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Investments | 9 Months Ended
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Sep. 30, 2020
Investments [Abstract] |
Investments | Investments Fixed income securities The amortized cost, gross unrealized gains and losses, and fair value of investments in fixed income securities classified as available-for-sale at September 30, 2020 and December 31, 2019 are shown in tables 7.1a and 7.1b below.
Details of fixed income securities by category as of September 30, 2020
Table | 7.1a |  |  |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  | Allowance for Expected Credit Loss |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 347,249 |  |  | $ | — |  |  | $ | 1,513 |  |  | $ | (15) |  |  | $ | 348,747 |
Obligations of U.S. states and political subdivisions |  | 1,886,910 |  |  | — |  |  | 146,562 |  |  | (891) |  |  | 2,032,581 |
Corporate debt securities |  | 2,627,745 |  |  | — |  |  | 144,646 |  |  | (2,748) |  |  | 2,769,643 |
Asset backed securities (“ABS”) |  | 201,731 |  |  | (362) |  |  | 3,472 |  |  | (145) |  |  | 204,696 |
Residential mortgage backed securities (“RMBS”) |  | 398,934 |  |  | — |  |  | 6,106 |  |  | (1,147) |  |  | 403,893 |
Commercial mortgage backed securities (“CMBS”) |  | 258,579 |  |  | — |  |  | 13,791 |  |  | (846) |  |  | 271,524 |
Collateralized loan obligations (“CLOs”) |  | 312,068 |  |  | — |  |  | — |  |  | (2,975) |  |  | 309,093 |
Debt securities issued by foreign sovereign governments |  | 4,485 |  |  | — |  |  | 56 |  |  | — |  |  | 4,541 |
Total fixed income securities |  | $ | 6,037,701 |  |  | $ | (362) |  |  | $ | 316,146 |  |  | $ | (8,767) |  |  | $ | 6,344,718 |
Details of fixed income securities by category as of December 31, 2019
Table | 7.1b |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized (Losses) (1) |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 195,176 |  |  | $ | 1,237 |  |  | $ | (210) |  |  | $ | 196,203 |
Obligations of U.S. states and political subdivisions |  | 1,555,394 |  |  | 99,328 |  |  | (857) |  |  | 1,653,865 |
Corporate debt securities |  | 2,711,910 |  |  | 76,220 |  |  | (3,008) |  |  | 2,785,122 |
ABS |  | 227,376 |  |  | 2,466 |  |  | (178) |  |  | 229,664 |
RMBS |  | 271,384 |  |  | 429 |  |  | (3,227) |  |  | 268,586 |
CMBS |  | 274,234 |  |  | 5,531 |  |  | (779) |  |  | 278,986 |
CLOs |  | 327,076 |  |  | 33 |  |  | (1,643) |  |  | 325,466 |
Total fixed income securities |  | $ | 5,562,550 |  |  | $ | 185,244 |  |  | $ | (9,902) |  |  | $ | 5,737,892 |
(1)At December 31, 2019 there was no other-than-temporary impairment losses recorded in other comprehensive income. We had $14.1 million and $13.9 million of investments at fair value on deposit with various states as of September 30, 2020 and December 31, 2019, respectively, due to regulatory requirements of those state insurance departments. The amortized cost and fair values of fixed income securities at September 30, 2020, by contractual maturity, are shown in table 7.2 below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most ABS, RMBS, CMBS, and CLOs provide for periodic payments throughout their lives, they are listed in separate categories.
