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Investment Information | 3 Months Ended
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Mar. 31, 2022
Disclosure Investment Information [Abstract] |
Investment Information | Available For Sale Investments The following table summarizes the fair value and cost or amortized cost of the Company’s securities classified as available for sale:
| Estimated Fair Value |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Expected Credit Losses |  | Cost or Amortized Cost |  |
March 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | $ | 7,231,686 |  |  | $ | 31,393 |  |  | $ | (356,464) |  |  | $ | (26,509) |  |  | $ | 7,583,266 |  |  |
Mortgage backed securities | 416,138 |  |  | 1,717 |  |  | (28,430) |  |  | (797) |  |  | 443,648 |  |  |
Municipal bonds | 370,470 |  |  | 4,169 |  |  | (10,900) |  |  | (106) |  |  | 377,307 |  |  |
Commercial mortgage backed securities | 1,066,365 |  |  | 751 |  |  | (15,862) |  |  | (256) |  |  | 1,081,732 |  |  |
U.S. government and government agencies | 4,716,790 |  |  | 10,031 |  |  | (178,836) |  |  | — |  |  | 4,885,595 |  |  |
Non-U.S. government securities | 2,169,714 |  |  | 42,121 |  |  | (92,040) |  |  | (532) |  |  | 2,220,165 |  |  |
Asset backed securities | 1,677,690 |  |  | 1,128 |  |  | (43,473) |  |  | (5,945) |  |  | 1,725,980 |  |  |
Total | 17,648,853 |  |  | 91,310 |  |  | (726,005) |  |  | (34,145) |  |  | 18,317,693 |  |  |
Short-term investments | 2,332,624 |  |  | 758 |  |  | (647) |  |  | — |  |  | 2,332,513 |  |  |
Total | $ | 19,981,477 |  |  | $ | 92,068 |  |  | $ | (726,652) |  |  | $ | (34,145) |  |  | $ | 20,650,206 |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | $ | 6,553,333 |  |  | $ | 104,170 |  |  | $ | (69,194) |  |  | $ | (2,037) |  |  | $ | 6,520,394 |  |  |
Mortgage backed securities | 408,477 |  |  | 2,825 |  |  | (5,410) |  |  | (48) |  |  | 411,110 |  |  |
Municipal bonds | 404,666 |  |  | 18,724 |  |  | (1,409) |  |  | (2) |  |  | 387,353 |  |  |
Commercial mortgage backed securities | 1,046,484 |  |  | 1,740 |  |  | (3,117) |  |  | (6) |  |  | 1,047,867 |  |  |
U.S. government and government agencies | 4,772,764 |  |  | 10,076 |  |  | (45,967) |  |  | — |  |  | 4,808,655 |  |  |
Non-U.S. government securities | 2,120,294 |  |  | 54,048 |  |  | (34,749) |  |  | (82) |  |  | 2,101,077 |  |  |
Asset backed securities | 2,692,091 |  |  | 6,540 |  |  | (11,108) |  |  | (708) |  |  | 2,697,367 |  |  |
Total | 17,998,109 |  |  | 198,123 |  |  | (170,954) |  |  | (2,883) |  |  | 17,973,823 |  |  |
Short-term investments | 1,734,716 |  |  | 568 |  |  | (590) |  |  | — |  |  | 1,734,738 |  |  |
Total | $ | 19,732,825 |  |  | $ | 198,691 |  |  | $ | (171,544) |  |  | $ | (2,883) |  |  | $ | 19,708,561 |  |  |
The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:
| Less than 12 Months |  | 12 Months or More |  | Total
| Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
March 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | $ | 5,798,556 |  |  | $ | (305,661) |  |  | $ | 513,866 |  |  | $ | (50,803) |  |  | $ | 6,312,422 |  |  | $ | (356,464) |
Mortgage backed securities | 328,090 |  |  | (21,714) |  |  | 68,490 |  |  | (6,716) |  |  | 396,580 |  |  | (28,430) |
Municipal bonds | 203,717 |  |  | (9,578) |  |  | 14,759 |  |  | (1,322) |  |  | 218,476 |  |  | (10,900) |
Commercial mortgage backed securities | 942,203 |  |  | (15,815) |  |  | 1,654 |  |  | (47) |  |  | 943,857 |  |  | (15,862) |
U.S. government and government agencies | 4,201,416 |  |  | (173,754) |  |  | 80,735 |  |  | (5,082) |  |  | 4,282,151 |  |  | (178,836) |
Non-U.S. government securities | 2,045,013 |  |  | (82,107) |  |  | 98,575 |  |  | (9,933) |  |  | 2,143,588 |  |  | (92,040) |
Asset backed securities | 1,450,006 |  |  | (41,196) |  |  | 110,116 |  |  | (2,277) |  |  | 1,560,122 |  |  | (43,473) |
Total | 14,969,001 |  |  | (649,825) |  |  | 888,195 |  |  | (76,180) |  |  | 15,857,196 |  |  | (726,005) |
Short-term investments | 420,157 |  |  | (647) |  |  | — |  |  | — |  |  | 420,157 |  |  | (647) |
Total | $ | 15,389,158 |  |  | $ | (650,472) |  |  | $ | 888,195 |  |  | $ | (76,180) |  |  | $ | 16,277,353 |  |  | $ | (726,652) |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | $ | 3,639,582 |  |  | $ | (63,938) |  |  | $ | 98,867 |  |  | $ | (5,256) |  |  | $ | 3,738,449 |  |  | $ | (69,194) |
Mortgage backed securities | 222,176 |  |  | (3,545) |  |  | 46,809 |  |  | (1,865) |  |  | 268,985 |  |  | (5,410) |
