Debt Securities

6 Months Ended

Jun. 30, 2023

Note 3 – Debt Securities

Investments in debt securities, classified as available-for-sale, are as follows:


	Amortized		Gross unrealized					Estimated
(in millions)	cost		Gains		Losses			fair value
June 30, 2023
U.S. Treasury bonds	$	130.9	$	—	$	(6.5	)	$	124.4
Municipal bonds		1,399.1		4.5		(163.6	)		1,240.0
Foreign government bonds		229.5		0.3		(13.9	)		215.9
Governmental agency bonds		242.3		—		(17.8	)		224.5
Governmental agency mortgage-backed securities		4,968.1		1.4		(658.1	)		4,311.4
U.S. corporate debt securities		972.7		1.9		(76.9	)		897.7
Foreign corporate debt securities		470.9		1.8		(32.1	)		440.6
	$	8,413.5	$	9.9	$	(968.9	)	$	7,454.5
December 31, 2022
U.S. Treasury bonds	$	308.5	$	1.4	$	(7.1	)	$	302.8
Municipal bonds		1,670.6		3.2		(195.1	)		1,478.7
Foreign government bonds		208.0		0.1		(14.4	)		193.7
Governmental agency bonds		247.9		—		(19.3	)		228.6
Governmental agency mortgage-backed securities		5,253.4		1.7		(652.7	)		4,602.4
U.S. corporate debt securities		1,004.4		1.5		(84.5	)		921.4
Foreign corporate debt securities		476.8		1.6		(36.4	)		442.0
	$	9,169.6	$	9.5	$	(1,009.5	)	$	8,169.6

Sales of debt securities resulted in realized gains of $0.7 million and $6.2 million, realized losses of $3.5 million and $13.5 million and proceeds of $187.5 million and $903.0 million for the three and six months ended June 30, 2023, respectively.

Sales of debt securities resulted in realized gains of $0.5 million and $4.0 million, realized losses of $7.3 million and $11.5 million and proceeds of $161.2 million and $457.4 million for the three and six months ended June 30, 2022, respectively.

Investments in debt securities in an unrealized loss position, and their respective length of time in such position, are as follows:


	Less than 12 months					12 months or longer					Total
(in millions)	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
June 30, 2023
U.S. Treasury bonds	$	58.9	$	(0.6	)	$	54.7	$	(5.9	)	$	113.6	$	(6.5	)
Municipal bonds		315.3		(6.6	)		822.1		(157.0	)		1,137.4		(163.6	)
Foreign government bonds		88.6		(1.0	)		88.0		(12.9	)		176.6		(13.9	)
Governmental agency bonds		113.7		(2.9	)		110.7		(14.9	)		224.4		(17.8	)
Governmental agency mortgage-backed securities		884.3		(40.7	)		3,304.5		(617.4	)		4,188.8		(658.1	)
U.S. corporate debt securities		174.3		(3.6	)		604.1		(73.3	)		778.4		(76.9	)
Foreign corporate debt securities		93.6		(2.3	)		277.5		(29.8	)		371.1		(32.1	)
	$	1,728.7	$	(57.7	)	$	5,261.6	$	(911.2	)	$	6,990.3	$	(968.9	)
December 31, 2022
U.S. Treasury bonds	$	108.0	$	(1.4	)	$	49.5	$	(5.7	)	$	157.5	$	(7.1	)
Municipal bonds		813.4		(55.8	)		540.0		(139.3	)		1,353.4		(195.1	)
Foreign government bonds		142.1		(5.9	)		45.7		(8.5	)		187.8		(14.4	)
Governmental agency bonds		172.7		(8.2	)		55.8		(11.1	)		228.5		(19.3	)
Governmental agency mortgage-backed securities		1,859.6		(141.4	)		2,626.8		(511.3	)		4,486.4		(652.7	)
U.S. corporate debt securities		528.3		(38.2	)		325.2		(46.3	)		853.5		(84.5	)
Foreign corporate debt securities		241.6		(17.5	)		137.1		(18.9	)		378.7		(36.4	)
	$	3,865.7	$	(268.4	)	$	3,780.1	$	(741.1	)	$	7,645.8	$	(1,009.5	)

Based on the Company’s review of its debt securities in an unrealized loss position it determined that the losses were due to non-credit factors and, therefore, it does not consider these securities to be credit impaired at June 30, 2023. As of June 30, 2023, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.