Fixed income securities maturity schedule
Table | 7.2 |  |  |  |
|  | September 30, 2020
(In thousands) |  | Amortized cost |  | Fair Value
Due in one year or less |  | $ | 437,605 |  |  | $ | 440,557 |
Due after one year through five years |  | 1,993,330 |  |  | 2,077,983 |
Due after five years through ten years |  | 1,152,214 |  |  | 1,256,504 |
Due after ten years |  | 1,283,240 |  |  | 1,380,468 |
|  | 4,866,389 |  |  | 5,155,512 |
ABS |  | 201,731 |  |  | 204,696 |
RMBS |  | 398,934 |  |  | 403,893 |
CMBS |  | 258,579 |  |  | 271,524 |
CLOs |  | 312,068 |  |  | 309,093 |
Total as of September 30, 2020 |  | $ | 6,037,701 |  |  | $ | 6,344,718 |
Proceeds from sales of fixed income securities classified as available-for-sale were $713.1 million and $201.4 million during the nine months ended September 30, 2020 and 2019, respectively. Gross gains of $3.4 million and $15.9 million and gross losses of $0.8 million and $5.9 million were realized during the three and nine months ended September 30, 2020, respectively. We recorded $0.4 million of realized losses for the three months ended September 30, 2020 and recorded realized losses of $0.7 million for the nine months ended September 30, 2020 related to our intent to sell certain securities. We also recorded a credit allowance of $0.4 million for the three and nine months ended September 30, 2020. Gross gains of $3.3 million and $5.3 million and gross losses of $0.7 million and $3.0 million were realized on those sales during the three and nine months ended September 30, 2019, respectively, and we recorded OTTI losses of $0.1 million for the nine months ended September 30, 2019. Realized investment gains and losses are reported in income based on specific identification of securities sold. Equity securities The cost and fair value of investments in equity securities at September 30, 2020 and December 31, 2019 are shown in tables 7.3a and 7.3b below.
Details of equity security investments as of September 30, 2020
Table | 7.3a |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross Gains |  | Gross Losses |  | Fair Value
Equity securities |  | $ | 17,486 |  |  | $ | 587 |  |  | $ | (13) |  |  | $ | 18,060 |
Details of equity security investments as of December 31, 2019
Table | 7.3b |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross Gains |  | Gross Losses |  | Fair Value
Equity securities |  | $ | 17,188 |  |  | $ | 154 |  |  | $ | (14) |  |  | $ | 17,328 |
For the three and nine months ended September 30, 2020, we recognized $0.1 million and $0.4 million of net gains on equity securities still held as of September 30, 2020. For the three and nine months ended September 30, 2019, we recognized an insignificant amount and $0.2 million, respectively, of net gains on equity securities still held as of September 30, 2019. Other invested assets Other invested assets include an investment in Federal Home Loan Bank ("FHLB") stock that is carried at cost, which due to its nature approximates fair value. Ownership of FHLB stock provides access to a secured lending facility, and our current FHLB Advance amount is secured by eligible collateral whose fair value is maintained at a minimum of 102% of the outstanding principal balance of the FHLB Advance. As of September 30, 2020, that collateral consisted of fixed income securities included in our total investment portfolio, and cash and cash equivalents, with a total fair value of $165.7 million. Unrealized investment losses Tables 7.4a and 7.4b below summarize, for all available-for-sale investments in an unrealized loss position at September 30, 2020 and December 31, 2019, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in tables 7.4a and 7.4b are estimated using the process described in Note 8 - “Fair Value Measurements” to these consolidated financial statements and in Note 3 - “Significant Accounting Policies” of the notes to the consolidated financial statements in our 2019 Annual Report on Form 10-K.
