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v3.22.4

Investments | 12 Months Ended
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Dec. 31, 2022
Investments [Abstract] |
Investments |
NOTE 5 | Investments |
FIXED INCOME SECURITIES Our fixed income securities consisted of the following as of December 31, 2022 and 2021:
Details of fixed income investment securities by category as of December 31, 2022
Table | 5.1a |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 145,581 |  |  | $ | 2 |  |  | $ | (9,683) |  |  | $ | 135,900 |
Obligations of U.S. states and political subdivisions |  | 2,400,261 |  |  | 4,866 |  |  | (256,073) |  |  | 2,149,054 |
Corporate debt securities |  | 2,416,475 |  |  | 1,043 |  |  | (196,377) |  |  | 2,221,141 |
ABS |  | 126,723 |  |  | 5 |  |  | (6,041) |  |  | 120,687 |
RMBS |  | 223,743 |  |  | 10 |  |  | (25,744) |  |  | 198,009 |
CMBS |  | 257,785 |  |  | 22 |  |  | (20,591) |  |  | 237,216 |
CLOs |  | 337,656 |  |  | 5 |  |  | (7,829) |  |  | 329,832 |
Foreign government debt |  | 4,486 |  |  | — |  |  | (699) |  |  | 3,787 |
Commercial paper |  | 14,075 |  |  | — |  |  | (3) |  |  | 14,072 |
Total fixed income securities |  | $ | 5,926,785 |  |  | $ | 5,953 |  |  | $ | (523,040) |  |  | $ | 5,409,698 |
Details of fixed income investment securities by category as of December 31, 2021
Table | 5.1b |  |  |  |  |  |  |  |
(In thousands) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $ | 133,990 |  |  | $ | 285 |  |  | $ | (868) |  |  | $ | 133,407 |
Obligations of U.S. states and political subdivisions |  | 2,408,688 |  |  | 133,361 |  |  | (7,396) |  |  | 2,534,653 |
Corporate debt securities |  | 2,704,586 |  |  | 75,172 |  |  | (13,776) |  |  | 2,765,982 |
ABS |  | 150,888 |  |  | 830 |  |  | (1,008) |  |  | 150,710 |
RMBS |  | 309,991 |  |  | 2,397 |  |  | (3,278) |  |  | 309,110 |
CMBS |  | 315,330 |  |  | 5,736 |  |  | (1,936) |  |  | 319,130 |
CLOs |  | 360,436 |  |  | 609 |  |  | (106) |  |  | 360,939 |
Foreign government debt |  | 13,749 |  |  | — |  |  | (99) |  |  | 13,650 |
Total fixed income securities |  | $ | 6,397,658 |  |  | $ | 218,390 |  |  | $ | (28,467) |  |  | $ | 6,587,581 |
We had $11.8 million and $13.4 million of investments at fair value on deposit with various states as of December 31, 2022 and 2021, respectively, due to regulatory requirements of those state insurance departments. In connection with our insurance and reinsurance activities within MAC and MIC, insurance subsidiaries of MGIC, we are required to maintain assets in trusts for the benefit of contractual counterparties, which had investments at fair value of $128.4 million and $189.8 million at December 31, 2022 and 2021, respectively. The decrease is primarily due to a decline in collateral required as the risk in force covered by these insurance and reinsurance activities has decreased. The amortized cost and fair values of fixed income securities at December 31, 2022, by contractual maturity, are shown in table 5.2 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 mortgage and asset-backed securities provide for periodic payments throughout their lives, they are listed in separate categories.
Fixed income securities maturity schedule
Table | 5.2 |  |  |  |
|  | December 31, 2022
(In thousands) |  | Amortized Cost |  | Fair Value
Due in one year or less |  | $ | 452,188 |  |  | $ | 445,210 |
Due after one year through five years |  | 1,358,606 |  |  | 1,288,152 |
Due after five years through ten years |  | 1,890,875 |  |  | 1,713,608 |
Due after ten years |  | 1,279,209 |  |  | 1,076,984 |
|  | 4,980,878 |  |  | 4,523,954 |
ABS |  | 126,723 |  |  | 120,687 |
RMBS |  | 223,743 |  |  | 198,009 |
CMBS |  | 257,785 |  |  | 237,216 |
CLOs |  | 337,656 |  |  | 329,832 |
Total as of December 31, 2022 |  | $ | 5,926,785 |  |  | $ | 5,409,698 |
EQUITY SECURITIES The cost and fair value of investments in equity securities as of December 31, 2022 and December 31, 2021 are shown in tables 5.3a and 5.3b below.