Municipal bonds | 26,665 |  |  | (385) |  |  | 16,361 |  |  | (1,024) |  |  | 43,026 |  |  | (1,409) |
Commercial mortgage backed securities | 675,603 |  |  | (2,805) |  |  | 5,908 |  |  | (312) |  |  | 681,511 |  |  | (3,117) |
U.S. government and government agencies | 4,211,621 |  |  | (44,180) |  |  | 33,373 |  |  | (1,787) |  |  | 4,244,994 |  |  | (45,967) |
Non-U.S. government securities | 1,511,301 |  |  | (31,983) |  |  | 62,957 |  |  | (2,766) |  |  | 1,574,258 |  |  | (34,749) |
Asset backed securities | 1,667,002 |  |  | (9,853) |  |  | 33,082 |  |  | (1,255) |  |  | 1,700,084 |  |  | (11,108) |
Total | 11,953,950 |  |  | (156,689) |  |  | 297,357 |  |  | (14,265) |  |  | 12,251,307 |  |  | (170,954) |
Short-term investments | 284,733 |  |  | (590) |  |  | — |  |  | — |  |  | 284,733 |  |  | (590) |
Total | $ | 12,238,683 |  |  | $ | (157,279) |  |  | $ | 297,357 |  |  | $ | (14,265) |  |  | $ | 12,536,040 |  |  | $ | (171,544) |
At March 31, 2022, on a lot level basis, approximately 6,550 security lots out of a total of approximately 9,060 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $3.6 million. At December 31, 2021, on a lot level basis, approximately 4,700 security lots out of a total of approximately 10,240 security lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity portfolio was $1.1 million. The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|  | March 31, 2022 |  | December 31, 2021
Maturity |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value |  | Amortized Cost
Due in one year or less |  | $ | 313,167 |  |  | $ | 311,780 |  |  | $ | 300,889 |  |  | $ | 299,772 |
Due after one year through five years |  | 9,592,143 |  |  | 9,884,149 |  |  | 8,355,255 |  |  | 8,339,387 |
Due after five years through 10 years |  | 4,107,319 |  |  | 4,353,470 |  |  | 4,689,155 |  |  | 4,684,393 |
Due after 10 years |  | 476,031 |  |  | 516,934 |  |  | 505,758 |  |  | 493,927 |
|  | 14,488,660 |  |  | 15,066,333 |  |  | 13,851,057 |  |  | 13,817,479 |
Mortgage backed securities |  | 416,138 |  |  | 443,648 |  |  | 408,477 |  |  | 411,110 |
Commercial mortgage backed securities |  | 1,066,365 |  |  | 1,081,732 |  |  | 1,046,484 |  |  | 1,047,867 |
Asset backed securities |  | 1,677,690 |  |  | 1,725,980 |  |  | 2,692,091 |  |  | 2,697,367 |
Total |  | $ | 17,648,853 |  |  | $ | 18,317,693 |  |  | $ | 17,998,109 |  |  | $ | 17,973,823 |
Equity Securities, at Fair Value At March 31, 2022, the Company held $1.0 billion of equity securities, at fair value, compared to $1.8 billion at December 31, 2021. Such holdings include publicly traded common stocks primarily in the consumer cyclical and non-cyclical, technology, communication and financial sectors and exchange-traded funds in fixed income, equity and other sectors. Other Investments, at Fair Value The following table summarizes the Company’s other investments and other investable assets:
| March 31, 2022 |  | December 31, 2021
Fixed maturities | $ | 426,187 |  |  | $ | 416,698 |
Other investments | 1,226,808 |  |  | 1,432,553 |
Short-term investments | 12,371 |  |  | 97,806 |
Equity securities | 21,300 |  |  | 26,493 |
Total | $ | 1,686,666 |  |  | $ | 1,973,550 |
The following table summarizes the Company’s other investments, as detailed in the previous table, by strategy:
| March 31, 2022 |  | December 31, 2021
Lending | $ | 472,099 |  |  | $ | 536,345 |
Investment grade fixed income | 350,217 |  |  | 147,810 |
Term loan investments | 160,945 |  |  | 484,950 |
Private equity | 98,471 |  |  | 91,126 |
Energy | 81,693 |  |  | 81,692 |
Credit related funds | 63,383 |  |  | 70,278 |
Infrastructure | — |  |  | 20,352 |
Total | $ | 1,226,808 |  |  | $ | 1,432,553 |
Investments Accounted For Using the Equity Method The following table summarizes the Company’s investments accounted for using the equity method, by strategy:
| March 31, 2022 |  | December 31, 2021
Credit related funds | $ | 1,067,549 |  |  | $ | 1,022,334 |
Private equity | 602,802 |  |  | 436,042 |
Real estate | 444,755 |  |  | 396,395 |
Lending | 409,736 |  |  | 376,649 |
Equities | 360,906 |  |  | 395,090 |
Infrastructure | 226,430 |  |  | 230,070 |
Energy | 107,842 |  |  | 119,141 |
Fixed income | 105,523 |  |  | 101,890 |
Total | $ | 3,325,543 |  |  | $ | 3,077,611 |