Unrealized loss aging for securities by type and length of time as of September 30, 2020
Table | 7.4a |  |  |  |  |  |  |  |  |  |  |  |
|  | Less Than 12 Months |  | 12 Months or Greater |  | Total
(In thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 5,004 |  |  | $ | (15) |  |  | $ | — |  |  | $ | — |  |  | $ | 5,004 |  |  | $ | (15) |
Obligations of U.S. states and political subdivisions |  | 72,620 |  |  | (891) |  |  | — |  |  | — |  |  | 72,620 |  |  | (891) |
Corporate debt securities |  | 263,665 |  |  | (2,748) |  |  | — |  |  | — |  |  | 263,665 |  |  | (2,748) |
ABS |  | 17,505 |  |  | (145) |  |  | — |  |  | — |  |  | 17,505 |  |  | (145) |
RMBS |  | 128,358 |  |  | (1,028) |  |  | 3,886 |  |  | (119) |  |  | 132,244 |  |  | (1,147) |
CMBS |  | 13,065 |  |  | (707) |  |  | 1,338 |  |  | (139) |  |  | 14,403 |  |  | (846) |
CLOs |  | 159,553 |  |  | (1,271) |  |  | 149,540 |  |  | (1,704) |  |  | 309,093 |  |  | (2,975) |
Total |  | $ | 659,770 |  |  | $ | (6,805) |  |  | $ | 154,764 |  |  | $ | (1,962) |  |  | $ | 814,534 |  |  | $ | (8,767) |
Unrealized loss aging for securities by type and length of time as of December 31, 2019
Table | 7.4b |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Less Than 12 Months |  | 12 Months or Greater |  | Total
(In thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 57,301 |  |  | $ | (200) |  |  | $ | 5,806 |  |  | $ | (10) |  |  | $ | 63,107 |  |  | $ | (210) |
Obligations of U.S. states and political subdivisions |  | 74,859 |  |  | (847) |  |  | 6,957 |  |  | (10) |  |  | 81,816 |  |  | (857) |
Corporate debt securities |  | 221,357 |  |  | (2,847) |  |  | 43,505 |  |  | (161) |  |  | 264,862 |  |  | (3,008) |
ABS |  | 21,542 |  |  | (118) |  |  | 3,851 |  |  | (60) |  |  | 25,393 |  |  | (178) |
RMBS |  | 105,443 |  |  | (461) |  |  | 110,452 |  |  | (2,766) |  |  | 215,895 |  |  | (3,227) |
CMBS |  | 62,388 |  |  | (728) |  |  | 11,852 |  |  | (51) |  |  | 74,240 |  |  | (779) |
CLOs |  | 81,444 |  |  | (225) |  |  | 196,988 |  |  | (1,418) |  |  | 278,432 |  |  | (1,643) |
Total |  | $ | 624,334 |  |  | $ | (5,426) |  |  | $ | 379,411 |  |  | $ | (4,476) |  |  | $ | 1,003,745 |  |  | $ | (9,902) |
Based on current facts and circumstances, we believe the unrealized losses as of September 30, 2020 presented in table 7.4a above are not indicative of the ultimate collectability of the current amortized cost of the securities. We believe the gross unrealized losses are primarily attributable to widening credit spreads over risk free rates, as a result of economic and market uncertainties arising from the COVID-19 pandemic, which includes demand shocks in multiple sectors that originated in the first nine months of 2020. We also rely upon estimates of several credit and non-credit factors in our review and evaluation of individual investments to determine whether a credit impairment exists. At September 30, 2020 we recorded an allowance for expected credit losses of $0.4 million. The unrealized losses in all categories of our investments at December 31, 2019 were primarily caused by changes in interest rates between the time of purchase and December 31, 2019. There were 197 and 217 securities in an unrealized loss position at September 30, 2020 and December 31, 2019, respectively. We report accrued investment income separately from fixed income, available-for-sale, securities and we have determined an allowance for credit losses for accrued investment income is not required. Accrued investment income is written off through net realized investment gains (losses) if, and at the time, the issuer of the security defaults or is expected to default on payment s. Table 7.5 below presents a rollforward of the changes in allowance for credit losses on available-for-sale fixed maturity securities by major security type for the period end September 30, 2020:
Rollforward of Allowance for Credit Allowance
Table | 7.5 |  |
(In thousands) |  | Asset Backed Securities
Balance at December 31, 2019 and June 30, 2020 |  | $ | — |
Additions for expected credit allowance where no credit losses were previously recognized. |  | 362 |
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized. |  | — |
Reductions due to sales/defaults of credit-impaired securities |  | — |
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell |  | — |
Balance at September 30, 2020 |  | $ | 362 |

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