Details of equity investment securities as of December 31, 2022
Table | 5.3a |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross gains |  | Gross losses |  | Fair Value
Equity securities |  | 15,924 |  |  | — |  |  | (1,784) |  |  | 14,140 |
Details of equity investment securities as of December 31, 2021
Table | 5.3b |  |  |  |  |  |  |  |
(In thousands) |  | Cost |  | Gross gains |  | Gross losses |  | Fair Value
Equity securities |  | 15,838 |  |  | 264 |  |  | (34) |  |  | 16,068 |
NET GAINS (LOSSES) ON INVESTMENTS AND OTHER FINANCIAL INSTRUMENTS The net gains (losses) on investments and other financial instruments and the proceeds from the sale of fixed income securities classified as available-for-sale are shown in table 5.4 below.
Details of net gains (losses) on investments and other financial instruments
Table | 5.4 |  |  |  |  |
(in thousands) | December 31, 2022 |  | December 31, 2021 |  | December 31, 2020
Fixed income securities |  |  |  |  |
Gains on sales | 7,152 |  |  | 8,980 |  |  | 21,272 |
Losses on sales | (15,477) |  |  | (1,942) |  |  | (8,809) |
Change in credit allowance | — |  |  | 49 |  |  | (49) |
Impairments | (1,415) |  |  | — |  |  | (331) |
Equity securities gains (losses) |  |  |  |  |
Gains (losses) on sales | (7) |  |  | 4 |  |  | 1,344 |
Market adjustment | (2,013) |  |  | (463) |  |  | 552 |
Change in embedded derivative on Home Re Transactions (1) | 4,269 |  |  | (721) |  |  | (1,176) |
Other |  |  |  |  |
Gains (losses) on sales | 2 |  |  | (33) |  |  | (231) |
Market adjustment | 26 |  |  | (13) |  |  | 4 |
Net gains (losses) on investments and other financial instruments | (7,463) |  |  | 5,861 |  |  | 12,576 |
Proceeds from sales of fixed income securities | 397,553 |  |  | 471,783 |  |  | 803,401 |
Proceeds from sales of equity securities | 97 |  |  | 2,621 |  |  | 25,693 |
(1) See Note 6 "Fair Value Measurements" for discussion of the embedded derivative on the Home Re Transactions. OTHER INVESTED ASSETS Our other invested assets balances includes 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. In the first quarter of 2022, we repaid the outstanding principal balance of our Federal Home Loan Bank Advance ("FHLB Advance") and accordingly reduced our investment in FHLB stock. At December 31, 2021, the FHLB Advance amount was secured by $167.2 million of eligible collateral. As a result of the prepayment of the FHLB Advance in 2022, we are no longer required to maintain collateral. UNREALIZED INVESTMENT LOSSES Tables 5.5a and 5.5b below summarize, for all available-for-sale investments in an unrealized loss position as of December 31, 2022 and 2021, 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 5.5a and 5.5b below are estimated using the process described in Note 6 - "Fair Value Measurements" to these consolidated financial statements.
