Contracts - Fair Value Option

The Company uses an internal model to calculate the fair value of the liability for losses and loss adjustment expenses and reinsurance balances recoverable on paid and unpaid losses for certain retroactive reinsurance contracts where we have elected the fair value option in our Non-life Run-off segment. The fair value was calculated as the aggregate of discounted cash flows plus a risk margin. The discounted cash flow approach uses (i) estimated nominal cash flows based upon an appropriate payment pattern developed in accordance with standard actuarial techniques and (ii) a discount rate based upon a high quality rated corporate bond plus a credit spread for non-performance risk. The model uses corporate bond rates across the yield curve depending on the estimated timing of the future cash flows and specific to the currency of the risk. The risk margin was calculated using the present value of the cost of capital. The cost of capital approach uses (i) projected capital requirements, (ii) multiplied by the risk cost of capital representing the return required for non-hedgeable risk based upon the weighted average cost of capital less investment income and (iii) discounted using the weighted average cost of capital.

Derivative Instruments

The fair values of our derivative instruments, as described in Note 6 - "Derivatives and Hedging Instruments" are classified as Level 2. The fair values are based upon prices in active markets for identical contracts.

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Level 3 Measurements and Changes in Leveling

Transfers into or out of levels are recorded at their fair values as of the end of the reporting period, consistent with the date of determination of fair value.

Investments

The following tables present a reconciliation of the beginning and ending balances for all investments measured at fair value on a recurring basis using Level 3 inputs:

																														Three Months Ended June 30, 2020
																														Privately-held Equities						Other Investments						Total
Beginning fair value																														$	267,012					$	314					$	267,326
Purchases																														34						—						34
Sales																														—						—						—
Total realized and unrealized gains																														3,954						—						3,954
Transfer out of Level 3 into Level 2																														—						—						—
Ending fair value																														$	271,000					$	314					$	271,314

			Three Months Ended June 30, 2019
			Fixed maturity investments																																										Privately-held Equities						Other Investments						Total
			Corporate						Residential mortgage-backed						Commercial mortgage-backed						Asset-backed
Beginning fair value			$	3,172					$	—					$	—					$	9,050					$	228,710					$	41,747					$	282,679
Purchases			90						—						—						—						—						11,995						12,085
Sales			( 381 )						—						—						( 9 )						—						—						( 390 )
Total realized and unrealized gains (losses)			( 40 )						—						( 145 )						2						684						( 3,290 )						( 2,789 )
Transfer into Level 3 from Level 2			2,871						102						1,515						15,049						—						—						19,537
Transfer out of Level 3 into Level 2			( 706 )						—						—						—						—						—						( 706 )
Ending fair value			$	5,006					$	102					$	1,370					$	24,092					$	229,394					$	50,452					$	310,416

																											Six Months Ended June 30, 2020
																														Privately-held Equities						Other Investments						Total
Beginning fair value																														$	265,799					$	87,869					$	353,668
Purchases																														1,392						37,092						38,484
Sales																														—						( 539 )						( 539 )
Total realized and unrealized gains (losses)																														3,809						( 40,368 )						( 36,559 )
Transfer into Level 3 from Level 2																														—						—						—
Transfer out of Level 3 into Level 2																														—						( 83,740 )						( 83,740 )
Ending fair value																														$	271,000					$	314					$	271,314

						Six Months Ended June 30, 2019
						Fixed maturity investments																																										Privately-held Equities						Other Investments						Total
						Corporate						Residential mortgage-backed						Commercial mortgage-backed						Asset-backed
Beginning fair value						$	37,386					$	—					$	7,389					$	9,121					$	228,710					$	39,367					$	321,973
Purchases						90						—						—						—						—						11,995						12,085
Sales						( 3,041 )						—						( 608 )						( 330 )						—						—						( 3,979 )
Total realized and unrealized gains (losses)						217						—						( 83 )						739						684						( 910 )						647
Transfer into Level 3 from Level 2						3,258						102						1,515						21,024						—						—						25,899
Transfer out of Level 3 into Level 2						( 32,904 )						—						( 6,843 )						( 6,462 )						—						—						( 46,209 )
Ending fair value						$	5,006					$	102					$	1,370					$	24,092					$	229,394					$	50,452					$	310,416

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Net realized and unrealized gains related to Level 3 assets in the tables above are included in net realized and unrealized gains (losses) in our unaudited condensed consolidated statements of earnings.

The securities transferred from Level 2 to Level 3 were transferred due to insufficient market observable inputs for the valuation of the specific assets. The transfers from Level 3 to Level 2 were based upon obtaining market observable information regarding the valuations of the specific assets.

Valuations Techniques and Inputs

The table below presents the quantitative information related to the fair value measurements for our privately held equity investments measured at fair value on a recurring basis using Level 3 inputs:

			Quantitative Information about Level 3 Fair Value Measurements
			Fair Value as of June 30, 2020						Valuation Techniques						Unobservable Input						Range (Average) (1)
			(in millions of U.S. dollars)
			$	245.3					Transactional value						Implied price per share at recent purchase transaction						13.50 - 13.85
			$	25.7					Cost as approximation of fair value						Cost as approximation of fair value
			$	271.0

⁽¹⁾ The average represents the arithmetic average of the inputs and is not weighted by the relative fair value.

The following table presents a reconciliation of the beginning and ending balances for all insurance contracts measured at fair value on a recurring basis using Level 3 inputs:

			Three Months Ended June 30,
			2020																														2019
			Liability for losses and LAE						Reinsurance balances recoverable						Net						Liability for losses and LAE						Reinsurance balances recoverable						Net
Beginning fair value			$	2,345,543					$	653,396					$	1,692,147					$	2,847,793					$	735,257					$	2,112,536
Assumed business			( 4,975 )						—						( 4,975 )						—						—						—
Incurred losses and LAE:
Reduction in estimates of ultimate losses			( 21,075 )						( 4,951 )						( 16,124 )						( 5,802 )						5,191						( 10,993 )
Reduction in unallocated LAE			( 3,299 )						—						( 3,299 )						( 4,011 )						—						( 4,011 )
Change in fair value			175,787						41,744						134,043						54,218						16,256						37,962
Total incurred losses and LAE			151,413						36,793						114,620						44,405						21,447						22,958
Paid losses			( 62,279 )						( 22,321 )						( 39,958 )						( 91,753 )						( 9,081 )						( 82,672 )
Effect of exchange rate movements			24,837						3,516						21,321						( 27,944 )						( 4,319 )						( 23,625 )
Ending fair value			$	2,454,539					$	671,384					$	1,783,155					$	2,772,501					$	743,304					$	2,029,197

Changes in fair value in the table above are included in net incurred losses and LAE in our consolidated statements of earnings.

