Front Street Funds withheld receivables Front Street Cayman has entered into various reinsurance agreements on a funds withheld basis, meaning that funds are withheld by the ceding company, from the coinsurance premium owed to Front Street Cayman as collateral for Front Street Cayman’s payment obligations. Accordingly, the collateral assets remain under the ultimate ownership for the ceding company. Front Street Cayman’s investment portfolio underlying the funds withheld assets includes fixed maturities and short-term investments that are recorded at fair value, and other invested assets. The carrying values of the investments underlying the funds withheld receivables at December 31, 2015 and September 30, 2015 were as follows (in millions):
| | | | | | | | | | | | | | | | | | December 31, 2015 | | September 30, 2015 | Asset Class | | Fair Value | | Percent | | Fair Value | | Percent | Corporates | | $ | 1,066.5 |
| | 67.2 | % | | $ | 1,083.0 |
| | 66.1 | % | Asset/Mortgage-backed securities | | 372.5 |
| | 23.5 | % | | 395.1 |
| | 24.1 | % | Municipals | | 86.4 |
| | 5.4 | % | | 100.9 |
| | 6.2 | % | Preferred stock | | 39.9 |
| | 2.5 | % | | 39.3 |
| | 2.4 | % | Agency bonds | | 11.3 |
| | 0.7 | % | | 11.4 |
| | 0.7 | % | Government bonds | | 11.1 |
| | 0.7 | % | | 8.4 |
| | 0.5 | % | Total fixed maturity securities | | 1,587.7 |
| | 100.0 | % | | 1,638.1 |
| | 100.0 | % | Accrued interest | | 19.4 |
| | | | 20.5 |
| | | Net cash, receivables (payables) | | 39.6 |
| | | | 41.1 |
| | | Policy loans and other | | 17.3 |
| |
|
| | 10.4 |
| | | Total investments | | $ | 1,664.0 |
| | | | $ | 1,710.1 |
| | |
The decrease in the fair value of the funds withheld receivables at December 31, 2015 compared to September 30, 2015 was primarily related to unrealized losses on the underlying debt securities included in the funds withheld receivables during the Fiscal 2016 Quarter influenced by market conditions with widening credit spreads resulting in generally lower valuations of these fixed maturity securities. The table below summarizes Front Street’s funds withheld receivables rated by established nationally recognized statistical rating organizations in percentage terms at December 31, 2015 and September 30, 2015 (by credit rating, in millions):
| | | | | | | | | | | | | | | | | | December 31, 2015 | | September 30, 2015 | Rating | | Fair Value | | Percent | | Fair Value | | Percent | AAA | | $ | 105.5 |
| | 6.6 | % | | $ | 113.8 |
| | 6.9 | % | AA | | 173.5 |
| | 10.9 | % | | 176.4 |
| | 10.8 | % | A | | 258.1 |
| | 16.3 | % | | 267.5 |
| | 16.3 | % | BBB | | 565.1 |
| | 35.6 | % | | 563.7 |
| | 34.4 | % | BB | | 201.1 |
| | 12.7 | % | | 202.3 |
| | 12.4 | % | B and below | | 268.8 |
| | 16.9 | % | | 295.2 |
| | 18.0 | % | Not rated | | 15.6 |
| | 1.0 | % | | 19.2 |
| | 1.2 | % | Total | | $ | 1,587.7 |
| | 100.0 | % | | $ | 1,638.1 |
| | 100.0 | % |
Salus Asset-based loans The Company’s portfolio of asset-based loans receivable, originated by Salus and its co-lender Front Street, are included in “Investments” in the Condensed Consolidated Balance Sheets as of December 31, 2015 and September 30, 2015. See Note 5, Investments, to our Condensed Consolidated Financial Statements for the composition of the asset-based loans portfolio by industry sector, as well as discussion and information regarding the credit quality indicators.
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