Investment Information

3 Months Ended

Mar. 31, 2023

Disclosure Investment Information [Abstract]

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, 2023
Fixed maturities:
Corporate bonds	$	9,409	$	84	$	(636)	$	(45)	$	10,006
Residential mortgage backed securities	823		6		(74)		—		891
Municipal bonds	314		2		(24)		—		336
Commercial mortgage backed securities	1,035		1		(54)		(2)		1,090
U.S. government and government agencies	4,563		14		(234)		—		4,783
Non-U.S. government securities	2,187		13		(178)		(3)		2,355
Asset backed securities	2,361		3		(97)		(6)		2,461
Total	20,692		123		(1,297)		(56)		21,922

Short-term investments	1,553		1		(1)		—		1,553
Total	$	22,245	$	124	$	(1,298)	$	(56)	$	23,475

December 31, 2022
Fixed maturities:
Corporate bonds	$	8,020	$	55	$	(781)	$	(30)	$	8,776
Residential mortgage backed securities	795		5		(87)		—		877
Municipal bonds	419		3		(33)		—		449
Commercial mortgage backed securities	1,047		1		(58)		(3)		1,107
U.S. government and government agencies	5,162		15		(343)		—		5,490
Non-U.S. government securities	2,313		9		(238)		(2)		2,544
Asset backed securities	1,927		1		(107)		(6)		2,039
Total	19,683		89		(1,647)		(41)		21,282

Short-term investments	1,332		1		(2)		—		1,333
Total	$	21,015	$	90	$	(1,649)	$	(41)	$	22,615

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, 2023
Fixed maturities:
Corporate bonds	$	2,723	$	(101)	$	4,702	$	(535)	$	7,425	$	(636)
Residential mortgage backed securities	412		(18)		279		(56)		691		(74)
Municipal bonds	131		(6)		164		(18)		295		(24)
Commercial mortgage backed securities	167		(8)		855		(46)		1,022		(54)
U.S. government and government agencies	1,209		(40)		2,137		(194)		3,346		(234)
Non-U.S. government securities	1,109		(61)		863		(117)		1,972		(178)
Asset backed securities	909		(31)		1,006		(66)		1,915		(97)
Total	6,660		(265)		10,006		(1,032)		16,666		(1,297)

Short-term investments	274		(1)		—		—		274		(1)
Total	$	6,934	$	(266)	$	10,006	$	(1,032)	$	16,940	$	(1,298)

December 31, 2022
Fixed maturities:
Corporate bonds	$	4,823	$	(393)	$	2,559	$	(388)	$	7,382	$	(781)
Residential mortgage backed securities	546		(52)		154		(35)		700		(87)
Municipal bonds	364		(30)		16		(3)		380		(33)
Commercial mortgage backed securities	598		(35)		445		(23)		1,043		(58)
U.S. government and government agencies	3,557		(197)		1,443		(146)		5,000		(343)
Non-U.S. government securities	1,703		(154)		542		(84)		2,245		(238)
Asset backed securities	1,148		(66)		512		(41)		1,660		(107)
Total	12,739		(927)		5,671		(720)		18,410		(1,647)

Short-term investments	237		(2)		—		—		237		(2)
Total	$	12,976	$	(929)	$	5,671	$	(720)	$	18,647	$	(1,649)

At March 31, 2023, on a lot level basis, approximately 9,380 security lots out of a total of approximately 12,970 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 $7 million. At December 31, 2022, on a lot level basis, approximately 9,810 security lots out of a total of approximately 12,590 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 $7 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, 2023				December 31, 2022
Maturity	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Due in one year or less	$	483	$	507	$	511	$	537
Due after one year through five years	11,405		11,938		11,016		11,715
Due after five years through 10 years	4,430		4,840		3,984		4,527
Due after 10 years	155		195		403		480
	16,473		17,480		15,914		17,259
Residential mortgage backed securities	823		891		795		877
Commercial mortgage backed securities	1,035		1,090		1,047		1,107
Asset backed securities	2,361		2,461		1,927		2,039
Total	$	20,692	$	21,922	$	19,683	$	21,282

Equity Securities, at Fair Value

At March 31, 2023, the Company held $859 million of equity securities, at fair value, compared to $860 million at December 31, 2022. 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, 2023		December 31, 2022
Fixed maturities	$	631	$	554
Other investments	1,121		1,043
Short-term investments	17		33
Equity securities	7		14



Total	$	1,776	$	1,644

The following table summarizes the Company’s other investments, as detailed in the previous table, by strategy:


	March 31, 2023		December 31, 2022
Lending	$	420	$	406
Investment grade fixed income	280		271
Term loan investments	209		164
Private equity	131		123
Credit related funds	62		56
Energy	19		23


Total	$	1,121	$	1,043

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, 2023		December 31, 2022
Credit related funds	$	1,156	$	1,136
Private equity	944		917
Real estate	574		535
Lending	533		531
Infrastructure	271		245
Equities	173		169
Fixed income	135		130
Energy	110		111
Total	$	3,896	$	3,774

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, 2023		December 31, 2022
Investments accounted for using the equity method (1)	$	3,896	$	3,774
Investments accounted for using the fair value option (2)	130		131
Total	$	4,026	$	3,905

(1) Aggregate unfunded commitments were $2.6 billion at March 31, 2023, compared with $2.6 billion at December 31, 2022.

(2) Aggregate unfunded commitments were $61 million at March 31, 2023, compared to $17 million at December 31, 2022.

Net Investment Income

The components of net investment income were derived from the following sources:


	March 31,
	2023		2022
Three Months Ended
Fixed maturities	$	188	$	82
Term loans	0		2
Equity securities	4		6
Short-term investments	14		3
Other (1)	13		10
Gross investment income	219		103
Investment expenses	(20)		(23)
Net investment income	$	199	$	80

(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,
	2023		2022
Three Months Ended
Available for sale securities:
Gross gains on investment sales	$	17	$	20
Gross losses on investment sales	(111)		(108)
Change in fair value of assets and liabilities accounted for using the fair value option:
Fixed maturities	6		(31)
Other investments	9		4
Equity securities	1		(3)

Equity securities, at fair value:
Net realized gains (losses) on sales during the period	19		65
Net unrealized gains (losses) on equity securities still held at reporting date	38		(176)
Allowance for credit losses:
Investments related	(16)		(32)
Underwriting related	0		(4)

Derivative instruments (1)	56		(24)
Other	(2)		(3)
Net realized gains (losses)	$	17	$	(292)

(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 an income of $48 million related to investment funds accounted for using the equity method in the 2023 first quarter, compared to $36 million for the 2022 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 Holdings Ltd., (“Greysbridge”) and Premia Holdings Ltd. Investments in Coface and Premia Holdings Ltd. are generally recorded on a three month lag, while the Company’s investment in Greysbridge is not recorded on a lag.

As of March 31, 2023, the Company owned approximately 29.86% of the issued shares of Coface, or 30.09% excluding treasury shares, with a carrying value of $576 million, compared to $563 million at December 31, 2022.

As of March 31, 2023, the Company owned 40% of Greysbridge with a carrying value of $330 million, compared to $306 million at December 31, 2022.

Income from operating affiliates for the 2023 first quarter was $39 million, compared to $25 million, for the 2022 first quarter.

See note 15 for information on Company’s transactions with related parties.

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)		Corporate Bonds		Non-U.S. Government Securities		Total
Three Months Ended March 31, 2023
Balance at beginning of period	$	9	$	30	$	2	$	41

Additions for current-period provision for expected credit losses	—		1		—		1
Additions (reductions) for previously recognized expected credit losses	(1)		15		1		15
Reductions due to disposals	—		(1)		—		(1)

Balance at end of period	$	8	$	45	$	3	$	56

Three Months Ended March 31, 2022
Balance at beginning of period	$	1	$	2	$	—	$	3

Additions for current-period provision for expected credit losses	6		25		—		31
Additions (reductions) for previously recognized expected credit losses	—		—		—		—
Reductions due to disposals	—		—		—		—

Balance at end of period	$	7	$	27	$	—	$	34

(1) Includes asset backed securities, residential 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 2022 Form 10-K.

The following table details the value of the Company’s restricted assets:


	March 31, 2023		December 31, 2022
Assets used for collateral or guarantees:
Affiliated transactions	$	4,353	$	4,254
Third party agreements	2,764		2,633
Deposits with U.S. regulatory authorities	805		776
Other (1)	1,089		1,038

Total restricted assets	$	9,011	$	8,701

(1) Primarily includes Funds at Lloyds, deposits with non-U.S. regulatory authorities and other restricted assets.

Reconciliation of Cash and Restricted Cash

The following table details reconciliation of cash and restricted cash within the Consolidated Balance Sheets:


	March 31, 2023		December 31, 2022
Cash	$	803	$	855
Restricted cash (included in ‘other assets’)	412		418
Cash and restricted cash	$	1,215	$	1,273