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Credit and Other Debt Agreements | 12 Months Ended
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Dec. 31, 2019
Debt Disclosure [Abstract] |
Credit and Other Debt Agreements |
8. | Credit and Other Debt Agreements
The following is a summary of our corporate and other debt (in millions):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Note Purchase Agreements: |  |  |  |  |  |  |  |
Semi-annual payments of interest, fixed rate of 3.20 %, ball o on due June 24 , 2019 |  | $ | — |  |  | $ | 50.0 |
Semi-annual payments of interest, fixed rate of 5.85 %, balloon due Nove mber 30 , 2019 |  |  | — |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 3.48 %, balloon due June 24, 2020 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 3.99 %, balloon due July 10, 2020 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 5.18 %, balloon due February 10, 2021 |  |  | 75.0 |  |  |  | 75.0 |
Semi-annual payments of interest, fixed rate of 3.69 %, balloon due June 14, 2022 |  |  | 200.0 |  |  |  | 200.0 |
Semi-annual payments of interest, fixed rate of 5.49 %, balloon due February 10, 2023 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 4.13 %, balloon due June 24, 2023 |  |  | 200.0 |  |  |  | 200.0 |
Quarterly payments of interest, floating rate of 90 day LIBOR plus 1.65 %, balloon due August 2, 2023 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 4.72 %, balloon due February 13, 2024 |  |  | 100.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.58 %, balloon due February 27, 2024 |  |  | 325.0 |  |  |  | 325.0 |
Quarterly payments of interest, floating rate of 90 day LIBOR plus 1.40 %, balloon due June 13, 2024 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 4.31 %, balloon due June 24, 2025 |  |  | 200.0 |  |  |  | 200.0 |
Semi-annual payments of interest, fixed rate of 4.85 %, balloon due February 13, 2026 |  |  | 140.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.73 %, balloon due February 27, 2026 |  |  | 175.0 |  |  |  | 175.0 |
Semi-annual payments of interest, fixed rate of 4.40 %, balloon due June 2, 2026 |  |  | 175.0 |  |  |  | 175.0 |
Semi-annual payments of interest, fixed rate of 4.36 %, balloon due June 24, 2026 |  |  | 150.0 |  |  |  | 150.0 |
Semi-annual payments of interest, fixed rate of 4.09 %, balloon due June 27, 2027 |  |  | 125.0 |  |  |  | 125.0 |
Semi-annual payments of interest, fixed rate of 4.09 %, balloon due August 2, 2027 |  |  | 125.0 |  |  |  | 125.0 |
Semi-annual payments of interest, fixed rate of 4.14 %, balloon due August 4, 2027 |  |  | 98.0 |  |  |  | 98.0 |
Semi-annual payments of interest, fixed rate of 3.46 %, balloon due December 1, 2027 |  |  | 100.0 |  |  |  | 100.0 |
Semi-annual payments of interest, fixed rate of 4.55%, balloon due June 2, 2028 |  |  | 75.0 |  |  |  | 75.0 |
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 13, 2028 |  |  | 125.0 |  |  |  | 125.0 |
Semi-annual payments of interest, fixed rate of 5.04%, balloon due February 13, 2029 |  |  | 100.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.98%, balloon due February 27, 2029 |  |  | 100.0 |  |  |  | 100.0 |
Semi-annual payments of interest, fixed rate of 4.19%, balloon due June 27, 2029 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 4.19%, balloon due August 2, 2029 |  |  | 50.0 |  |  |  | 50.0 |
Semi-annual payments of interest, fixed rate of 3.48%, balloon due December 2, 2029 |  |  | 50.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.44%, balloon due June 13, 2030 |  |  | 125.0 |  |  |  | 125.0 |
Semi-annual payments of interest, fixed rate of 5.14%, balloon due March 13, 2031 |  |  | 180.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.70%, balloon due June 2, 2031 |  |  | 25.0 |  |  |  | 25.0 |
Semi-annual payments of interest, fixed rate of 4.34%, balloon due June 27, 2032 |  |  | 75.0 |  |  |  | 75.0 |
Semi-annual payments of interest, fixed rate of 4.34%, balloon due August 2, 2032 |  |  | 75.0 |  |  |  | 75.0 |
Semi-annual payments of interest, fixed rate of 4.59%, balloon due June 13, 2033 |  |  | 125.0 |  |  |  | 125.0 |
Semi-annual payments of interest, fixed rate of 5.29%, balloon due March 13, 2034 |  |  | 40.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.48%, balloon due June 12, 2034 |  |  | 175.0 |  |  |  | — |
Semi-annual payments of interest, fixed rate of 4.69%, balloon due June 13, 2038 |  |  | 75.0 |  |  |  | 75.0 |
Semi-annual payments of interest, fixed rate of 5.45%, balloon due March 13, 2039 |  |  | 40.0 |  |  |  | — |
Total Note Purchase Agreements |  |  | 3,923.0 |  |  |  | 3,198.0 |
Credit Agreement: |  |  |  |  |  |  |  |
Periodic payments of interest and principal, prime or LIBOR plus up to 1.45%, expires June 7, 2024 |  |  | 520.0 |  |  |  | 265.0 |
Premium Financing Debt Facility - expires July 18, 2021: |  |  |  |  |  |  |  |
Facility B |  |  |  |  |  |  |  |
AUD denominated tranche, interbank rates plus 1.100% |  |  | 142.1 |  |  |  | 133.9 |
NZD denominated tranche, interbank rates plus 1.150% |  |  | — |  |  |  | 10.1 |
Facility C and D |  |  |  |  |  |  |  |