Unrealized loss aging for securities by type and length of time as of December 31, 2022
Table | 5.5a |  |  |  |  |  |  |  |  |  |  |  |
|  | 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 |  | $ | 67,531 |  |  | $ | (3,583) |  |  | $ | 76,246 |  |  | $ | (6,100) |  |  | $ | 143,777 |  |  | $ | (9,683) |
Obligations of U.S. states and political subdivisions |  | 1,344,272 |  |  | (157,903) |  |  | 360,956 |  |  | (98,170) |  |  | 1,705,228 |  |  | (256,073) |
Corporate debt securities |  | 1,488,255 |  |  | (109,976) |  |  | 758,732 |  |  | (86,401) |  |  | 2,246,987 |  |  | (196,377) |
ABS |  | 53,201 |  |  | (1,008) |  |  | 67,073 |  |  | (5,033) |  |  | 120,274 |  |  | (6,041) |
RMBS |  | 77,563 |  |  | (8,572) |  |  | 136,179 |  |  | (17,172) |  |  | 213,742 |  |  | (25,744) |
CMBS |  | 166,973 |  |  | (12,951) |  |  | 70,792 |  |  | (7,640) |  |  | 237,765 |  |  | (20,591) |
CLOs |  | 213,461 |  |  | (4,644) |  |  | 114,459 |  |  | (3,185) |  |  | 327,920 |  |  | (7,829) |
Foreign government debt |  | — |  |  | — |  |  | 3,787 |  |  | (699) |  |  | 3,787 |  |  | (699) |
Commercial paper |  | — |  |  | — |  |  | 3,816 |  |  | (3) |  |  | 3,816 |  |  | (3) |
Total |  | $ | 3,411,256 |  |  | $ | (298,637) |  |  | $ | 1,592,040 |  |  | $ | (224,403) |  |  | $ | 5,003,296 |  |  | $ | (523,040) |
Unrealized loss aging for securities by type and length of time as of December 31, 2021
Table | 5.5b |  |  |  |  |  |  |  |  |  |  |  |
|  | 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 |  | $ | 91,154 |  |  | $ | (790) |  |  | $ | 2,616 |  |  | $ | (78) |  |  | $ | 93,770 |  |  | $ | (868) |
Obligations of U.S. states and political subdivisions |  | 452,021 |  |  | (7,189) |  |  | 15,540 |  |  | (207) |  |  | 467,561 |  |  | (7,396) |
Corporate debt securities |  | 865,085 |  |  | (13,260) |  |  | 10,997 |  |  | (516) |  |  | 876,082 |  |  | (13,776) |
ABS |  | 100,064 |  |  | (998) |  |  | 1,552 |  |  | (10) |  |  | 101,616 |  |  | (1,008) |
RMBS |  | 180,586 |  |  | (2,548) |  |  | 31,641 |  |  | (730) |  |  | 212,227 |  |  | (3,278) |
CMBS |  | 89,889 |  |  | (1,887) |  |  | 1,511 |  |  | (49) |  |  | 91,400 |  |  | (1,936) |
CLOs |  | 177,663 |  |  | (71) |  |  | 21,973 |  |  | (35) |  |  | 199,636 |  |  | (106) |
Foreign government debt |  | 13,649 |  |  | (99) |  |  | — |  |  | — |  |  | 13,649 |  |  | (99) |
Total |  | $ | 1,970,111 |  |  | $ | (26,842) |  |  | $ | 85,830 |  |  | $ | (1,625) |  |  | $ | 2,055,941 |  |  | $ | (28,467) |
The change in net unrealized gains (losses) of investments is shown in table 5.6 below.
Change in net unrealized gains (losses)
Table | 5.6 |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | 2020
Fixed income securities |  | $ | (707,005) |  |  | $ | (154,555) |  |  | $ | 169,135 |
There were 1,226 and 610 securities in an unrealized loss position as of December 31, 2022 and 2021, respectively. Based on current facts and circumstances, we believe the unrealized losses as of December 31, 2022 presented in table 5.5a above are not indicative of the ultimate collectability of the current amortized cost of the securities. The unrealized losses in all categories of our investments were primarily caused by an increase in prevailing interest rates. 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. All of the securities in an unrealized loss position are current with respect to their interest obligations. The source of net investment income is shown in table 5.7 below.
Net investment income
Table | 5.7 |  |  |  |  |  |
(In thousands) |  | 2022 |  | 2021 |  | 2020
Fixed income securities |  | $ | 166,306 |  |  | $ | 160,030 |  |  | $ | 157,065 |
Equity securities |  | 437 |  |  | 471 |  |  | 620 |
Cash equivalents |  | 5,049 |  |  | 75 |  |  | 1,648 |
Other |  | 51 |  |  | 22 |  |  | 275 |
Investment income |  | 171,843 |  |  | 160,598 |  |  | 159,608 |
Investment expenses |  | (4,367) |  |  | (4,160) |  |  | (5,212) |
Net investment income |  | $ | 167,476 |  |  | $ | 156,438 |  |  | $ | 154,396 |

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