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Investments

6 Months Ended

Jun. 30, 2021

Investments [Abstract]

Investments

3. INVESTMENTS

The following tables show amortized cost, allowance for credit losses, gross unrealized appreciation, gross unrealized depreciation and market value of available for sale, fixed maturity securities as of the dates indicated:

		At June 30, 2021
		Amortized			Allowance for			Unrealized			Unrealized			Market
(Dollars in thousands)		Cost			Credit Losses			Appreciation			Depreciation			Value
Fixed maturity securities
	U.S. Treasury securities and obligations of
	U.S. government agencies and corporations	$	1,259,149		$	-		$	29,365		$	(12,756)		$	1,275,758
	Obligations of U.S. states and political subdivisions		574,398			-			35,933			(986)			609,345
	Corporate securities		7,155,688			(18,475)			285,509			(63,018)			7,359,704
	Asset-backed securities		3,141,971			(4,915)			35,316			(2,955)			3,169,417
	Mortgage-backed securities
	Commercial		1,026,809			-			55,125			(3,535)			1,078,399
	Agency residential		2,255,348			-			47,124			(12,205)			2,290,267
	Non-agency residential		8,220			-			6			(15)			8,211
	Foreign government securities		1,494,989			-			80,268			(21,296)			1,553,961
	Foreign corporate securities		3,802,145			(1,260)			167,015			(37,763)			3,930,137
Total fixed maturity securities		$	20,718,717		$	(24,650)		$	735,661		$	(154,529)		$	21,275,199

		At December 31, 2020
		Amortized			Allowance for			Unrealized			Unrealized			Market
(Dollars in thousands)		Cost			Credit Losses			Appreciation			Depreciation			Value
Fixed maturity securities
	U.S. Treasury securities and obligations of
	U.S. government agencies and corporations	$	1,325,156		$	-		$	49,084		$	(7,134)		$	1,367,106
	Obligations of U.S. states and political subdivisions		543,895			-			34,654			(1,254)			577,295
	Corporate securities		6,824,800			(1,220)			380,677			(55,231)			7,149,026
	Asset-backed securities		2,540,809			-			30,691			(5,698)			2,565,802
	Mortgage-backed securities
	Commercial		915,923			-			75,275			(895)			990,303
	Agency residential		2,206,139			-			64,663			(3,063)			2,267,739
	Non-agency residential		5,187			-			9			(2)			5,194
	Foreign government securities		1,565,260			(22)			102,587			(22,450)			1,645,375
	Foreign corporate securities		3,297,898			(503)			204,023			(29,085)			3,472,333
Total fixed maturity securities		$	19,225,067		$	(1,745)		$	941,663		$	(124,812)		$	20,040,173

The amortized cost and market value of fixed maturity securities are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.

	At June 30, 2021						At December 31, 2020
	Amortized			Market			Amortized			Market
(Dollars in thousands)	Cost			Value			Cost			Value
Fixed maturity securities – available for sale:
Due in one year or less	$	1,628,113		$	1,638,768		$	1,365,793		$	1,374,674
Due after one year through five years		6,432,847			6,618,429			6,529,189			6,774,785
Due after five years through ten years		4,890,259			5,091,435			4,414,211			4,751,903
Due after ten years		1,335,150			1,380,273			1,247,816			1,309,773
Asset-backed securities		3,141,971			3,169,417			2,540,809			2,565,802
Mortgage-backed securities:
Commercial		1,026,809			1,078,399			915,923			990,303
Agency residential		2,255,348			2,290,267			2,206,139			2,267,739
Non-agency residential		8,220			8,211			5,187			5,194
Total fixed maturity securities	$	20,718,717		$	21,275,199		$	19,225,067		$	20,040,173

The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the following sources for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2021			2020			2021			2020
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	97,127		$	614,077		$	(235,581)		$	337,053
Change in unrealized appreciation (depreciation), pre-tax		97,127			614,077			(235,581)			337,053
Deferred tax benefit (expense)		(11,366)			(69,581)			29,061			(40,557)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity	$	85,761		$	544,496		$	(206,520)		$	296,496

The Company reviews all of its fixed maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline in value is due to non-credit related or credit related factors. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related decline in market value. Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to

sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. The Company will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss).

The Company does not create an allowance for uncollectible interest. If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time.