AUD denominated tranche, interbank rates plus 0.575% |  |  | 18.8 |  |  |  | — |
NZD denominated tranche, interbank rates plus 0.600% |  |  | 9.7 |  |  |  | 10.0 |
Total Premium Financing Debt Facility |  |  | 170.6 |  |  |  | 154.0 |
Total corporate and other debt |  |  | 4,613.6 |  |  |  | 3,617.0 |
Less unamortized debt acquisition costs on Note Purchase Agreements |  |  | (6.9 | ) |  |  | (6.6 | )
Net corporate and other debt |  | $ | 4,606.7 |  |  | $ | 3,610.4 |
Note Purchase Agreements - On June 13, 2018 , we closed and funded offerings of $500.0 million aggregate principal amount of private placement senior unsecured notes (both fixed and floating rate), which was used in part to fund the $50.0 million June 24, 2018 Series K notes maturity. The weighted average maturity of the $450.0 million of senior fixed rate notes is 13.6 years and their weighted average interest rate is 4.42% after giving effect to net hedging gains. The interest rate on the $50.0 million of floating rate notes would be 3.14% using three-month LIBOR on February 3, 2020. In 2017 and 2018, we entered into pre-issuance interest rate hedging transactions related to the $500.0 million private placement funded on June 13, 2018. We realized a net cash gain of approximately $2.9 million on the hedging transaction that will be recognized on a pro rata basis as a reduction in our reported interest expense over the life of the debt. We used the proceeds of these offerings to repay certain existing indebtedness and fund acquisitions. The notes consist of the following tranches:
| • | $125.0 million of 4.34% senior notes due in 2028 (4.00% after giving effect to hedging gains);
| • | $125.0 million of 4.44% senior notes due in 2030;
| • | $125.0 million of 4.59% senior notes due in 2033;
| • | $75.0 million of 4.69% senior notes due in 2038; and
| • | $50.0 million of floating rate notes due in 2024 , at an interest rate of 1.40% plus three-month LIBOR, calculated quarterly.
On June 24, 2018 we funded the $50.0 million maturity of our Series K notes, and on November 30, 2018 we funded the $50.0 million maturity of our Series C notes. On February 13, 2019, we closed an offering of $600.0 million aggregate principal amount of fixed rate private placement senior unsecured notes. This offering was funded on February 13, 2019 ($340.0 million) and March 13, 2019 ($260.0 million). The weighted average maturity of these notes is 10.1 years and the weighted average interest rate is 5.04% after giving effect to a net hedging loss. In 2017 and 2018, we entered into pre-issuance interest rate hedging transactions related to this private placement. We realized a net cash loss of approximately $1.2 million on the hedging transactions that will be recognized on a pro rata basis as an increase in our reported interest expense over the life of the debt. We used the proceeds of these offering to repay certain existing indebtedness and fund acquisitions. The notes consist of the following tranches:
| • | $100.0 million of 4.72% senior notes due in 2024 ;
| • | $140.0 million of 4.85% senior notes due in 2026;
| • | $100.0 million of 5.04% senior notes due in 2029;
| • | $180.0 million of 5.14% senior notes due in 2031;
| • | $40.0 million of 5.29% senior notes due in 2034; and
| • | $40.0 million of 5.45% senior notes due in 2039
On June 12, 2019, we closed a private placement of $175.0 million aggregate principal amount of unsecured senior notes. The unsecured senior notes were issued with an interest rate of 4.48% and are due in 2034. We used the proceeds of these offerings in part to fund the $50.0 million June 24, 2019 Series L note maturity, and for acquisitions and general corporate purposes. The weighted average interest rate is 4.68% after giving effect to a net hedging loss. In 2017 and 2018, we entered into pre-issuance interest rate hedging transactions related to this private placement. We realized a net cash loss of approximately $5.2 million on the hedging transactions that will be recognized on a pro rata basis as an increase in our reported interest expense over ten years of the total 15-year notes. On December 2, 2019 we closed a private placement of $50.0 million aggregate principal amount of unsecured senior notes. The unsecured senior notes were issued with an interest rate and weighted average interest rate of 3.48% and are due in 2029. We used the proceeds of those offerings to fund the $50.0 million November 30, 2019 Series C note maturity. As previously disclosed, on January 30, 2020, we closed and funded an offering of $575.0 million aggregate principal amount of fixed rate private placement unsecured senior notes. The weighted average maturity of these notes is 11.7 years and the weighted average interest rate is 4.23% per annum after giving effect to underwriting costs and the net hedge loss. In 2017 and 2018, we entered into pre-issuance interest rate hedging transactions related to this private placements. We realized a net cash loss of approximately $8.9 million on the hedging transactions that will be recognized on a pro rata basis as an increase to our reported interest expense over ten years. The notes consist of the following tranches:
| • | $30.0 million of 3.75% senior notes due in 2027;
| • | $341.0 million of 3.99% senior notes due in 2030;
| • | $69.0 million of 4.09% senior notes due in 2032;
| • | $79.0 million of 4.24% senior notes due in 2035; and
| • | $56.0 million of 4.49% senior notes due in 2040
We plan to use these offerings to repay certain existing indebtedness and for general corporate purposes, including to fund acquisitions. Under the terms of the note purchase agreements described above, we may redeem the notes at any time, in whole or in part, at 100% of the principal amount of such notes being redeemed, together with accrued and unpaid interest and a “make-whole amount”. The “make-whole amount” is derived from a net present value computation of the remaining scheduled payments of principal and interest using a discount rate based on the U.S. Treasury yield plus 0.5% and is designed to compensate the purchasers of the notes for their investment risk in the event prevailing interest rates at the time of prepayment are less favorable than the interest rates under the notes. We do not currently intend to prepay any of the notes. The note purchase agreements described above contain customary provisions for transactions of this type, including representations and warranties regarding us and our subsidiaries and various financial covenants, including covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2019. The note purchase agreements also provide customary events of default, generally with corresponding grace periods, including, without limitation, payment defaults with respect to the notes, covenant defaults, cross-defaults to other agreements evidencing our or our subsidiaries’ indebtedness, certain judgments against us or our subsidiaries and events of bankruptcy involving us or our material subsidiaries. The notes issued under the note purchase agreement are senior unsecured obligations of ours and rank equal in right of payment with our Credit Agreement discussed below. Credit Agreement - On June 7, 2019, we entered into an amendment and restatement to our multicurrency credit agreement dated April 8, 2016, (which we refer to as the Credit Agreement) with a group of fifteen financial institutions. The amendment and restatement, among other things, extended the expiration date of the Credit Agreement from April 8, 2021 to June 7, 2024 and increased the revolving credit commitment from $800.0 million to $1,200.0 million, of which up to $75.0 million may be used for issuances of standby or commercial letters of credit and up to $75.0 million may be used for the making of swing loans (as defined in the Credit Agreement). We may from time to time request, subject to certain conditions, an increase in the revolving credit commitment under the Credit Agreement up to a maximum aggregate revolving credit commitment of $1,700.0 million. The Credit Agreement provides that we may elect that each borrowing in U.S. dollars be either base rate loans or eurocurrency loans, each as defined in the Credit Agreement. However, the Credit Agreement provides that all loans denominated in currencies other than U.S. dollars will be eurocurrency loans. Interest rates on base rate loans and outstanding drawings on letters of credit in U.S. dollars under the Credit Agreement will be based on the base rate, as defined in the Credit Agreement, plus a margin of 0.00% to 0.45%, depending on the financial leverage ratio we maintain. Interest rates on eurocurrency loans or outstanding drawings on letters of credit in currencies other than U.S. dollars under the Credit Agreement will be based on adjusted LIBOR, as defined in the Credit Agreement, plus a margin of 0.85% to 1.45%, depending on the financial leverage ratio we maintain. Interest rates on swing loans will be based, at our election, on either the base rate or an alternate rate that may be quoted by the lead lender. The annual facility fee related to the Credit Agreement is 0.15% and 0.30% of the revolving credit commitment, depending on the financial leverage ratio we maintain. In connection with entering into the Credit Agreement, we incurred approximately $2.5 million of debt acquisition costs that were capitalized and will be amortized on a pro rata basis over the term of the Credit Agreement. The terms of the Credit Agreement include various financial covenants, including covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2019. The Credit Agreement also includes customary provisions for transactions of this type, including events of default, with corresponding grace periods and cross-defaults to other agreements evidencing our indebtedness. At December 31, 2019, $16.2 million of letters of credit (for which we had $16.5 million of liabilities recorded at December 31, 2019) were outstanding under the Credit Agreement. See Note 17 to these consolidated financial statements for a discussion of the letters of credit. There were $520.0 million of borrowings outstanding under the Credit Agreement at December 31, 2019. Accordingly, at December 31, 2019, $663.8 million remained available for potential borrowings. Premium Financing