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The following table presents the components of the net change in fair value:

						Three Months Ended June 30,
						2020						2019
Changes in fair value due to changes in:
Duration						$	3,702					$	5,839
Corporate bond yield						130,341						32,123
Change in fair value						$	134,043					$	37,962

			Six Months Ended June 30,
			2020																														2019
			Liability for losses and LAE						Reinsurance balances recoverable on paid and unpaid losses						Net						Liability for losses and LAE						Reinsurance balances recoverable on paid and unpaid losses						Net
Beginning fair value			$	2,621,122					$	695,518					$	1,925,604					$	2,874,055					$	739,591					$	2,134,464
Incurred losses and LAE:
Reduction in estimates of ultimate losses			( 35,514 )						( 8,122 )						( 27,392 )						( 12,956 )						1,705						( 14,661 )
Reduction in unallocated LAE			( 9,712 )						—						( 9,712 )						( 8,352 )						—						( 8,352 )
Change in fair value			110,983						35,177						75,806						131,679						37,676						94,003
Total incurred losses and LAE			65,757						27,055						38,702						110,371						39,381						70,990
Paid losses			( 143,442 )						( 38,435 )						( 105,007 )						( 207,613 )						( 36,323 )						( 171,290 )
Effect of exchange rate movements			( 88,898 )						( 12,754 )						( 76,144 )						( 4,312 )						655						( 4,967 )
Ending fair value			$	2,454,539					$	671,384					$	1,783,155					$	2,772,501					$	743,304					$	2,029,197

Changes in fair value in the table above are included in net incurred losses and LAE in our consolidated statements of earnings. The following table presents the components of the net change in fair value:

						Six Months Ended June 30,
						2020						2019
Changes in fair value due to changes in:
Duration						$	7,850					$	14,886
Corporate bond yield						66,249						79,117
Weighted cost of capital						( 5,048 )						—
Risk cost of capital						6,755						—
Change in fair value						$	75,806					$	94,003

Below is a summary of the quantitative information regarding the significant observable and unobservable inputs used in the internal model to determine fair value on a recurring basis:

June 30, 2020

December 31, 2019

Valuation Technique

Unobservable (U) and Observable (O) Inputs

Weighted Average

Weighted Average

Internal model

Corporate bond yield (O)

A rated

A rated

Internal model

Credit spread for non-performance risk (U)

0.2 %

0.2 %

Internal model

Risk cost of capital (U)

5.1 %

5.1 %

Internal model

Weighted average cost of capital (U)

8.25 %

8.5 %

Internal model

Duration - liability (U)

7.92 years

7.82 years

Internal model

Duration - reinsurance balances recoverable (U)

8.75 years

8.68 years

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The fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses may increase or decrease due to changes in the corporate bond rate, the credit spread for non-performance risk, the risk cost of capital, the weighted average cost of capital and the estimated payment pattern as described below:

• An increase in the corporate bond rate or credit spread for non-performance risk would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the corporate bond rate or credit spread for non-performance risk would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

• An increase in the weighted average cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the weighted average cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

• An increase in the risk cost of capital would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a decrease in the risk cost of capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

• The duration of the liability and recoverable is adjusted every period to reflect actual net payments during the period and expected future payments. An acceleration of the estimated payment pattern, a decrease in duration, would result in an increase in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses. Conversely, a deceleration of the estimated payment pattern, an increase in duration, would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

In addition, the estimate of the capital required to support the liabilities is based upon current industry standards for capital adequacy. If the required capital per unit of risk increases, then the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses would increase. Conversely, a decrease in required capital would result in a decrease in the fair value of the liability for losses and LAE and reinsurance balances recoverable on paid and unpaid losses.

Disclosure of Fair Values for Financial Instruments Carried at Cost

Senior Notes

As of June 30, 2020, our 4.50 % Senior Notes due 2022 (the "2022 Senior Notes") and our 4.95 % Senior Notes due 2029 (the "2029 Senior Notes" and, together with the 2022 Senior Notes, the "Senior Notes") were carried at amortized cost of $ 348.9 million and $ 493.9 million, respectively, while the fair value based on observable market pricing from a third party pricing service was $ 355.0 million and $ 526.1 million, respectively. The Senior Notes are classified as Level 2.

Insurance Contracts

Disclosure of fair value of amounts relating to insurance contracts is not required, except those for which we elected the fair value option, as described above.

Remaining Assets and Liabilities

Our remaining assets and liabilities were generally carried at cost or amortized cost, which due to their short-term nature approximates fair value as of June 30, 2020 and December 31, 2019.

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12. PREMIUMS WRITTEN AND EARNED

The following table provides a summary of premiums written and earned by segment and for our other activities:

			Three Months Ended June 30,																																										Six Months Ended June 30,
			2020																		2019																		2020																		2019
			Premiums Written						Premiums Earned						Premiums Written						Premiums Earned						Premiums Written						Premiums Earned						Premiums Written						Premiums Earned
Non-life Run-off
Gross			$	( 2,155 )					$	14,395					$	( 4,209 )					$	55,551					$	( 1,828 )					$	32,473					$	( 25,086 )					$	139,517
Ceded			( 1,048 )						( 3,878 )						800						( 7,081 )						801						( 5,926 )						2,499						( 14,373 )
Net			$	( 3,203 )					$	10,517					$	( 3,409 )					$	48,470					$	( 1,027 )					$	26,547					$	( 22,587 )					$	125,144
Atrium
Gross			$	48,631					$	48,152					$	43,788					$	41,884					$	106,468					$	95,985					$	97,773					$	85,270
Ceded			( 7,739 )						( 4,765 )						( 6,826 )						( 3,685 )						( 16,878 )						( 10,228 )						( 14,312 )						( 8,318 )
Net			$	40,892					$	43,387					$	36,962					$	38,199					$	89,590					$	85,757					$	83,461					$	76,952
StarStone
Gross			$	86,087					$	112,288					$	108,902					$	114,462					$	241,569					$	238,825					$	252,766					$	257,240
Ceded			( 9,165 )						( 29,452 )						( 5,495 )						( 16,140 )						( 57,841 )						( 58,375 )						( 37,703 )						( 28,996 )
Net			$	76,922					$	82,836					$	103,407					$	98,322					$	183,728					$	180,450					$	215,063					$	228,244
Other
Gross			$	6,829					$	6,795					$	460					$	6,013					$	2,944					$	9,468					$	1,324					$	12,686
Ceded			( 664 )						( 664 )						1						( 42 )						—						—						( 18 )						( 117 )
Net			$	6,165					$	6,131					$	461					$	5,971					$	2,944					$	9,468					$	1,306					$	12,569
Total
Gross			$	139,392					$	181,630					$	148,941					$	217,910					$	349,153					$	376,751					$	326,777					$	494,713
Ceded			( 18,616 )						( 38,759 )						( 11,520 )						( 26,948 )						( 73,918 )						( 74,529 )						( 49,534 )						( 51,804 )
Total			$	120,776					$	142,871					$	137,421					$	190,962					$	275,235					$	302,222					$	277,243					$	442,909

Gross premiums written for the three months ended June 30, 2020 and 2019 were $ 139.4 million and $ 148.9 million, respectively, a decrease of $ 9.5 million. The decrease was primarily due to a decrease in gross premiums written in our StarStone segment of $ 22.8 million, partially offset by increases in our Atrium and Non-life Run-off segments of $ 4.8 million and $ 2.1 million, respectively. The decrease in the StarStone segment was primarily due to underwriting restrictions put in place as a result of the COVID-19 pandemic, a policy cancellation as a result of the StarStone International Run-Off and our strategy to exit certain lines of business. The increase in the Atrium segment was driven by new opportunities to write new business and an increase in rates, partially offset by the impact of COVID-19 and underwriting actions to not renew certain contracts in the current period.

Gross premiums written for the six months ended June 30, 2020 and 2019 were $ 349.2 million and $ 326.8 million, respectively, an increase of $ 22.4 million. The increase was primarily due to a reduction in negative gross premiums written in our Non-life Run-off segment of $ 23.3 million and an increase in gross premiums written in our Atrium segment of $ 8.7 million, partially offset by a decrease in gross premiums written in our StarStone segment of $ 11.2 million. The negative gross premium written in the Non-life Run-off segment for the six months ended June 30, 2019 was due to premium adjustments on the acquired unearned premium primarily related to the run-off business assumed as a result of the AmTrust RITC transactions and the acquisition of Maiden Re North America. The increase in the Atrium segment was driven by new opportunities to write new business and an increase in rates, partially offset by the impact of COVID-19 and underwriting actions to not renew certain contracts in the current period. The decrease in the StarStone segment was driven primarily by underwriting restrictions put in place as a result of COVID-19 and our strategy to exit certain lines of business, partially off set by new business and rate improvements in certain lines.