The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

		Duration of Unrealized Loss at June 30, 2021 By Security Type
	Less than 12 months						Greater than 12 months						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
(Dollars in thousands)	Market Value			Depreciation			Market Value			Depreciation			Market Value			Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	341,846		$	(12,494)		$	2,620		$	(262)		$	344,466		$	(12,756)
Obligations of U.S. states and political subdivisions		23,662			(986)			-			-			23,662			(986)
Corporate securities		1,598,159			(61,141)			37,936			(1,877)			1,636,095			(63,018)
Asset-backed securities		710,904			(2,955)			-			-			710,904			(2,955)
Mortgage-backed securities
Commercial		134,941			(3,535)			-			-			134,941			(3,535)
Agency residential		1,020,232			(11,327)			43,983			(878)			1,064,215			(12,205)
Non-agency residential		1,309			(15)			-			-			1,309			(15)
Foreign government securities		304,722			(20,686)			3,107			(610)			307,829			(21,296)
Foreign corporate securities		861,693			(34,534)			30,035			(3,229)			891,728			(37,763)
Total fixed maturity securities	$	4,997,468		$	(147,673)		$	117,681		$	(6,856)		$	5,115,149		$	(154,529)

		Duration of Unrealized Loss at June 30, 2021 By Maturity
	Less than 12 months						Greater than 12 months						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
(Dollars in thousands)	Market Value			Depreciation			Market Value			Depreciation			Market Value			Depreciation
Fixed maturity securities
Due in one year or less	$	260,687		$	(15,951)		$	5,846		$	(471)		$	266,533		$	(16,422)
Due in one year through five years		1,385,520			(51,928)			48,824			(3,048)			1,434,344			(54,976)
Due in five years through ten years		1,153,553			(48,557)			19,028			(2,459)			1,172,581			(51,016)
Due after ten years		330,322			(13,405)			-			-			330,322			(13,405)
Asset-backed securities		710,904			(2,955)			-			-			710,904			(2,955)
Mortgage-backed securities		1,156,482			(14,877)			43,983			(878)			1,200,465			(15,755)
Total fixed maturity securities	$	4,997,468		$	(147,673)		$	117,681		$	(6,856)		$	5,115,149		$	(154,529)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at June 30, 2021 were $5,115,149 thousand and $154,529 thousand, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at June 30, 2021, did not exceed 1.6% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss position at June 30, 2021, comprised less than 0.3% of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $147,673 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, U.S. Treasury and government securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $133,996 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $6,856 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to foreign and domestic corporate securities. Of these unrealized losses, $6,678 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:

		Duration of Unrealized Loss at December 31, 2020 By Security Type
	Less than 12 months						Greater than 12 months						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
(Dollars in thousands)	Market Value			Depreciation			Market Value			Depreciation			Market Value			Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	135,190		$	(7,134)		$	-		$	-		$	135,190		$	(7,134)
Obligations of U.S. states and political subdivisions		19,524			(999)			4,059			(255)			23,583			(1,254)
Corporate securities		669,755			(26,159)			247,962			(29,072)			917,717			(55,231)
Asset-backed securities		235,566			(4,768)			85,595			(930)			321,161			(5,698)
Mortgage-backed securities
Commercial		53,511			(578)			6,592			(317)			60,103			(895)
Agency residential		434,447			(2,016)			50,353			(1,047)			484,800			(3,063)
Non-agency residential		185			(2)			-			-			185			(2)
Foreign government securities		114,755			(8,813)			150,812			(13,637)			265,567			(22,450)
Foreign corporate securities		354,548			(17,489)			115,595			(11,596)			470,143			(29,085)
Total fixed maturity securities	$	2,017,481		$	(67,958)		$	660,968		$	(56,854)		$	2,678,449		$	(124,812)

		Duration of Unrealized Loss at December 31, 2020 By Maturity
	Less than 12 months						Greater than 12 months						Total
				Gross						Gross						Gross
				Unrealized						Unrealized						Unrealized
(Dollars in thousands)	Market Value			Depreciation			Market Value			Depreciation			Market Value			Depreciation
Fixed maturity securities
Due in one year or less	$	96,144		$	(4,942)		$	112,419		$	(12,071)		$	208,563		$	(17,013)
Due in one year through five years		653,816			(32,469)			283,866			(21,319)			937,682			(53,788)
Due in five years through ten years		422,517			(19,392)			49,749			(2,034)			472,266			(21,426)
Due after ten years		121,295			(3,791)			72,394			(19,136)			193,689			(22,927)
Asset-backed securities		235,566			(4,768)			85,595			(930)			321,161			(5,698)
Mortgage-backed securities		488,143			(2,596)			56,945			(1,364)			545,088			(3,960)
Total fixed maturity securities	$	2,017,481		$	(67,958)		$	660,968		$	(56,854)		$	2,678,449		$	(124,812)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2020 were $2,678,449 thousand and $124,812 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2020, did not exceed 0.7.% of the overall market value of the Company’s fixed maturity securities. The market value of the securities for the issuer with the second largest unrealized loss comprised less than 0.1% of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $67,958 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities and foreign government securities. Of these unrealized losses, $63,424 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $56,854 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $33,533 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The components of net investment income are presented in the table below for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2021			2020			2021			2020
Fixed maturities	$	148,262		$	133,918		$	289,178		$	271,842
Equity securities		3,493			3,662			8,331			7,183
Short-term investments and cash		773			1,687			953			3,862
Other invested assets:
Limited partnerships		239,966			(88,254)			354,299			(66,686)
Other		25,855			(2,962)			31,874			(16,033)
Gross investment income before adjustments		418,349			48,051			684,635			200,168
Funds held interest income (expense)		3,287			2,021			11,253			10,237
Future policy benefit reserve income (expense)		(170)			(303)			(461)			(514)
Gross investment income		421,466			49,769			695,427			209,891
Investment expenses		(14,371)			(11,686)			(27,919)			(24,008)
Net investment income	$	407,095		$	38,083		$	667,508		$	185,883

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. The net investment income from limited partnerships is dependent upon the Company’s share of the net asset values of interests underlying each limited partnership. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.

