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Investments

12 Months Ended

Dec. 31, 2021

Investments [Abstract]

2. INVESTMENTS

The tables below present the amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and market value of fixed maturity securities as of December 31, 2021 and 2020.

		At December 31, 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	$	1,407,256		$	-		$	23,720		$	(10,358)		$	1,420,618
	Obligations of U.S. states and political subdivisions		558,842			(151)			29,080			(1,150)			586,621
	Corporate securities		7,443,535			(19,267)			195,210			(62,580)			7,556,898
	Asset-backed securities		3,579,439			(7,679)			21,817			(11,848)			3,581,729
	Mortgage-backed securities
	Commercial		1,032,506			-			37,550			(5,690)			1,064,366
	Agency residential		2,361,208			-			32,997			(18,873)			2,375,332
	Non-agency residential		6,530			-			22			(16)			6,536
	Foreign government securities		1,423,634			-			41,957			(28,079)			1,437,512
	Foreign corporate securities		4,250,642			(2,641)			95,195			(64,536)			4,278,660
Total fixed maturity securities		$	22,063,592		$	(29,738)		$	477,548		$	(203,130)		$	22,308,272

		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 December 31, 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	$	1,398,742		$	1,398,006		$	1,365,793		$	1,374,674
Due after one year through five years		7,075,077			7,154,468			6,529,189			6,774,785
Due after five years through ten years		5,003,792			5,100,672			4,414,211			4,751,903
Due after ten years		1,606,298			1,627,163			1,247,816			1,309,773
Asset-backed securities		3,579,439			3,581,729			2,540,809			2,565,802
Mortgage-backed securities:
Commercial		1,032,506			1,064,366			915,923			990,303
Agency residential		2,361,208			2,375,332			2,206,139			2,267,739
Non-agency residential		6,530			6,536			5,187			5,194
Total fixed maturity securities	$	22,063,592		$	22,308,272		$	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:

	Years Ended December 31,
(Dollars in thousands)	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 and short-term investments	$	(542,343)		$	465,192
Change in unrealized appreciation (depreciation), pre-tax		(542,343)			465,192
Deferred tax benefit (expense)		57,581			(45,458)
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in shareholders’ equity	$	(484,762)		$	419,734

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. The amounts presented in the tables below include $15.7 million of market value and $(0.4) million of gross unrealized depreciation as of December 31, 2021 related to fixed maturity securities for which the Company has recorded an allowance for credit losses.

		Duration of Unrealized Loss at December 31, 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	$	504,168		$	(6,264)		$	91,735		$	(4,094)		$	595,903		$	(10,358)
Obligations of U.S. states and political subdivisions		51,094			(1,038)			2,558			(112)			53,652			(1,150)
Corporate securities		2,132,576			(38,316)			472,831			(24,264)			2,605,407			(62,580)
Asset-backed securities		1,954,079			(11,180)			41,823			(668)			1,995,902			(11,848)
Mortgage-backed securities
Commercial		221,852			(2,854)			40,496			(2,836)			262,348			(5,690)
Agency residential		1,101,215			(12,178)			279,697			(6,695)			1,380,912			(18,873)
Non-agency residential		2,320			(14)			156			(2)			2,476			(16)
Foreign government securities		392,447			(9,709)			100,673			(18,370)			493,120			(28,079)
Foreign corporate securities		1,734,510			(46,247)			210,722			(18,289)			1,945,232			(64,536)
Total fixed maturity securities	$	8,094,261		$	(127,800)		$	1,240,691		$	(75,330)		$	9,334,952		$	(203,130)

		Duration of Unrealized Loss at December 31, 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	$	129,860		$	(2,415)		$	136,827		$	(11,832)		$	266,687		$	(14,247)
Due in one year through five years		2,165,467			(35,264)			446,247			(28,685)			2,611,714			(63,949)
Due in five years through ten years		1,727,823			(47,413)			244,454			(22,038)			1,972,277			(69,451)
Due after ten years		791,645			(16,482)			50,991			(2,574)			842,636			(19,056)
Asset-backed securities		1,954,079			(11,180)			41,823			(668)			1,995,902			(11,848)
Mortgage-backed securities		1,325,387			(15,046)			320,349			(9,533)			1,645,736			(24,579)
Total fixed maturity securities	$	8,094,261		$	(127,800)		$	1,240,691		$	(75,330)		$	9,334,952		$	(203,130)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2021 were $9.3 billion and $203.1 million, respectively. The market value of securities for the single issuer (the United States government) whose securities comprised the largest unrealized loss position at December 31, 2021, did not exceed 2.7% 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 0.5% 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 $127.8 million 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, agency residential mortgage-backed securities, asset-backed securities and foreign government securities. Of these unrealized losses, $116.2 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $75.3 million 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, $72.3 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. 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. The amounts presented in the tables below include $0.3 million of market value and $(0.1) million of gross unrealized depreciation as of December 31, 2020 related to fixed maturity securities for which the Company has recorded an allowance for credit losses.