Certain of the Company’s other investments are in investment funds for which the Company has the option to redeem at agreed upon values as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investments in investment funds may be redeemed daily, monthly, quarterly or on other terms. Two common redemption restrictions which may impact the Company’s ability to redeem these investment funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the investment fund’s net assets which may otherwise hinder the general partner or investment manager’s ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. If the investment funds are eligible to be redeemed, the time to redeem such fund can take weeks or months following the notification. Limited Partnership Interests In the normal course of its activities, the Company invests in limited partnerships as part of its overall investment strategy. Such amounts are included in ‘investments accounted for using the equity method’ and ‘investments accounted for using the fair value option.’ The Company has determined that it is not required to consolidate these investments because it is not the primary beneficiary of the funds. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. The following table summarizes investments in limited partnership interests where the Company has a variable interest by balance sheet line item:
| March 31, 2022 |  | December 31, 2021
Investments accounted for using the equity method (1) | 3,325,543 |  |  | 3,077,611 |
Investments accounted for using the fair value option (2) | 146,718 |  |  | 170,595 |
Total | $ | 3,472,261 |  |  | $ | 3,248,206 |
(1) Aggregate unfunded commitments were $2.7 billion at March 31, 2022, compared to $2.6 billion at December 31, 2021. (2) Aggregate unfunded commitments were $21.3 million at March 31, 2022, compared to $18.8 million at December 31, 2021. Net Investment Income The components of net investment income were derived from the following sources:
| March 31,
| 2022 |  | 2021
Three Months Ended |  |  |
Fixed maturities | $ | 82,053 |  |  | $ | 90,626 |
Term loans | 1,617 |  |  | 14,728 |
Equity securities | 6,238 |  |  | 5,650 |
Short-term investments | 2,575 |  |  | 607 |
Other (1) | 10,459 |  |  | 14,355 |
Gross investment income | 102,942 |  |  | 125,966 |
Investment expenses | (22,506) |  |  | (27,110) |
Net investment income | $ | 80,436 |  |  | $ | 98,856 |
(1) Includes income distributions from investment funds and other items. Net Realized Gains (Losses) Net realized gains (losses), which include changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings were as follows:
| March 31,
| 2022 |  | 2021
Three Months Ended |  |  |
Available for sale securities: |  |  |
Gross gains on investment sales | $ | 19,707 |  |  | $ | 65,002 |
Gross losses on investment sales | (108,347) |  |  | (62,998) |
Change in fair value of assets and liabilities accounted for using the fair value option: |  |  |
Fixed maturities | (30,589) |  |  | 16,553 |
Other investments | 4,389 |  |  | 46,855 |
Equity securities | (3,313) |  |  | 2,065 |
Short-term investments | (149) |  |  | 736 |
Equity securities, at fair value: |  |  |
Net realized gains (losses) on sales during the period | 65,211 |  |  | 37,849 |
Net unrealized gains (losses) on equity securities still held at reporting date | (176,195) |  |  | 19,708 |
Allowance for credit losses: |  |  |
Investments related | (31,722) |  |  | (1,648) |
Underwriting related | (4,286) |  |  | 5,268 |
Derivative instruments (1) | (23,711) |  |  | 36,116 |
Other | (3,409) |  |  | (23,045) |
Net realized gains (losses) | $ | (292,414) |  |  | $ | 142,461 |
(1) See note 9 for information on the Company’s derivative instruments. Equity in Net Income (Loss) of Investment Funds Accounted for Using the Equity Method The Company recorded $36.3 million of equity in net income related to investment funds accounted for using the equity method in the 2022 first quarter, compared to income of $71.7 million for the 2021 first quarter. In applying the equity method, investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the net income or loss of the funds (which include changes in the market value of the underlying securities in the funds). Such investments are generally recorded on a one to three month lag based on the availability of reports from the investment funds. Investments in Operating Affiliates Investments in which the Company has significant influence over the operating and financial policies are classified as ‘investments in operating affiliates’ on the Company’s balance sheets and are accounted for under the equity method. Such investments primarily include the Company’s investment in Coface SA (“Coface”), Greysbridge and