Debt Facility - On August 15, 2019, we entered into an amendment to our Syndicated Facility Agreement, revolving loan facility ( which we refer to as the Premium Financing Debt Facility ) that provides funding for the three acquired Australian (AU) and New Zealand (NZ) premium finance subsidiaries. The amendment, among other things, extended the expiration date of the Premium Financing Debt Facility from May 18, 2020 to July 18, 2021, increased the Interbank fee rates and increased the total commitment for the AU$ denominated tranche from AU$185.0 million to AU$245.0 million. The Premium Financing Debt Facility is comprised of: (i) Facility B is separate AU$205.0 million and NZ$25.0 million tranches, (ii) Facility C is an AU$40.0 million equivalent multi-currency overdraft tranche and (iii) Facility D is a NZ$15.0 million equivalent multi-currency overdraft tranche. There was a three month increase in the AU$160.0 million tranche to AU$190.0 million, which expired January 31, 2019. The interest rates on Facility B are Interbank rates, which vary by tranche, duration and currency, plus a margin of 1.10% and 1.15% for the AU$ and NZ$ tranches, respectively. The interest rates on Facilities C and D are 30 day Interbank rates, plus a margin of 0.575% and 0.600% for the AU$ and NZ$ tranches, respectively. The annual fee for Facility B is 0.495% and 0.5175% for the undrawn commitments for the AU$ and NZ$ tranches, respectively. The annual fee for Facility C is 0.525% and for Facility D is 0.55% of the total commitments of the facilities. The terms of our Premium Financing Debt Facility include various financial covenants, including covenants that require us to maintain specified financial ratios. We were in compliance with these covenants as of December 31, 2019. The Premium Financing Debt Facility also includes customary provisions for transactions of this type, including events of default, with corresponding grace periods and cross-defaults to other agreements evidencing our indebtedness. Facilities B, C and D are secured by the premium finance receivables of the Australian and New Zealand premium finance subsidiaries. At December 31, 2019, AU$205.0 million and zero NZ$ of borrowings were outstanding under Facility B, AU$27.1 million of borrowings outstanding under Facility C and NZ$14.7 million of borrowings were outstanding under Facility D. Accordingly, as of December 31, 2019, zero AU$ and NZ$25.0 million remained available for potential borrowing under Facility B, and AU$12.9 million and NZ$0.3 million under Facilities C and D, respectively. See Note 17 to these 2019 consolidated financial statements for additional discussion on our contractual obligations and commitments as of December 31, 2019. The aggregate estimated fair value of the $3,923.0 million in debt under the note purchase agreements at December 31, 2019 was $4,254.2 million due to the long-term duration and fixed interest rates associated with these debt obligations. No active or observable market exists for our private long-term debt. Therefore, the estimated fair value of this debt is based on discounted future cash flows, which is a Level 3 fair value measurement, using current interest rates available for debt with similar terms and remaining maturities. The estimated fair value of this debt is based on the income valuation approach, which is a valuation technique that converts future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts. Because our debt issuances generate a measurable income stream for each lender, the income approach was deemed to be an appropriate methodology for valuing the private placement long-term debt. The methodology used calculated the original deal spread at the time of each debt issuance, which was equal to the difference between the yield of each issuance (the coupon rate) and the equivalent benchmark treasury yield at that time. The market spread as of the valuation date was calculated, which is equal to the difference between an index for investment grade insurers and the equivalent benchmark treasury yield today. An implied premium or discount to the par value of each debt issuance based on the difference between the origination deal spread and market as of the valuation date was then calculated. The index we relied on to represent investment graded insurers was the Bloomberg Valuation Services (BVAL) U.S. Insurers BBB index. This index is comprised primarily of insurance brokerage firms and was representative of the industry in which we operate. For the purposes of our analysis, the average BBB rate was assumed to be the appropriate borrowing rate for us. The estimated fair value of the $520.0 million of borrowings outstanding under our Credit Agreement approximate their carrying value due to their short-term duration and variable interest rates. The estimated fair value of the $170.6 million of borrowings outstanding under our Premium Financing Debt Facility approximates their carrying value due to their short-term duration and variable interest rates.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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