		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 $2.7 billion and $124.8 million, respectively. The market value of securities for the single issuer (the United States government) 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 $68.0 million 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, foreign government securities and agency residential asset-backed securities. Of these unrealized losses, $63.4 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $56.9 million 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, $33.5 million were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. 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:

	Years Ended December 31,
(Dollars in thousands)	2021			2020				2019
Fixed maturities	$	561,091		$	542,363		$	520,291
Equity securities		17,276			18,776			19,505
Short-term investments and cash		1,329			5,012			17,619
Other invested assets
Limited partnerships		565,265			112,853			105,815
Other		62,944			1,699			14,117
Gross investment income before adjustments		1,207,905			680,703			677,347
Funds held interest income (expense)		12,324			12,754			13,271
Future policy benefit reserve income (expense)		(1,093)			(1,237)			(1,380)
Gross investment income		1,219,136			692,220			689,238
Investment expenses		(54,244)			(49,755)			(42,099)
Net investment income	$	1,164,892		$	642,465		$	647,139

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 $2.3 billion in limited partnerships and private placement loans at December 31, 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.

Variable Interest Entities

The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities but also as an investment manager. A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine

whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Consolidated Financial Statements. As of December 31, 2021 and 2020, the Company did not hold any securities for which it is the primary beneficiary.

The Company, through normal investment activities, makes passive investments in general and limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of December 31, 2021 and 2020 is limited to the total carrying value of $2.9 billion and $2.0 billion, respectively, which are included in general and limited partnerships and other alternative investments in Other Invested Assets in the Company's Consolidated Balance Sheets. As of December 31, 2021, the Company has outstanding commitments totaling $2.1 billion whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management.

In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in asset-back securities, which includes collateralized loan obligations and are reported in fixed maturities, available-for-sale. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.

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

	Years Ended December 31,
(Dollars in thousands)	2021				2020		2019
Fixed maturity securities, market value:
Allowance for credit losses	$	(27,992)		$	(1,745)		$	-
Other-than-temporary impairments		-			-			(20,899)
Gains (losses) from sales		16,503			(2,214)			28,025
Fixed maturity securities, fair value:
Gains (losses) from sales		-			(2,863)			355
Gains (losses) from fair value adjustments		-			1,944			1,808
Equity securities, fair value:
Gains (losses) from sales		27,596			(8,963)			4,148
Gains (losses) from fair value adjustments		235,686			278,461			165,200
Other invested assets		6,142			1,705			6,003
Short-term investments gain (loss)		8			1,324			364
Total net realized capital gains (losses)	$	257,943		$	267,649		$	185,004

		Roll Forward of Allowance for Credit Losses
		Twelve Months Ended December 31, 2021
								Obligations of
								U.S. States			Foreign			Foreign
		Corporate			Asset-Backed			and Political			Government			Corporate
		Securities			Securities			Subdivisions			Securities			Securities			Total
(Dollars in thousands)

Beginning Balance		$	(1,220)		$	-		$	-		$	(22)		$	(503)		$	(1,745)
Credit losses on securities where credit
losses were not previously recorded			(21,177)			(4,915)			(151)			-			(2,436)			(28,679)
Increases in allowance on previously
impaired securities			(2,529)			(2,764)						-			-			(5,293)
Decreases in allowance on previously
impaired securities			-			-						-			-			-
Reduction in allowance due to disposals			5,659			-						22			298			5,979

Balance as of December 31		$	(19,267)		$	(7,679)		$	(151)		$	-		$	(2,641)		$	(29,738)

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:

	Years Ended December 31,
(Dollars in thousands)	2021			2020			2019
Proceeds from sales of fixed maturity securities	$	1,915,916		$	1,950,774		$	3,283,154
Gross gains from sales		71,744			79,609			63,721
Gross losses from sales		(55,241)			(84,686)			(35,341)

Proceeds from sales of equity securities	$	990,376		$	376,347		$	283,965
Gross gains from sales		42,241			37,415			14,274
Gross losses from sales		(14,645)			(46,378)			(10,126)

Securities with a carrying value amount of $1.5 billion at December 31, 2021 were on deposit with various state or governmental insurance departments in compliance with insurance laws.