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The following table presents a reconciliation of the beginning and ending goodwill and intangible assets for the six months ended June 30, 2020:

									Intangible assets
			Goodwill						Intangible assets with a definite life						Intangible assets with an indefinite life						Total						Total
Balance as of December 31, 2019			109,807						14,630						67,131						81,761						191,568
Impairment losses (StarStone International)			( 8,000 )						—						( 4,000 )						( 4,000 )						( 12,000 )
Amortization			—						( 1,016 )						—						( 1,016 )						( 1,016 )
Balance as of June 30, 2020			$	101,807					$	13,614					$	63,131					$	76,745					$	178,552

Goodwill

The changes in the goodwill by segment was as follows for the six months ended June 30, 2020:

			Non-life Run-Off						Atrium						StarStone						Total
Balance as of December 31, 2019:			$	62,959					$	38,848					$	8,000					$	109,807
Impairment losses (StarStone International)			—						—						( 8,000 )						( 8,000 )
Balance as of June 30, 2020:
Goodwill			62,959						38,848						8,000						109,807
Accumulated impairment losses			—						—						( 8,000 )						( 8,000 )
			$	62,959					$	38,848					$	—					$	101,807

On June 10, 2020, we announced the StarStone International Run-Off. During the three and six months ended June 30, 2020, we recognized a full impairment loss of $ 8.0 million related to the goodwill allocated to StarStone International.

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Intangible Assets

The gross carrying value, accumulated amortization and net carrying value of intangible assets by segment and by type as of June 30, 2020 and December 31, 2019 was as follows:

			June 30, 2020																														December 31, 2019
			Gross carrying value						Accumulated amortization						Net carrying value						Gross carrying value						Accumulated amortization						Net carrying value
Atrium segment:
Intangible assets with a definite life:
Distribution channel			$	20,000					$	( 8,777 )					$	11,223					$	20,000					$	( 8,111 )					$	11,889
Brand			7,000						( 4,609 )						2,391						7,000						( 4,259 )						2,741
Intangible assets with an indefinite life:
Lloyd’s syndicate capacity			33,031						—						33,031						33,031						—						33,031
Management contract			30,100						—						30,100						30,100						—						30,100
Total Atrium segment intangible assets			$	90,131					$	( 13,386 )					$	76,745					$	90,131					$	( 12,370 )					$	77,761
StarStone segment:
Intangible assets with an indefinite life:
Lloyd’s syndicate capacity			4,000						( 4,000 )						—						4,000						—						4,000
Total intangible assets			$	94,131					$	( 17,386 )					$	76,745					$	94,131					$	( 12,370 )					$	81,761

Atrium

The definite-lived assets are amortized on a straight-line basis over a period ranging from ten to fifteen years . The following table presents the amortization recorded on the intangible assets:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Intangible asset amortization			$	508					$	565					$	1,016					$	1,130

The estimated future amortization expense related to Atrium's intangible assets is as follows:

Year																		Total
2020																		$	1,017
2021																		2,033
2022																		2,033
2023																		1,975
2024																		1,333
2025 and thereafter																		5,223
Total future estimated amortization expense																		$	13,614

StarStone

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14. DEBT OBLIGATIONS AND CREDIT FACILITIES

We primarily utilize debt facilities for funding acquisitions and for significant new business, investment activities and, from time to time, for general corporate purposes. Our debt obligations were as follows:

Facility						Origination Date						Term						June 30, 2020						December 31, 2019
4.50 % Senior Notes due 2022						March 10, 2017						5 years						$	348,886					$	348,616
4.95 % Senior Notes due 2029						May 28, 2019						10 years						493,893						493,600
Total Senior Notes																		842,779						842,216
EGL Revolving Credit Facility						August 16, 2018						5 years						350,000						—
2018 EGL Term Loan Facility						December 27, 2018						3 years						349,243						348,991
Total debt obligations																								$	1,542,022					$	1,191,207

During the six months ended June 30, 2020, we utilized $ 364.0 million and repaid $ 14.0 million under our facilities. The facilities were utilized for funding significant new business as described in Note 3 - "Significant New Business" and providing additional liquidity to the Company to maximize financial flexibility following the recent disruption in global financial markets associated with the COVID-19 pandemic.

The table below provides a summary of the total interest expense:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Interest expense on debt obligations			$	13,675					$	12,754					$	26,870					$	23,207
Amortization of debt issuance costs			343						282						563						555
Funds withheld balances and other			—						—						—						310
Total interest expense			$	14,018					$	13,036					$	27,433					$	24,072

Senior Notes

4.50 % Senior Notes due 2022

On March 10, 2017, we issued the 2022 Senior Notes for an aggregate principal amount of $ 350.0 million. The 2022 Senior Notes pay 4.5 % interest semi-annually and mature on March 10, 2022. The 2022 Senior Notes are unsecured and unsubordinated obligations that rank equal to any of our other unsecured and unsubordinated obligations, senior to any future obligations that are expressly subordinated to the 2022 Senior Notes, effectively subordinate to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally subordinate to all liabilities of our subsidiaries.

The 2022 Senior Notes are rated BBB- and are redeemable at our option on a make whole basis at any time prior to the date that is one month prior to the maturity of the 2022 Senior Notes. On or after the date that is one month prior to the maturity of the 2022 Senior Notes, the notes are redeemable at a redemption price equal to 100 % of the principal amount of the 2022 Senior Notes to be redeemed.

We incurred costs of $ 2.9 million in issuing the 2022 Senior Notes. These costs included underwriters’ fees, legal and accounting fees, and other fees, and are capitalized and presented as a direct deduction from the principal amount of debt obligations in the consolidated balance sheets. These costs are amortized over the term of the 2022 Senior Notes and are included in interest expense in our consolidated statements of earnings. The unamortized costs as of June 30, 2020 and December 31, 2019 were $ 1.1 million and $ 1.4 million, respectively.

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4.95 % Senior Notes due 2029

On May 28, 2019, we issued the 2029 Senior Notes for an aggregate principal amount of $ 500.0 million. The 2029 Senior Notes pay 4.95 % interest semi-annually and mature on June 1, 2029. The 2029 Senior Notes are unsecured and unsubordinated obligations that rank equal to any of our other unsecured and unsubordinated obligations, senior to any future obligations that are expressly subordinated to the 2029 Senior Notes, effectively subordinate to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness, and contractually subordinate to all liabilities of our subsidiaries.

The 2029 Senior Notes are rated BBB- and are redeemable at our option on a make whole basis at any time prior to the date that is three months prior to the maturity of the 2029 Senior Notes. On or after the date that is three months prior to the maturity of the 2029 Senior Notes, the notes are redeemable at a redemption price equal to 100 % of the principal amount of the notes to be redeemed.

We incurred costs of $ 6.8 million in issuing the 2029 Senior Notes. These costs included underwriters’ fees, legal and accounting fees, and other fees, and are capitalized and presented as a direct deduction from the principal amount of debt obligations in the consolidated balance sheets. These costs are amortized over the term of the 2029 Senior Notes and are included in interest expense in our consolidated statements of earnings. The unamortized costs as of June 30, 2020 and December 31, 2019 were $ 6.1 million and $ 6.4 million, respectively.