Premia. Investments in Coface and Premia are generally recorded on a three month lag, while the Company’s investment in Greysbridge is not recorded on a lag. In 2021, the Company completed the share purchase agreement with Natixis to purchase 29.5% of the common equity of Coface, a France-based leader in the global trade credit insurance market. The consideration paid was €9.95 per share, or an aggregate €453 million (approximately $546 million) including related fees. Income (loss) from operating affiliates reflected a one-time gain of $74.5 million realized from the acquisition. As of March 31, 2022, the Company owned approximately 29.86% of the issued shares of Coface, or 30.09% excluding treasury shares, with a carrying value of $646.0 million, compared to $630.5 million at December 31, 2021. In July 2021, the Company announced the completion of the previously disclosed acquisition of Somers by Greysbridge for a cash purchase price of $35.00 per common share. Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certain investment funds managed by Warburg. At March 31, 2022 the Company’s carrying value in Greysbridge was $362.2 million, compared to $375.7 million at December 31, 2021, which reflected the Company’s aggregate purchase price of $278.9 million along with income (loss) from operating affiliates, which included a one-time gain of $95.7 million recognized from the acquisition. Income from operating affiliates for the 2022 first quarter was $24.5 million, compared to an income of $75.5 million, for the 2021 first quarter. Allowance for Expected Credit Losses The following table provides a roll forward of the allowance for expected credit losses of the Company’s securities classified as available for sale:
|  | Structured Securities (1) |  | Municipal Bonds |  | Corporate Bonds |  |  |  | Total
Three Months Ended March 31, 2022 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 802 |  |  | $ | 2 |  |  | $ | 2,079 |  |  |  |  | $ | 2,883 |
Additions for current-period provision for expected credit losses |  | 5,990 |  |  | 95 |  |  | 25,150 |  |  |  |  | 31,235 |
Additions (reductions) for previously recognized expected credit losses |  | 487 |  |  | 9 |  |  | (15) |  |  |  |  | 481 |
Reductions due to disposals |  | (281) |  |  | — |  |  | (173) |  |  |  |  | (454) |
Balance at end of period |  | $ | 6,998 |  |  | $ | 106 |  |  | $ | 27,041 |  |  |  |  | $ | 34,145 |
Three Months Ended March 31, 2021 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1,490 |  |  | $ | 11 |  |  | $ | 896 |  |  |  |  | $ | 2,397 |
Additions for current-period provision for expected credit losses |  | 182 |  |  | — |  |  | 2,421 |  |  |  |  | 2,603 |
Additions (reductions) for previously recognized expected credit losses |  | (382) |  |  | (9) |  |  | (540) |  |  |  |  | (931) |
Reductions due to disposals |  | (83) |  |  | — |  |  | (156) |  |  |  |  | (239) |
Balance at end of period |  | $ | 1,207 |  |  | $ | 2 |  |  | $ | 2,621 |  |  |  |  | $ | 3,830 |
(1) Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities. Restricted Assets The Company is required to maintain assets on deposit, which primarily consist of fixed maturities, with various regulatory authorities to support its underwriting operations. The Company’s subsidiaries maintain assets in trust accounts as collateral for transactions with affiliated companies and also have investments in segregated portfolios primarily to provide collateral or guarantees for letters of credit to third parties. See note 18, “Commitments and Contingencies,” of the notes to consolidated financial statements in the Company’s 2021 Form 10-K. The following table details the value of the Company’s restricted assets:
| March 31, 2022 |  | December 31, 2021
Assets used for collateral or guarantees: |  |  |
Affiliated transactions | $ | 4,202,190 |  |  | $ | 4,223,955 |
Third party agreements | 3,018,035 |  |  | 2,721,160 |
Deposits with U.S. regulatory authorities | 773,105 |  |  | 798,100 |
Deposits with non-U.S. regulatory authorities | 509,741 |  |  | 506,517 |
Total restricted assets | $ | 8,503,071 |  |  | $ | 8,249,732 |
Reconciliation of Cash and Restricted Cash The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:
| March 31, 2022 |  | December 31, 2021
Cash | $ | 812,917 |  |  | $ | 858,668 |
Restricted cash (included in ‘other assets’) | $ | 503,201 |  |  | $ | 456,103 |
Cash and restricted cash | $ | 1,316,118 |  |  | $ | 1,314,771 |

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