The Company had contractual commitments to invest up to an additional $2,866,741 thousand in limited partnerships and private placement loan securities at June 30, 2021. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026.

The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its participation in the facility. As of June 30, 2021, the market value of investments in the facility consolidated within the Company’s balance sheets was $575,807 thousand.

The components of net realized capital gains (losses) are presented in the tables below for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2021				2020		2021				2020
Fixed maturity securities, market value:
Allowance for credit losses	$	(15,927)		$	(4,063)		$	(22,904)		$	(25,837)
Gains (losses) from sales		10,060			9,619			19,234			(4,457)
Fixed maturity securities, fair value:
Gains (losses) from sales		-			-			-			-
Gains (losses) from fair value adjustments		-			(272)			-			(1,395)
Equity securities, fair value:
Gains (losses) from sales		3,755			16,274			9,993			(11,325)
Gains (losses) from fair value adjustments		103,525			161,694			132,581			17,691
Other invested assets		2,748			1,293			4,094			(1,034)
Short-term investments gain (loss)		(52)			103			13			417
Total net realized capital gains (losses)	$	104,109		$	184,648		$	143,011		$	(25,940)

	Roll Forward of Allowance for Credit Losses
	Three Months Ended June 30, 2021															Six Months Ended June 30, 2021
							Foreign			Foreign												Foreign			Foreign
	Corporate			Asset-Backed			Government			Corporate						Corporate			Asset-Backed			Government			Corporate
	Securities			Securities			Securities			Securities			Total			Securities			Securities			Securities			Securities			Total
(Dollars in thousands)
Beginning Balance	$	(3,603)		$	(4,915)		$	-		$	(205)		$	(8,723)		$	(1,220)		$	-		$	(22)		$	(503)		$	(1,745)
Credit losses on securities where credit
losses were not previously recorded		(13,537)			-			-			(1,055)			(14,592)			(15,920)			(4,915)			-			(1,055)			(21,890)
Increases in allowance on previously														-
impaired securities		(1,468)			-			-			-			(1,468)			(1,468)			-			-			-			(1,468)
Decreases in allowance on previously														-
impaired securities		-			-			-			-			-			-			-			-			-			-
Reduction in allowance due to disposals		133			-			-			-			133			133			-			22			298			453

Balance as of June 30, 2021	$	(18,475)		$	(4,915)		$	-		$	(1,260)		$	(24,650)		$	(18,475)		$	(4,915)		$	-		$	(1,260)		$	(24,650)

	Roll Forward of Allowance for Credit Losses
	Three Months Ended June 30, 2020												Six Months Ended June 30, 2020
				Foreign			Foreign									Foreign			Foreign
	Corporate			Government			Corporate						Corporate			Government			Corporate
	Securities			Securities			Securities			Total			Securities			Securities			Securities			Total

Beginning Balance	$	(17,305)		$	(519)		$	(3,950)		$	(21,774)		$	-		$	-		$	-		$	-
Credit losses on securities where credit
losses were not previously recorded		(10,355)			-			(605)			(10,960)			(27,660)			(519)			(4,555)			(32,734)
Increases in allowance on previously											-
impaired securities		(782)			-			(300)			(1,082)			(782)			-			(300)			(1,082)
Decreases in allowance on previously											-
impaired securities		3,431			212			693			4,336			3,431			212			693			4,336
Reduction in allowance due to disposals		2,758			215			670			3,643			2,758			215			670			3,643

Balance as of June 30, 2020	$	(22,253)		$	(92)		$	(3,492)		$	(25,837)		$	(22,253)		$	(92)		$	(3,492)		$	(25,837)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) fair value re-measurements, allowances for credit losses per ASU 2016-13 and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above.

The proceeds and split between gross gains and losses, from sales of fixed maturity and equity securities, are presented in the table below for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2021			2020			2021			2020
Proceeds from sales of fixed maturity securities	$	371,459		$	488,320		$	599,737		$	990,273
Gross gains from sales		19,870			21,355			34,734			35,356
Gross losses from sales		(9,810)			(11,736)			(15,500)			(39,813)

Proceeds from sales of equity securities	$	193,350		$	100,344		$	474,663		$	213,185
Gross gains from sales		5,803			18,172			18,107			20,756
Gross losses from sales		(2,048)			(1,898)			(8,114)			(32,081)