EGL Revolving Credit Facility

On August 16, 2018, we and certain of our subsidiaries, as borrowers and guarantors, entered into a new five-year unsecured $ 600.0 million revolving credit agreement. The revolving credit agreement expires in August 2023 and we have the option to increase the commitments under the facility by up to an aggregate amount of $ 400.0 million from the existing lenders, or through the addition of new lenders subject to the terms of the agreement. Borrowings under the facility will bear interest at a rate based on the Company's long term senior unsecured debt ratings.

As of June 30, 2020, we were permitted to borrow up to an aggregate of $ 600.0 million under the facility. As of June 30, 2020, there was $ 250.0 million of available unutilized capacity under the facility. Subsequent to June 30, 2020, we have neither borrowed nor repaid any additional amounts under the facility, as such the unutilized capacity remains at $ 250.0 million.

Interest is payable at least every month at either the alternate base rate ("ABR") or LIBOR plus a margin as set forth in the revolving credit agreement. The margin could vary based upon any change in our long term senior unsecured debt rating assigned by Standard & Poor's ("S&P") or Fitch. We also pay a commitment fee based on the average daily unutilized portion of the facility. If an event of default occurs, the interest rate may increase and the agent may, and at the request of the required lenders shall, cancel lender commitments and demand early repayment.

2018 EGL Term Loan Facility

On December 27, 2018, we entered into and fully utilized a three-year $ 500.0 million unsecured term loan (the "2018 EGL Term Loan Facility"). The proceeds were partially used to fund the acquisition of Maiden Re North America. We have the option to increase the principal amount of the term loan credit facility up to an aggregate amount of $ 150.0 million from the existing lenders or through the addition of new lenders, subject to the terms of the term loan credit agreement. During 2019, we repaid $ 150.0 million of principal on the facility, bringing the outstanding loan amount to $ 349.2 million, which includes unamortized issuance costs of $ 0.8 million, as of June 30, 2020.

Interest is payable at least every three months at either ABR or LIBOR plus a margin set forth in the term loan credit agreement. The margin could vary based upon any change in our long term senior unsecured debt rating assigned by S&P or Fitch. During the existence of an event of default, the interest rate may increase and the agent may, and at the request of the required lenders shall, demand early repayment.

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We incurred costs of $ 1.5 million associated with closing the 2018 EGL Term Loan Facility. These costs included bank, legal and accounting fees, and other fees, and are capitalized and presented as a direct deduction from the principal amount of debt obligations in the consolidated balance sheets. These costs are amortized over the term of the facility and are included in general and administrative expenses in our consolidated statements of earnings. The unamortized costs as of June 30, 2020 and December 31, 2019 were $ 0.8 million and $ 1.0 million, respectively.

Refer to Note 15 - "Debt Obligations and Credit Facilities" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 for further information on the terms of the above facilities.

Letters of Credit

We utilize unsecured and secured letters of credit to support certain of our insurance and reinsurance performance obligations.

Funds at Lloyd's

We have an unsecured letter of credit agreement for Funds at Lloyd's ("FAL Facility") to issue up to $ 375.0 million of letters of credit, with provision to increase the facility by an additional $ 25.0 million up to an aggregate amount of $ 400.0 million, subject to lenders approval. On November 6, 2019, we amended and restated the FAL Facility to extend its term by one year . The FAL Facility is available to satisfy our Funds at Lloyd's requirements and expires in 2023. As of June 30, 2020 and December 31, 2019, our combined Funds at Lloyd's were comprised of cash and investments of $ 574.1 million and $ 639.3 million, respectively, and unsecured letters of credit of $ 252.0 million as of both dates.

$ 120.0 million Letter of Credit Facility

We use this facility to support certain reinsurance collateral obligations of our subsidiaries. On December 6, 2019, we reduced the facility size from $ 170.0 million to $ 120.0 million. Pursuant to the facility agreement, we have the option to increase commitments under the facility by an additional $ 60.0 million. As of both June 30, 2020 and December 31, 2019, we had issued an aggregate amount of letters of credit under this facility of $ 115.3 million.

$ 800.0 million Syndicated Letter of Credit Facility

During 2019, we entered into an unsecured $ 760.0 million letter of credit facility agreement, most recently amended on June 3, 2020. On August 4, 2020, we exercised our option to increase the commitments available under the facility by an aggregate amount of $ 40.0 million, bringing the total size of the facility to $ 800.0 million. The facility is used to post letters of credit to collateralize reinsurance performance obligations to various parties, including $ 447.4 million relating to the reinsurance transaction with Maiden Reinsurance Ltd. ("Maiden Re Bermuda"). As of June 30, 2020 and December 31, 2019, we had issued an aggregate amount of letters of credit under this facility of $ 594.1 million and $ 608.0 million, respectively.

$ 65.0 million Letter of Credit Facility

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Redeemable Noncontrolling Interest

RNCI as of June 30, 2020 and December 31, 2019 comprised the ownership interests held by the Trident V Funds ("Trident") ( 39.3 %) and Dowling Capital Partners, L.P. ("Dowling") ( 1.7 %) in our subsidiary North Bay Holdings Limited ("North Bay"). North Bay owns our investments in Atrium and StarStone.

The following is a reconciliation of the beginning and ending carrying amount of the equity attributable to the RNCI:

						Three Months Ended																		Six Months Ended
						June 30,																		June 30,
						2020						2019						2020						2019
Balance at beginning of period						$	392,773					$	456,346					$	438,791					$	458,543
Dividends paid						—						( 11,556 )						—						( 11,556 )
Net losses attributable to RNCI						( 20,140 )						( 2,917 )						( 52,099 )						( 5,461 )
Accumulated other comprehensive earnings attributable to RNCI						10,543						70						6,373						155
Foreign currency translation adjustments						( 165 )						—						( 165 )						—
Change in redemption value of RNCI						( 16,478 )						( 6,247 )						( 26,628 )						( 5,985 )
Cumulative effect of change in accounting principle attributable to RNCI (1)						—						—						261						—
Balance at end of period						$	366,533					$	435,696					$	366,533					$	435,696

⁽¹⁾ The Company adopted ASU 2016-13 and the related amendments on January 1, 2020. Refer to Note 1 - "Significant Accounting Policies" for further details.

We carried the RNCI at its estimated redemption value, which is fair value, as of June 30, 2020 and December 31, 2019. The decrease was attributable to $ 52.1 million of net losses primarily related to StarStone during the six months ended June 30, 2020 resulting from exit costs associated with the decision to place StarStone International into run-off; and $ 26.6 million due to change in redemption value. The redemption value decreased as a result of the StarStone International Run-Off decision and the agreement to sell StarStone U.S.

Noncontrolling Interest

As of June 30, 2020 and December 31, 2019, we had $ 13.6 million and $ 14.2 million, respectively, of NCI related to external interests in three of our subsidiaries. A reconciliation of the beginning and ending carrying amount of the equity attributable to NCI is included in the unaudited condensed consolidated statement of changes in shareholders equity.

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16. SHARE CAPITAL

Refer to Note 17 - "Share Capital" to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information on our share capital.