In determining credit losses on its debt securities in an unrealized loss position, the Company considers certain factors that may include, among others, severity of the unrealized loss, security type, industry sector, credit rating, yield to maturity, profitability and stock performance.

Investments in debt securities at June 30, 2023, by contractual maturities, are as follows:


(in millions)	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
U.S. Treasury bonds
Amortized cost	$	13.9	$	109.3	$	3.1	$	4.6	$	130.9
Estimated fair value	$	13.7	$	103.6	$	2.7	$	4.4	$	124.4
Municipal bonds
Amortized cost		11.3		282.2		547.2		558.4		1,399.1
Estimated fair value		11.2		257.0		471.3		500.5		1,240.0
Foreign government bonds
Amortized cost		40.6		105.5		74.1		9.3		229.5
Estimated fair value		40.2		103.4		64.2		8.1		215.9
Governmental agency bonds
Amortized cost		25.0		158.3		6.5		52.5		242.3
Estimated fair value		24.7		151.5		5.8		42.5		224.5
U.S. corporate debt securities
Amortized cost		7.0		709.2		194.4		62.1		972.7
Estimated fair value		6.9		655.1		183.9		51.8		897.7
Foreign corporate debt securities
Amortized cost		16.9		317.3		100.0		36.7		470.9
Estimated fair value		16.6		297.4		94.2		32.4		440.6
Total debt securities (excluding mortgage-backed securities)
Amortized cost	$	114.7	$	1,681.8	$	925.3	$	723.6	$	3,445.4
Estimated fair value	$	113.3	$	1,568.0	$	822.1	$	639.7	$	3,143.1
Total mortgage-backed securities
Amortized cost										4,968.1
Estimated fair value										4,311.4
Total debt securities
Amortized cost									$	8,413.5
Estimated fair value									$	7,454.5

Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity as borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

The composition of the debt securities portfolio at June 30, 2023, by credit rating, is as follows:


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	124.4		100.0	%	$	—		—	%	$	—		—	%	$	124.4
Municipal bonds		1,192.3		96.2			47.4		3.8			0.3		—			1,240.0
Foreign government bonds		210.4		97.5			4.8		2.2			0.7		0.3			215.9
Governmental agency bonds		224.5		100.0			—		—			—		—			224.5
Governmental agency mortgage- backed securities		4,311.4		100.0			—		—			—		—			4,311.4
U.S. corporate debt securities		433.5		48.3			324.7		36.2			139.5		15.5			897.7
Foreign corporate debt securities		210.2		47.7			195.0		44.3			35.4		8.0			440.6
	$	6,706.7		89.9	%	$	571.9		7.7	%	$	175.9		2.4	%	$	7,454.5

Included in debt securities at June 30, 2023, were bank loans totaling $138.2 million, of which $132.3 million were non-investment grade; high yield corporate debt securities totaling $40.8 million, all of which were non-investment grade; and emerging market debt securities totaling $45.1 million, of which $2.5 million were non-investment grade.

The composition of the debt securities portfolio in an unrealized loss position at June 30, 2023, by credit rating, is as follows:


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	113.6		100.0	%	$	—		—	%	$	—		—	%	$	113.6
Municipal bonds		1,099.2		96.7			37.9		3.3			0.3		—			1,137.4
Foreign government bonds		174.6		98.9			1.3		0.7			0.7		0.4			176.6
Governmental agency bonds		224.4		100.0			—		—			—		—			224.4
Governmental agency mortgage- backed securities		4,188.8		100.0			—		—			—		—			4,188.8
U.S. corporate debt securities		410.7		52.8			286.0		36.7			81.7		10.5			778.4
Foreign corporate debt securities		190.2		51.3			156.3		42.1			24.6		6.6			371.1
	$	6,401.5		91.6	%	$	481.5		6.9	%	$	107.3		1.5	%	$	6,990.3

Debt securities in an unrealized loss position at June 30, 2023, included bank loans totaling $66.3 million, of which $64.5 million were non-investment grade; high yield corporate debt securities totaling $40.3 million, all of which were non-investment grade; and emerging market debt securities totaling $39.9 million, of which $2.2 million were non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency mortgage-backed securities are not rated by any of the ratings agencies; however, these securities have been included in the above table in the “A- or higher” rating category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.