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Capital Structure | 12 Months Ended
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Dec. 31, 2020
Capital Structure |
Capital Structure |
Note 12 | Capital Structure
Total debt outstanding
|  | As of December 31,
($ in millions) |  | 2020 |  | 2019
Floating Rate Senior Notes, due 2021 (1) |  | $ | 250 |  |  | $ | 250 |
Floating Rate Senior Notes, due 2023 (1) |  | 250 |  |  | 250 |
3.150% Senior Notes, due 2023 (2) |  | 500 |  |  | 500 |
0.750% Senior Notes, due 2025 (2) |  | 600 |  |  | — |
Due after one year through five years |  | 1,600 |  |  | 1,000 |
3.280% Senior Notes, due 2026 (2) |  | 550 |  |  | 550 |
1.450% Senior Notes, due 2030 (2) |  | 600 |  |  | — |
Due after five years through ten years |  | 1,150 |  |  | 550 |
6.125% Senior Notes, due 2032 (2) |  | 159 |  |  | 159 |
5.350% Senior Notes due 2033 (2) |  | 323 |  |  | 323 |
5.550% Senior Notes due 2035 (2) |  | 546 |  |  | 546 |
5.950% Senior Notes, due 2036 (2) |  | 386 |  |  | 386 |
6.900% Senior Debentures, due 2038 |  | 165 |  |  | 165 |
5.200% Senior Notes, due 2042 (2) |  | 62 |  |  | 62 |
4.500% Senior Notes, due 2043 (2) |  | 500 |  |  | 500 |
4.200% Senior Notes, due 2046 (2) |  | 700 |  |  | 700 |
3.850% Senior Notes, due 2049 (2) |  | 500 |  |  | 500 |
5.100% Subordinated Debentures, due 2053 |  | 500 |  |  | 500 |
5.750% Subordinated Debentures, due 2053 |  | 800 |  |  | 800 |
6.500% Junior Subordinated Debentures, due 2067 |  | 500 |  |  | 500 |
Due after ten years |  | 5,141 |  |  | 5,141 |
Long-term debt total principal |  | 7,891 |  |  | 6,691 |
Debt issuance costs |  | (66) |  |  | (60) |
Total long-term debt |  | 7,825 |  |  | 6,631 |
Short-term debt (3) |  | — |  |  | — |
Total debt |  | $ | 7,825 |  |  | $ | 6,631 |
(1)2021 and 2023 Floating Rate Senior Notes are not redeemable prior to the applicable maturity dates and bear interest at a floating rate equal to three-month LIBOR, reset quarterly on each interest reset date, plus 0.43% and 0.63% per year, respectively. (2)Senior Notes are subject to redemption at the Company’s option in whole or in part at any time at the greater of either 100% of the principal amount plus accrued and unpaid interest to the redemption date or the discounted sum of the present values of the remaining scheduled payments of principal and interest and accrued and unpaid interest to the redemption date. (3)The Company classifies any borrowings which have a maturity of twelve months or less at inception as short-term debt.
Debt maturities for each of the next five years and thereafter
($ in millions) |  |
2021 |  | $ | 250 |
2022 |  | — |
2023 |  | 750 |
2024 |  | — |
2025 |  | 600 |
Thereafter |  | 6,291 |
Total long-term debt principal |  | $ | 7,891 |
On November 19, 2020, the Company issued $600 million of 0.750% Senior Notes due 2025 and $600 million of 1.450% Senior Notes due 2030. Interest on the Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The Senior Notes are redeemable at any time at the applicable redemption price prior to the maturity date. The net proceeds of this issuance were used to partially fund the acquisition of National General. The Subordinated Debentures may be redeemed (i) in whole at any time or in part from time to time on or after January 15, 2023 for the 5.100% Subordinated Debentures and August 15, 2023 for the 5.750% Subordinated Debentures at their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption; provided that if the Subordinated Debentures are not redeemed in whole, at least $25 million aggregate principal amount must remain outstanding, or (ii) in whole, but not in part, prior to January 15, 2023 for the 5.100% Subordinated Debentures and August 15, 2023 for the 5.750% Subordinated Debentures, within 90 days after the occurrence of certain tax and rating agency events, at their principal amount or, if greater, a make-whole redemption price, plus accrued and unpaid interest to, but excluding, the date of redemption. The 5.750% Subordinated Debentures have this make-whole redemption price provision only when a reduction of equity credit assigned by a rating agency has occurred. Interest on the 5.100% Subordinated Debentures is payable quarterly at the stated fixed annual rate to January 14, 2023, or any earlier redemption date, and then at an annual rate equal to the three-month LIBOR plus 3.165%. Interest on the 5.750% Subordinated Debentures is payable semi-annually at the stated fixed annual rate to August 14, 2023, or any earlier redemption date, and then quarterly at an annual rate equal to the three-month LIBOR plus 2.938%. The Company may elect to defer payment of interest on the Subordinated Debentures for one or more consecutive interest periods that do not exceed five years. During a deferral period, interest will continue to accrue on the Subordinated Debentures at the then-applicable rate and deferred