Dividends Declared and Paid

The following table details the dividends that have been declared and paid on our Series D and E Preferred Shares for the period from January 1, 2020 to August 10, 2020:

																								Dividend per:
Preferred Share Series						Date Declared						Record Date						Date Paid or Payable						Preferred Share						Depositary Share						Total dividends paid in the six months ended June 30, 2020
																								(in U.S. dollars)																		(in thousands of U.S. dollars)
Series D						February 4, 2020						February 15, 2020						March 2, 2020						$	437.50					$	0.43750					$	7,000
Series E						February 4, 2020						February 15, 2020						March 2, 2020						$	437.50					$	0.43750					1,925
Series D						May 5, 2020						May 15, 2020						June 1, 2020						$	437.50					$	0.43750					7,000
Series E						May 5, 2020						May 15, 2020						June 1, 2020						$	437.50					$	0.43750					1,925
Series D						August 5, 2020						August 15, 2020						September 1, 2020						$	437.50					$	0.43750					—
Series E						August 5, 2020						August 15, 2020						September 1, 2020						$	437.50					$	0.43750					—
																																				$	17,850

Share Repurchases

On March 9, 2020, our Board of Directors adopted a stock trading plan for the purpose of repurchasing a limited number of our Company’s ordinary shares, not to exceed $ 150.0 million in aggregate (the "Repurchase Program"). On March 23, 2020, we suspended our Repurchase Program due to uncertainty in the global financial markets resulting from the COVID-19 pandemic. From inception to March 23, 2020, we repurchased 92,510 ordinary shares for an aggregate price of $ 12.5 million under the Repurchase Program. The average price paid per share repurchased was $ 135.40 .

Joint Share Ownership Plan

On January 21, 2020, 565,630 Voting Ordinary Shares were issued to the trustee of the Enstar Group Limited Employee Benefit Trust (the "EB Trust"). Voting rights in respect of shares held in the EB Trust have been contractually waived. We have consolidated the EB Trust, and shares held in the EB Trust are classified like treasury shares as contra-equity in our consolidated balance sheet.

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17. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net earnings per ordinary share:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Numerator:
Earnings (losses) attributable to Enstar ordinary shareholders:
Net earnings from continuing operations			$	799,232					$	234,168					$	283,632					$	588,160
Net earnings (loss) from discontinued operations (3)			( 679 )						( 2,326 )						( 1,900 )						2,433
Net earnings attributable to Enstar ordinary shareholders:			$	798,553					$	231,842					$	281,732					$	590,593
Denominator:
Weighted-average ordinary shares outstanding — basic (1)			21,565,240						21,477,772						21,557,542						21,470,675
Effect of dilutive securities:
Share-based compensation plans (2)			185,300						138,464						177,264						131,798
Warrants			38,702						59,215						53,525						59,296
Weighted-average ordinary shares outstanding — diluted			21,789,242						21,675,451						21,788,331						21,661,769
Earnings (loss) per ordinary share attributable to Enstar:
Basic:
Net earnings from continuing operations			$	37.06					$	10.90					$	13.16					$	27.40
Net earnings (loss) from discontinued operations			( 0.03 )						( 0.11 )						( 0.09 )						0.11
Net earnings per ordinary share			$	37.03					$	10.79					$	13.07					$	27.51
Diluted:
Net earnings from continuing operations			$	36.68					$	10.81					$	13.02					$	27.15
Net earnings (loss) from discontinued operations			( 0.03 )						( 0.11 )						( 0.09 )						0.11
Net earnings per ordinary share			$	36.65					$	10.70					$	12.93					$	27.26

⁽¹⁾ Weighted-average ordinary shares for basic earnings per share includes ordinary shares (voting and non-voting) but excludes ordinary shares held in the EB Trust in respect of JSOP awards.

⁽²⁾ Share-based dilutive securities include restricted shares, restricted share units, and performance share units. Certain share-based compensation awards, including the ordinary shares held in the EB Trust in respect of JSOP awards, were excluded from the calculation for the three and six months ended June 30, 2020 because they were anti-dilutive.

⁽³⁾ Net earnings (loss) from discontinued operations attributable to Enstar ordinary shareholders equals net earnings (loss) from discontinued operations, net of income taxes, plus net loss (earnings) from discontinued operations attributable to noncontrolling interest; refer to Note 4 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for a breakdown by period.

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18. SHARE-BASED COMPENSATION

We provide various employee benefits including share-based compensation, an employee share purchase plan and an annual incentive compensation program. These are described in Note 19 - "Share-Based Compensation and Pensions" to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

The table below provides a summary of the compensation costs for all of our share-based compensation plans:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Share-based compensation plans:
Restricted shares and restricted share units			$	2,330					$	1,289					$	3,929					$	3,132
Performance share units			5,855						11,130						5,188						12,455
Cash-settled stock appreciation rights			( 316 )						( 267 )						( 3,475 )						( 211 )
Joint share ownership plan expense			1,133						—						2,005						—
Other share-based compensation plans:
Northshore incentive plan			( 25 )						986						447						2,032
StarStone incentive plan			—						—						( 223 )						—
Deferred compensation and ordinary share plan for non-employee directors			93						49						959						876
Employee share purchase plan			104						104						208						207
Total share-based compensation			$	9,174					$	13,291					$	9,038					$	18,491

Interim Tax Calculation Method

We use the estimated annual effective tax rate method for computing our interim tax provision. This method applies our best estimate of the effective tax rate expected for the full year to our year-to-date earnings before income taxes. We provide for income tax expense or benefit based upon our pre-tax earnings and the provisions of currently enacted tax laws. Certain items deemed to be unusual, infrequent or not reliably estimated are excluded from the estimated annual effective tax rate. In the event such items are identified, the actual tax expense or benefit is reported in the same period as the related item. Certain other items are not included in the estimated annual effective tax rate, such as changes in the assessment of valuation allowance on deferred tax assets and uncertain tax positions, if any.

Interim Tax Expense

The effective tax rates on income for the three months ended June 30, 2020 and 2019 were 2.1 % and 3.1 %, respectively. The effective tax rates on income for the six months ended June 30, 2020 and 2019 were 4.4 % and 2.0 %, respectively. The effective tax rate on income differs from the statutory rate of 0 % due to tax on foreign operations, primarily the U.S. and the U.K.

We have foreign operating subsidiaries and branch operations principally located in the U.S., U.K., Continental Europe and Australia that are subject to federal, foreign, state and local taxes in those jurisdictions. Deferred tax lia bilities have not been accrued with respect to the undistributed earnings of our foreign subsidiaries. If the earnings were to be distributed, as dividends or other distributions, withholding taxes may be imposed by the jurisdiction of the paying subsidiary. For our U.S. subsidiaries, we have not currently accrued any withholding taxes with respect to unremitted earnings as management has indefinitely reinvested these earnings. For our U.K. subsidiaries, there are no withholding taxes imposed. For our other foreign subsidiaries, it would not be practicable to compute such amounts due to a variety of factors, including the amount, timing, and manner of any repatriation. Because we operate in many jurisdictions, our net earnings are subject to risk due to changing tax laws and tax rates around the world. The current, rapidly changing economic environment may increase the likelihood of substantial changes to tax laws in the jurisdictions in which we operate.

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Assessment of Valuation Allowance on Deferred Tax Assets

We have estimated the future taxable income of our foreign subsidiaries and have provided a valuation allowance in respect of loss carryforwards where we do not expect to realize a benefit. We have considered all available evidence using a "more likely than not" standard in determining the amount of the valuation allowance. During the three and six months ended June 30, 2020, we have maintained a valuation allowance for deferred tax assets which management does not believe meet the "more likely than not" criteria.

Unrecognized Tax Benefits

There were no unrecognized tax benefits as of June 30, 2020 and December 31, 2019.

Tax Examinations

Our operating subsidiaries may be subject to audit by various tax authorities and may have different statutes of limitations expiration dates. With limited exceptions, our major subsidiaries that operate in the U.S., U.K. and Australia are no longer subject to tax examinations for years before 2015.

Through several private transactions occurring from May 2012 to July 2012 and an additional private transaction that closed in May 2018, investment funds managed by Stone Point Capital LLC ("Stone Point") have acquired an aggregate of 1,635,986 of our Voting Ordinary Shares (which constitutes approximately 8.8 % of our outstanding Voting Ordinary Shares). On November 6, 2013, we appointed James D. Carey to our Board of Directors. Mr. Carey is the sole member of an entity that is one of four general partners of the entities serving as general partners for Trident, is a member of the investment committees of such general partners, and is a member and senior principal of Stone Point, the manager of the Trident funds.

In addition, we have entered into certain agreements with Trident with respect to Trident’s co-investments in the Atrium, Arden, and StarStone acquisitions. These include investors’ agreements and shareholders’ agreements (most recently amended on June 14, 2020), which provide for, among other things: (i) our right to redeem Trident’s equity interest in the Atrium/Arden and StarStone transactions in cash at fair market value at any time following March 31, 2023 (the "Call Right"); and (ii) Trident’s right to have its equity co-investment interests in the Atrium/Arden and StarStone transactions redeemed by us at fair market value (which we may satisfy in either cash or our ordinary shares) following December 31, 2022 (the "Put Right").

Following the consummation of the StarStone U.S. transaction described in Note 4 – “Divestitures, Held-for-Sale Businesses and Discontinued Operations” (the “Sale Transaction”): (a) we will have the right to exercise the Call Right separately with respect to (1) Trident’s interests in North Bay, (2) Trident’s indirect interest in North Bay’s equity interest in the StarStone U.S. business received in the Sale Transaction (the “StarStone U.S. Equity Interest”) and (3) Trident’s indirect interest in the business included in the StarStone International Run-off; and (b) Trident will have the right to exercise its Put Right separately with respect to (1) its interest in North Bay, (2) its indirect interest in the StarStone U.S. Equity Interest, and (3) its indirect interest in the business included in the StarStone International Runoff.

However, if neither the Sale Transaction nor a proposed future reorganization of North Bay (the “Reorganization” and, together with the Sale Transaction, the “Transactions”) are consumed by April 1, 2021, the date associated with the Call Right and the Put Right would instead be April 1, 2021 and clauses (a)(2), (a)(3), (b)(2) and (b)(3) above would no longer apply. If the Sale Transaction is consummated, but a Reorganization transaction is not agreed and consummated by (x) December 31, 2020, then, any time after that date, Trident will have the right to require us to purchase its indirect interest in the StarStone U.S. Equity Interest or (y) April 1, 2021, then, any time after that date, we will have the right to purchase Trident’s indirect interest in the StarStone U.S. Equity Interest.

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Pursuant to the terms of the shareholders’ agreements, Mr. Carey serves as a Trident representative on the boards of the holding companies, including North Bay, established in connection with the Atrium/Arden and StarStone co-investment transactions. Trident also has a second representative on these boards who is a Stone Point employee.

We, in partnership with StarStone's other shareholders, have recently completed two transactions to provide capital support to StarStone in the form of:

(i) a contribution to its contributed surplus account and a loss portfolio transfer, effective October 1, 2018. To fund the transaction, the North Bay shareholders contributed an aggregate amount of $ 135.0 million to North Bay in proportion to their ownership interests. Trident’s proportionate contribution of $ 53.1 million was temporarily funded by North Bay and was reimbursed in the first quarter of 2019; and

(ii) a loss portfolio transfer, effective April 1, 2019, for which shareholders agreed to contribute an aggregate amount of $ 48.0 million.

In addition, Enstar has separately entered into a loss portfolio transfer and adverse development cover with StarStone effective October 1, 2019, whereby StarStone transferred $ 189.4 million in loss reserves and unearned premium to a wholly-owned Enstar subsidiary in exchange for premium of $ 189.4 million. Enstar also provided an additional $ 59.0 million adverse development cover in excess of the $ 189.4 million.

The RNCI on our balance sheet relating to these Trident co-investment transactions was as follows:

			June 30, 2020						December 31, 2019
Redeemable Noncontrolling Interest			$	351,253					$	420,499

As of June 30, 2020, we had the following additional relationships with Stone Point and its affiliates:

• Investments in funds (carried within other investments) managed by Stone Point, with respect to which we recognized net unrealized gains (losses);

• Investments in registered investment companies affiliated with entities owned by Trident or otherwise affiliated with Stone Point, with respect to which we recognized net unrealized gains (losses) and interest income;

• Separate accounts managed by Eagle Point Credit Management, PRIMA Capital Advisors and SKY Harbor Capital Management, which are affiliates of entities owned by Trident, with respect to which we incurred management fees;

• Investments in funds (carried within other investments) managed by Sound Point Capital, an entity in which Mr. Carey has an indirect minority ownership interest and serves as a director, with respect to which we recognized net unrealized gains (losses);

• Sound Point Capital has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;

• Marble Point Capital, which is an affiliate of an entity owned by Trident, has acted as collateral manager for certain of our direct investments in CLO debt and equity securities, with respect to which we recognized net unrealized gains (losses) and interest income;

• A separate account managed by Sound Point Capital, with respect to which we incurred management fees in prior periods;

• In the fourth quarter of 2018, we invested $ 25.0 million in Mitchell TopCo Holdings, the parent company of Mitchell International and Genex Services, as a co-investor alongside certain Trident funds; and

• In the second quarter of 2020, we invested $ 10.0 million in a 2.5 year senior secured unrated floating rate term loan facility formed and managed by Sound Point Capital. The facility's borrower, Amplify U.S. Inc., is a subsidiary of Evergreen (as defined below) and has used the proceeds to purchase AmTrust preferred stock. The facility ranks senior to all other claims of the borrower, the purchased preferred stock and cash flows therefrom serve as collateral, and AmTrust has provided an unsecured guarantee for the facility. For further information on our relationships with Evergreen and AmTrust, refer to the AmTrust section below.

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The following table presents the amounts included in our consolidated balance sheet related to our related party transactions with Stone Point and its affiliated entities:

			June 30, 2020						December 31, 2019
Short-term investments, AFS, at fair value			$	1,598					$	1,431
Fixed maturities, trading, at fair value			207,570						269,131
Fixed maturities, AFS, at fair value			209,803						160,303
Equities, at fair value			89,069						121,794
Other investments, at fair value:
Hedge funds			17,925						18,993
Fixed income funds			325,482						381,449
Private equity funds			28,335						34,858
CLO equities			30,126						32,560
CLO equity funds			123,299						87,509
Private Debt			15,815						16,312
Real estate fund			21,586						18,106
Cash and cash equivalents			11,472						54,080
Other assets			10,574						10
Other liabilities			1,193						4,710

The following table presents the amounts included in net earnings related to our related party transactions with Stone Point and its affiliated entities:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Net investment income			$	4,793					$	1,563					$	8,877					$	2,752
Net realized and unrealized (losses) gains			29,729						9,564						( 72,787 )						29,747
Total net (losses) earnings			$	34,522					$	11,127					$	( 63,910 )					$	32,499

We have made direct investments in in funds (the “Hillhouse Funds”) managed by Hillhouse Capital Management, Ltd. and Hillhouse Capital Advisors, Ltd. (together, “Hillhouse Capital”) and AnglePoint Asset Management Ltd. ("AnglePoint"). As of June 30, 2020, our carrying value of our direct investment the InRe Fund, L.P. (the "InRe Fund"), which is managed by AnglePoint, was $ 1.5 billion with the InRe Fund's assets being invested in approximately 22 % in fixed income securities, 16 % in North American equities, 54 % in international equities and 8 % in financing, derivatives and other items.

As of June 30, 2020 and December 31, 2019 our equity method investee, Enhanzed Reinsurance Ltd. ("Enhanzed Re"), had investments in a fund managed by AnglePoint, as set forth in the table below.