interest will compound on each interest payment date. If all deferred interest on the Subordinated Debentures is paid, the Company can again defer interest payments. As of December 31, 2020, the Company had outstanding $500 million of Series A 6.500% Fixed-to-Floating Rate Junior Subordinated Debentures (“Debentures”). The scheduled maturity date for the Debentures is May 15, 2057 with a final maturity date of May 15, 2067. The Debentures may be redeemed (i) in whole or in part, at any time on or after May 15, 2037 at the principal amount plus accrued and unpaid interest to the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to May 15, 2037 at the principal amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price. Interest on the Debentures is payable semi-annually at the stated fixed annual rate to May 15, 2037, and then payable quarterly at an annual rate equal to the three-month LIBOR plus 2.120%. The Company may elect at one or more times to defer payment of interest on the Debentures for one or more consecutive interest periods that do not exceed 10 years. Interest compounds during such deferral periods at the rate in effect for each period. The interest deferral feature obligates the Company in certain circumstances to issue common stock or certain other types of securities if it cannot otherwise raise sufficient funds to make the required interest payments. The Company has reserved 75 million shares of its authorized and unissued common stock to satisfy this obligation. The terms of the Company’s outstanding subordinated debentures prohibit the Company from declaring or paying any dividends or distributions on common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on common stock or preferred stock if the Company has elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In connection with the issuance of the Debentures, the Company entered into a replacement capital covenant (“RCC”). This covenant was not intended for the benefit of the holders of the Debentures and could not be enforced by them. Rather, it was for the benefit of holders of one or more other designated series of the Company’s indebtedness (“covered debt”), currently the 5.750% Subordinated Debentures due 2053. Pursuant to the RCC, the Company has agreed that it will not repay, redeem, or purchase the Debentures on or before May 15, 2067 (or such earlier date on which the RCC terminates by its terms) unless, subject to certain limitations, the Company has received net cash proceeds in specified amounts from the sale of common stock or certain other qualifying securities. The promises and covenants contained in the RCC will not apply if (i) S&P upgrades the Company’s issuer credit rating to A or above, (ii) the Company redeems the Debentures due to a tax event, (iii) after notice of redemption has been given by the Company and a market disruption event occurs preventing the Company from raising proceeds in accordance with the RCC, or (iv) the Company repurchases or redeems up to 10% of the outstanding principal of the Debentures in any one-year period, provided that no more than 25% will be so repurchased, redeemed or purchased in any ten-year period. The RCC terminates in 2067. The RCC will terminate prior to its scheduled termination date if (i) the Debentures are no longer outstanding and the Company has fulfilled its obligations under the RCC or it is no longer applicable, (ii) the holders of a majority of the then-outstanding principal amount of the then-effective series of covered debt consent to agree to the termination of the RCC, (iii) the Company does not have any series of outstanding debt that is eligible to be treated as covered debt under the RCC, (iv) the Debentures are accelerated as a result of an event of default, (v) certain rating agency or change in control events occur, (vi) S&P, or any successor thereto, no longer assigns a solicited rating on senior debt issued or guaranteed by the Company, or (vii) the termination of the RCC would have no effect on the equity credit provided by S&P with respect to the Debentures. An event of default, as defined by the supplemental indenture, includes default in the payment of interest or principal and bankruptcy proceedings. The administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month U.S. dollar (“USD”) LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The Subordinated Debentures and the 2023 Floating Rate Senior Notes allow for the use of an alternative methodology to determine the interest rate if LIBOR is no longer available. To manage short-term liquidity, the Company maintains a commercial paper program and a credit facility as a potential source of funds. The commercial paper program has a borrowing limit of $750 million. In November 2020, the Company entered into a new agreement for a $750 million unsecured revolving credit facility with a maturity date of November 2025. This facility contains an increase provision that would allow up to an additional $500 million of borrowing. This facility has a financial covenant requiring the Company not to exceed a 37.5% debt to capitalization ratio as defined in the agreement. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of the Company’s senior unsecured, unguaranteed long-term debt. The total amount outstanding at any point in time under the combination of the commercial paper program and the credit facility cannot exceed the amount that can be borrowed under the credit facility. No amounts were outstanding under the credit facility as of December 31, 2020 or 2019. The Company had no commercial paper outstanding as of December 31, 2020 or 2019. The Company paid $311 million, $312 million and $330 million of interest on debt in 2020, 2019 and 2018, respectively. The Company had $430 million and $389 million of investment-related debt that is reported in other liabilities and accrued expenses as of December 31, 2020 and 2019, respectively. During 2018, the Company filed a universal shelf registration statement with the Securities and Exchange Commission (“SEC”) that expires in 2021. The registration statement covers an unspecified amount of securities and can be used to issue debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. Common stock The Company had 900 million shares of issued common stock of which 304 million shares were outstanding and 596 million shares were held in treasury as of December 31, 2020. In 2020, the Company acquired 17 million shares at an average cost of $97.54 and reissued 3 million net shares under equity incentive plans. Preferred stock All outstanding preferred stock represents noncumulative perpetual preferred stock with a $1.00 par value per share and a liquidation preference of $25,000 per share.
Total preferred stock outstanding |
|  | As of December 31, |  | Aggregate liquidation preference ($ in millions) |  |  |  | Dividend per depository share (1) |  | Aggregate dividend payment ($ in millions) |
|  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | Dividend rate |  | 2020 |  | 2019 |  | 2018 |  | 2020 |  | 2019 |  | 2018 |
Series A |  | — |  |  | 11,500 |  |  | $ | — |  |  | $ | 287.5 |  |  | 5.625 | % |  | $ | — |  |  | $ | 1.41 |  |  | $ | 1.41 |  |  | $ | 4 |  | (2) | $ | 16 |  |  | $ | 16 |  |
Series C |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.750 | % |  | — |  |  | — |  |  | 1.69 |  |  | — |  |  | — |  |  | 26 |  | (2)
Series D |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.625 | % |  | — |  |  | 1.66 |  |  | 1.66 |  |  | — |  |  | 9 |  | (2) | 9 |  |
Series E |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.625 | % |  | — |  |  | 1.66 |  |  | 1.66 |  |  | — |  |  | 49 |  | (2) | 49 |  |
Series F |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.250 | % |  | — |  |  | 1.56 |  |  | 1.56 |  |  | — |  |  | 16 |  | (2) | 16 |  |
Series G |  | 23,000 |  |  | 23,000 |  |  | 575.0 |  |  | 575.0 |  |  | 5.625 | % |  | 1.41 |  |  | 1.41 |  |  | 1.41 |  |  | 32 |  |  | 32 |  |  | 18 |  |
Series H |  | 46,000 |  |  | 46,000 |  |  | 1,150.0 |  |  | 1,150.0 |  |  | 5.100 | % |  | 1.28 |  |  | 1.28 |  |  | — |  |  | 59 |  |  | 12 |  |  | — |  |
Series I |  | 12,000 |  |  | 12,000 |  |  | 300.0 |  |  | 300.0 |  |  | 4.750 | % |  | 1.19 |  |  | 1.19 |  |  | — |  |  | 13 |  |  | — |  |  | — |  |
Total |  | 81,000 |  |  | 92,500 |  |  | $ | 2,025 |  |  | $ | 2,313 |  |  |  |  |  |  |  |  |  |  | $ | 108 |  |  | $ | 134 |  | (2) | $ | 134 |  | (2)
(1)Each depositary share represents a 1/1,000 th interest in a share of preferred stock. (2)Excludes $10 million, $37 million and $13 million in 2020, 2019 and 2018, respectively, related to original issuance costs in preferred stock dividends on the Consolidated Statements of Operations and Consolidated Statements of Shareholders’ Equity as a result of the preferred stock redemptions. On January 15, 2020, the Company redeemed all 11,500 shares of its Fixed Rate Noncumulative Preferred Stock, Series A, par value $1.00 per share and liquidation preference $25,000 per share and the corresponding depositary shares. The total redemption payment was $288 million, using the proceeds from the issuance of the Fixed Rate Noncumulative Perpetual Preferred Stock, Series I. In the first quarter of 2020, the Company recognized $10 million of original issuance costs in preferred stock dividends on the Consolidated Statements of Operations and Consolidated Statements of Shareholders’ Equity as a result of the preferred stock redemption. The preferred stock ranks senior to the Company’s common stock with respect to the payment of dividends and liquidation rights. The Company will pay dividends on the preferred stock on a noncumulative basis only when, as and if declared by the Company’s board of directors (or a duly authorized committee of the