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Our consolidated balance sheet included the following balances related to transactions with Hillhouse Capital and AnglePoint (as applicable):

			June 30, 2020						December 31, 2019
Investments in funds managed by AnglePoint, held by Enhanzed Re			$	522,207					$	327,799
Our ownership of equity method investments			47.4		%				47.4		%
Our share of Investments in funds managed by AnglePoint held by Enhanzed Re (through our ownership of equity method investments)			$	247,526					$	155,377
Investment in other funds managed by Hillhouse Capital and AnglePoint:
InRe Fund			$	1,534,329					$	918,633
Other funds			268,353						232,968
			$	1,802,682					$	1,151,601

The increase in the investment in the Hillhouse Funds was primarily due to additional subscriptions of $ 300.0 million and unrealized gains for the six months ended June 30, 2020. We incurred management and performance fees of approximately $ 131.7 million, included within the Hillhouse Funds' reported NAV, for the six months ended June 30, 2020 in relation to the investment in funds managed by Hillhouse Capital and AnglePoint as described above.

Monument Insurance Group Limited ("Monument") was established in October 2016 and Enstar has invested a total of $ 59.6 million in the common and preferred shares of Monument as at June 30, 2020 (December 31, 2019: $ 26.6 million) for an interest of approximately 26.6 % (December 31, 2019: 26.6 %). In connection with our investment in Monument, we entered into a Shareholders Agreement with the other shareholders. We have accounted for our equity interest in Monument as an equity method investment as we have significant influence over its operating and financial policies.

On May 31, 2019, we completed the transfer of our remaining life assurance policies written by our wholly-owned subsidiary Alpha Insurance SA to a subsidiary of Monument. In this transaction, we transferred policy benefits for life and annuity contracts with a carrying value of € 88.8 million (or approximately $ 99.1 million) and total assets with a fair value of € 91.1 million (or approximately $ 101.6 million) to a subsidiary of Monument.

Our investment in the common and preferred shares of Monument, which is included in equity method investments on our consolidated balance sheet, was as follows:

			June 30, 2020						December 31, 2019
Investment in Monument			$	92,117					$	60,598

During the three and six months ended June 30, 2020 we received director fees from Monument of $ 0.1 million in connection with one of our representatives serving on Monument's board of directors.

Effective January 1, 2017, we sold SeaBright Insurance Company (“SeaBright Insurance”) and its licenses to Delaware Life Insurance Company ("Delaware Life"), a subsidiary of Guggenheim Partners, LLC. Following the sale, SeaBright Insurance was renamed Clear Spring Property and Casualty Company (“Clear Spring”). Clear Spring was subsequently capitalized with $ 56.0 million of equity, with Enstar retaining a 20 % indirect equity interest in Clear Spring.

We have accounted for our equity interest in Clear Spring as an equity method investment as we have

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significant influence over its operating and financial policies.

Our investment in the common shares of Clear Spring which is included in equity method investments on our consolidated balance sheet, was as follows:

			June 30, 2020						December 31, 2019
Investment in Clear Spring			$	10,402					$	10,645

Effective January 1, 2017, StarStone National Insurance Company (“StarStone National”) entered into a ceding quota share treaty with Clear Spring pursuant to which Clear Spring reinsures 33.3 % of core workers' compensation business written by StarStone National. This agreement was terminated as of December 31, 2018.

Effective January 1, 2017, we also entered into an assuming quota share treaty with Clear Spring pursuant to which an Enstar subsidiary reinsures 25 % of all workers' compensation business written by Clear Spring. This is recorded as other activities.

Our consolidated balance sheet included the following balances between us and Clear Spring:

			June 30, 2020						December 31, 2019
Balances under StarStone ceding quota share included, in assets or liabilities held for sale:
Reinsurance balances recoverable			$	21,523					$	22,812
Prepaid insurance premiums			—						51
Ceded payable			3,593						3,616
Ceded acquisition costs			—						21
Balances under assuming quota share:
Losses and LAE			4,455						6,135
Unearned reinsurance premiums			—						13
Funds held			7,807						8,611

Our consolidated statement of earnings included the following amounts between us and Clear Spring:

			Three Months Ended																		Six Months Ended
			June 30,																		June 30,
			2020						2019						2020						2019
Transactions under StarStone ceding quota share, included in net earnings (loss) from discontinued operations:
Ceded premium earned			$	682					$	( 4,271 )					$	1					$	( 9,756 )
Ceded incurred losses and LAE			( 2,043 )						3,129						( 1,289 )						6,988
Ceded acquisition costs			( 99 )						8						( 27 )						62
Transactions under assuming quota share:
Premium earned			( 170 )						1,068						—						2,439
Net incurred losses and LAE			510						( 472 )						882						( 1,437 )
Acquisition costs			20						23						7						9
Total net earnings (loss)			$	( 1,100 )					$	( 515 )					$	( 426 )					$	( 1,695 )

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AmTrust

In November 2018, pursuant to a Subscription Agreement with Evergreen Parent L.P. ("Evergreen"), K-Z Evergreen, LLC and Trident Pine Acquisition LP ("Trident Pine"), we purchased equity in Evergreen in the aggregate amount of $ 200.0 million. Evergreen is an entity formed by private equity funds managed by Stone Point and the Karfunkel-Zyskind family that acquired the approximately 45 % of the issued and outstanding shares of common stock of AmTrust that the Karfunkel-Zyskind Family and certain of its affiliates and related parties did not already own or control. The equity interest was in the form of three separate classes of equity securities issued at the same price and in the same proportion as the equity interest purchased by Trident Pine. In a second transaction in December 2019, Enstar acquired an additional $ 25.9 million of Evergreen securities from another investor.

Our indirect investment in the shares of AmTrust, carried in equities on our consolidated balance sheet was as follows:

			June 30, 2020						December 31, 2019
Investment in AmTrust			$	245,316					$	240,115

The following table presents the amounts included in net earnings related to our related party transactions with AmTrust:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Net investment income			$	1,896					$	1,829					$	4,367					$	3,650
Net realized and unrealized gains			3,954						—						3,809						—
Total net earnings			$	5,850					$	1,829					$	8,176					$	3,650

In June 2018, we made a $ 50.0 million indirect investment in the shares of Citco III Limited ("Citco"), a fund administrator with global operations. Pursuant to an investment agreement and in consideration for participation therein, a related party of Hillhouse Capital provided us with investment support. In a private transaction that preceded our co-investment opportunity, certain Citco shareholders, including Trident, agreed to sell all or a portion of their interests in Citco. As of June 30, 2020, Trident owned an approximate 3.4 % interest in Citco. Mr. Carey currently serves as an observer to the board of directors of Citco in connection with Trident's investment therein.

Our indirect investment in the shares of Citco, which is included in equity method investments on our consolidated balance sheet, was as follows:

			June 30, 2020						December 31, 2019
Investment in Citco			$	51,815					$	51,742

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27.7 %. As of June 30, 2020, Enstar contributed $ 154.1 million of its total capital commitment to Enhanzed Re and had an uncalled amount of $ 68.7 million. We have accounted for our equity interest in Enhanzed Re as an equity method investment as we have significant influence over its operating and financial policies.

Enstar acts as the (re)insurance manager for Enhanzed Re, for which it receives fee income recorded within other income, AnglePoint acts as the primary investment manager, and an affiliate of Allianz provides investment management services. Enhanzed Re writes business from affiliates of its operating sponsors, Allianz SE and Enstar. It also underwrites other business to maximize diversification by risk and geography.

Our investment in the common shares of Enhanzed Re, which is included in equity method investments on our consolidated balance sheet, was as follows:

			June 30, 2020						December 31, 2019
Investment in Enhanzed Re			$	188,868					$	182,856

Our consolidated balance sheet included the following balances between us and Enhanzed Re:

			June 30, 2020						December 31, 2019
Balances under ceding quota share:
Insurance balances payables			$	1,738					$	1,443
Reinsurance balances recoverable			55,547						59,601
Funds held			48,730						50,089
Other assets			328						1,033

Our consolidated statement of earnings included the following amounts between us and Enhanzed Re:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Amounts under ceding quota share:
Net incurred losses and LAE			( 13 )						—						( 13 )						—
Acquisition costs			—						—						$	23					—
Other income/expense			( 3,172 )						166						( 2,881 )						252
Total net earnings			$	( 3,185 )					$	166					$	( 2,871 )					$	252

Concentration of Credit Risk

We believe that there are no significant concentrations of credit risk associated with our cash and cash equivalents, fixed maturity investments, or other investments. Our cash and investments are managed pursuant to guidelines that follow prudent standards of diversification and liquidity, and limit the allowable holdings of a single issue and issuers. We are also subject to custodial credit risk on our investments, which we manage by diversifying our holdings amongst large financial institutions that are highly regulated.

We have exposure to credit risk on certain of our assets pledged to ceding companies under insurance contracts. In addition, we are potentially exposed should any insurance intermediaries be unable to fulfill their contractual obligations with respect to payments of balances owed to and by us.

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Credit risk exists in relation to insurance and reinsurance balances recoverable on paid and unpaid losses. We remain liable to the extent that counterparties do not meet their contractual obligations and, therefore, we evaluate and monitor concentration of credit risk among our insurers and reinsurers.

We are also subject to credit risk in relation to funds held by reinsured companies. Under funds held arrangements, the reinsured company has retained funds that would otherwise have been remitted to our reinsurance subsidiaries. The funds may be placed into trust or subject to other security arrangements. However, we generally have the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by us. As of June 30, 2020, we had a significant funds held concentration of $ 965.5 million to one reinsured company which has financial strength credit ratings of A+ from A.M. Best and AA from S&P.

We limit the amount of credit exposure to any one counterparty, and none of our counterparty credit exposures, excluding U.S. government instruments and the counterparty noted above, exceeded 10% of shareholders’ equity as of June 30, 2020. Our credit exposure to the U.S. government was $ 905.9 million as of June 30, 2020.

Legal Proceedings

We are, from time to time, involved in various legal proceedings in the ordinary course of business, including litigation and arbitration regarding claims. Estimated losses relating to claims arising in the ordinary course of business, including the anticipated outcome of any pending arbitration or litigation, are included in the liability for losses and LAE in our consolidated balance sheets. In addition to claims litigation, we may be subject to other lawsuits and regulatory actions in the normal course of business, which may involve, among other things, allegations of underwriting errors or omissions, employment claims or regulatory activity. We do not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material effect on our business, results of operations or financial condition. We anticipate that, similar to the rest of the insurance and reinsurance industry, we will continue to be subject to litigation and arbitration proceedings in the ordinary course of business, including litigation generally related to the scope of coverage with respect to asbestos and environmental and other claims.

Unfunded Investment Commitments

As of June 30, 2020, we had unfunded commitments of $ 544.7 million and $ 76.5 million to private equity funds and equity method investments, respectively.

Guarantees

As of June 30, 2020 and December 31, 2019, parental guarantees and capital instruments supporting subsidiaries' insurance obligations were $ 1.3 billion and $ 1.0 billion, respectively. We also guarantee the FAL facility, which is described in Note 14 - "Debt Obligations and Credit Facilities."

In connection with the sale of StarStone U.S., the net loss reserves of StarStone U.S. will be reinsured to an Enstar Non-life Run-off entity upon completion of the sale which is expected to occur in the second half of 2020. The obligations under the loss portfolio transfer reinsurance agreement will be guaranteed by Enstar. Refer to Note 4 - "Divestitures, Held-for-Sale Businesses and Discontinued Operations" for further details.

Redeemable Noncontrolling Interest

We have the right to purchase the RNCI interests from the RNCI holders at certain times in the future (each such right, a "call right") and the RNCI holders have the right to sell their RNCI interests to us at certain times in the future (each such right, a "put right"). The RNCI rights held by Trident are described in Note 20 - "Related Party Transactions." Dowling has a right to participate if Trident exercises its put right.

Leases

Our leases are all currently classified as operating leases whereby the related lease expense is recognized within general and administrative expenses in our consolidated statements of earnings on a straight-line basis over the term of the lease. We also recognize a right-of-use asset and an offsetting lease liability within other assets and other liabilities, respectively, in our consolidated balance sheets, for each operating lease that we enter into.

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Our leases are primarily related to office space and facilities used to conduct business operations and have remaining lease terms of one year to 37 years; some of which include options to extend the lease term for up to five years , and some of which include options to terminate the lease within one year . Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Since a majority of our leases do not provide an implicit discount rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of lease payments. For more information on our leasing arrangements and the related accounting, refer to Note 23 - "Commitments and Contingencies" to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.

The table below provides the lease cost and other information relating to our operating leases:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2020						2019						2020						2019
Lease cost
Operating lease cost			$	3,202					$	3,199					$	6,524					$	6,686
Short-term lease cost (1)			61						—						119						—
Total lease cost			3,263						3,199						6,643						6,686
Sub-lease income (2)			( 138 )						( 137 )						( 276 )						( 268 )
Total net lease cost			$	3,125					$	3,062					$	6,367					$	6,418
Other information
Operating Cash paid for amounts included in the measurement of lease liabilities			$	4,145					$	3,169					$	7,328					$	6,193
Non-cash activity: right-of-use assets relating to leases			191						619						263						52,228
Weighted-average remaining lease term															6.2 years						6.6 years
Weighted-average discount rate															6.3		%				6.2		%

⁽¹⁾ Leases with an initial lease term of twelve months or less are not recognized within our consolidated balance sheets.

⁽²⁾ Sub-lease income consists of rental income received from third parties to whom we have sub-leased some of our leased office spaces and is included within other income in our consolidated statements of earnings.

The table below provides a summary of the operating leases recorded on our consolidated balance sheets:

			Balance sheet classification						June 30, 2020						December 31, 2019
Right-of-use assets (1)			Other assets						$	36,613					$	46,747
Current lease liabilities			Other liabilities						8,836						11,403
Non-current lease liabilities			Other liabilities						29,629						34,785

⁽¹⁾ Following our decision to put the StarStone International operations into orderly run-off effective June 10, 2020, we recorded total impairment charges of $ 3.5 million on the right-of-use assets relating to certain StarStone International operating leases as of June 30, 2020.

The table below provides a summary of the contractual maturities of our operating lease liabilities:

						June 30, 2020
2020						$	5,923
2021						9,684
2022						7,931
2023						6,877
2024						5,151
2025 and beyond						12,195
Total lease payments (1)						47,761
Less: Imputed interest						( 9,296 )
Present value of lease liabilities						$	38,465

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Assets by Segment

Invested assets are managed on a subsidiary basis, and investment income and realized and unrealized gains (losses) on investments are recognized in each segment as earned. Our total assets by segment and for our other activities were as follows:

			June 30, 2020						December 31, 2019
Assets by Segment:
Non-life Run-off			$	17,154,632					$	15,775,407
Atrium			608,038						580,405
StarStone			4,108,324						3,985,138
Other			( 577,079 )						( 514,851 )
Total assets			$	21,293,915					$	19,826,099

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