board) and to the extent that the Company has legally available funds to pay dividends. If dividends are declared on the preferred stock, they will be payable quarterly in arrears at an annual fixed rate. Dividends on the preferred stock are not cumulative. Accordingly, in the event dividends are not declared on the preferred stock for payment on any dividend payment date, then those dividends will cease to be payable. If the Company has not declared a dividend before the dividend payment date for any dividend period, the Company has no obligation to pay dividends for that dividend period, whether or not dividends are declared for any future dividend period. No dividends may be paid or declared on the Company’s common stock and no shares of the Company’s common stock may be repurchased unless the full dividends for the latest completed dividend period on the preferred stock have been declared and paid or provided for. The Company is prohibited from declaring or paying dividends on its Series G preferred stock in excess of the amount of net proceeds from an issuance of common stock taking place within 90 days before a dividend declaration date if, on that dividend declaration date, either: (1) the risk-based capital ratios of the largest U.S. property-casualty insurance subsidiaries that collectively account for 80% or more of the net written premiums of U.S. property-casualty insurance business on a weighted average basis were less than 175% of their company action level risk-based capital as of the end of the most recent year; or (2) consolidated net income for the four-quarter period ending on the preliminary quarter end test date (the quarter that is two quarters prior to the most recently completed quarter) is zero or negative and consolidated shareholders’ equity (excluding AOCI, and subject to certain other adjustments relating to changes in U.S. GAAP) as of each of the preliminary quarter test date and the most recently completed quarter has declined by 20% or more from its level as measured at the end of the benchmark quarter (the date that is ten quarters prior to the most recently completed quarter). If the Company fails to satisfy either of these tests on any dividend declaration date, the restrictions on dividends will continue until the Company is able again to satisfy the test on a dividend declaration date. In addition, in the case of a restriction arising under (2) above, the restrictions on dividends will continue until consolidated shareholders’ equity (excluding AOCI, and subject to certain other adjustments relating to changes in U.S. GAAP) has increased, or has declined by less than 20%, in either case as compared to its level at the end of the benchmark quarter for each dividend payment date as to which dividend restrictions were imposed. The preferred stock does not have voting rights except with respect to certain changes in the terms of the preferred stock, in the case of certain dividend nonpayments, certain other fundamental corporate events, mergers or consolidations and as otherwise provided by law. If and when dividends have not been declared and paid in full for at least six quarterly dividend periods or their equivalent (whether or not consecutive), the authorized number of directors then constituting our board of directors will be increased by two. The holders of the preferred stock, together with the holders of all other affected classes and series of voting parity stock, voting as a single class, will be entitled to elect the two additional members of the board of directors of the Company, subject to certain conditions. The board of directors shall at no time have more than two preferred stock directors. The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after April 15, 2023 for Series G, October 15, 2024 for Series H and January 15, 2025 for Series I at a redemption price of $25,000 per share of preferred stock, plus declared and unpaid dividends. Prior to April 15, 2023 for Series G, October 15, 2024 for Series H and January 15, 2025 for Series I, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain regulatory capital event at a redemption price equal to $25,000 or $25,500 per share or a certain rating agency event at a redemption price equal to $25,000 or $25,500 per share, plus declared and unpaid dividends for Series G and for Series H and I, respectively.

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- Definition The entire disclosure on debt and capital stock. The disclosure on debt includes 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, 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. Also includes the entire disclosure on preferred stock for terms, amounts, nature of changes, rights and privileges, dividends, and other matters related to preferred stock. + References No definition available. + Details
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