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Investments
 9 Months Ended
Sep. 30, 2019
Investments [Abstract]  
Investments Investments
(a) Our HTM fixed income securities as of September 30, 2019 represented less than 1% of our total invested assets, down slightly compared to December 31, 2018. The carry value and net unrealized/unrecognized gains were $26.9 million and $1.5 million, respectively, at September 30, 2019, and $37.1 million and $1.3 million, respectively, at December 31, 2018. Included in the net unrealized/unrecognized gains were gross unrealized/unrecognized losses of less than $0.1 million at September 30, 2019 and $0.2 million at December 31, 2018.

Unrecognized holding gains and losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the date a security is designated as HTM through the date of the balance sheet.

(b) Information regarding our AFS securities as of September 30, 2019 and December 31, 2018 was as follows:
September 30, 2019
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
116,555

 
4,357

 
(12
)
 
120,900

Foreign government
 
20,947

 
573

 
—

 
21,520

Obligations of states and political subdivisions
 
1,127,709

 
62,910

 
(4
)
 
1,190,615

Corporate securities
 
1,762,981

 
78,345

 
(2,399
)
 
1,838,927

Collateralized loan obligations and other asset-backed securities ("CLO and other ABS")
 
764,038

 
8,998

 
(4,653
)
 
768,383

Commercial mortgage-backed securities ("CMBS")
 
524,441

 
31,435

 
(145
)
 
555,731

Residential mortgage-backed securities (“RMBS”)
 
1,389,985

 
44,710

 
(534
)
 
1,434,161

Total AFS fixed income securities
 
$
5,706,656

 
231,328

 
(7,747
)
 
5,930,237

December 31, 2018
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
120,092

 
1,810

 
(592
)
 
121,310

Foreign government
 
23,202

 
36

 
(107
)
 
23,131

Obligations of states and political subdivisions
 
1,121,615

 
19,485

 
(2,631
)
 
1,138,469

Corporate securities
 
1,639,852

 
5,521

 
(27,965
)
 
1,617,408

CLO and other ABS
 
720,193

 
4,112

 
(6,943
)
 
717,362

CMBS
 
527,409

 
3,417

 
(3,748
)
 
527,078

RMBS
 
1,118,435

 
12,988

 
(3,081
)
 
1,128,342

Total AFS fixed income securities
 
$
5,270,798

 
47,369

 
(45,067
)
 
5,273,100



Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an other-than-temporary impairment ("OTTI") charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in AOCI on the Consolidated Balance Sheets.
  
(c) The severity of impairment on AFS securities in an unrealized/unrecognized loss position averaged approximately 1% of amortized cost at September 30, 2019 and approximately 2% at December 31, 2018. Quantitative information regarding these losses is provided below.
September 30, 2019
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
U.S. government and government agencies
 
$
5,014

 
(11
)
 
498

 
(1
)
 
5,512

 
(12
)
Obligations of states and political subdivisions
 
437

 
(4
)
 
—

 
—

 
437

 
(4
)
Corporate securities
 
89,919

 
(1,862
)
 
15,867

 
(537
)
 
105,786

 
(2,399
)
CLO and other ABS
 
176,999

 
(2,458
)
 
180,898

 
(2,195
)
 
357,897

 
(4,653
)
CMBS
 
59,857

 
(126
)
 
7,665

 
(19
)
 
67,522

 
(145
)
RMBS
 
84,408

 
(503
)
 
9,513

 
(31
)
 
93,921

 
(534
)
Total AFS fixed income securities
 
$
416,634

 
(4,964
)
 
214,441

 
(2,783
)
 
631,075

 
(7,747
)
December 31, 2018
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair
Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
U.S. government and government agencies
 
$
6,693

 
(174
)
 
23,163

 
(418
)
 
29,856

 
(592
)
Foreign government
 
12,208

 
(93
)
 
1,482

 
(14
)
 
13,690

 
(107
)
Obligations of states and political subdivisions
 
196,798

 
(2,074
)
 
42,821

 
(557
)
 
239,619

 
(2,631
)
Corporate securities
 
1,041,952

 
(23,649
)
 
78,953

 
(4,316
)
 
1,120,905

 
(27,965
)
CLO and other ABS
 
516,106

 
(6,750
)
 
16,800

 
(193
)
 
532,906

 
(6,943
)
CMBS
 
229,338

 
(2,548
)
 
66,294

 
(1,200
)
 
295,632

 
(3,748
)
RMBS
 
139,338

 
(1,660
)
 
45,661

 
(1,421
)
 
184,999

 
(3,081
)
Total AFS fixed income securities
 
$
2,142,433

 
(36,948
)
 
275,174

 
(8,119
)
 
2,417,607

 
(45,067
)
  1 Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. 

The $37.3 million decrease in the unrealized loss position reflected: (i) lower interest rates, with an 87-basis point decrease in 2-year U.S. Treasury Note yields and a 102-basis point decrease in 10-year U.S. Treasury Note yields during Nine Months 2019; and (ii) tightening option adjusted corporate credit spreads, with a 38-basis point decrease in the Bloomberg Barclays U.S. Aggregate Corporate Bond Index during Nine Months 2019. We do not currently intend to sell any of the securities in the tables above, nor will we be required to sell any of these securities. Considering these factors, and in accordance with our review of these securities under our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” within Item 8. “Financial Statements and Supplementary Data.” of our 2018 Annual Report, we have concluded that they are temporarily impaired as we believe: (i) they will mature at par value; (ii) they have not incurred a credit impairment; and (iii) future values of these securities will fluctuate with changes in interest rates. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral.
 
(d) Fixed income securities at September 30, 2019, by contractual maturity, are shown below. Mortgage-backed securities are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without call or prepayment penalties.
 
Listed below are the contractual maturities of fixed income securities at September 30, 2019:
 
 
AFS
 
HTM
($ in thousands)
 
Fair Value
 
Carrying Value
 
Fair Value
Due in one year or less
 
$
310,387

 
4,754

 
4,773

Due after one year through five years
 
3,296,126

 
16,334

 
17,589

Due after five years through 10 years
 
2,191,633

 
5,837

 
5,994

Due after 10 years
 
132,091

 
—

 
—

Total fixed income securities
 
$
5,930,237

 
26,925

 
28,356

  
(e) The following table summarizes our other investment portfolio by strategy:
Other Investments
 
September 30, 2019
 
December 31, 2018
($ in thousands)
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
Alternative Investments
 
 

 
 

 
 
 
 
 
 
 
 
   Private equity
 
$
105,922

 
97,552

 
203,474

 
84,352

 
93,688

 
178,040

   Private credit
 
37,710

 
109,797

 
147,507

 
41,682

 
81,453

 
123,135

   Real assets
 
21,828

 
22,534

 
44,362

 
27,862

 
27,129

 
54,991

Total alternative investments
 
165,460

 
229,883

 
395,343

 
153,896

 
202,270

 
356,166

Other securities
 
23,783

 
—

 
23,783

 
25,042

 
—

 
25,042

Total other investments
 
$
189,243

 
229,883

 
419,126

 
178,938

 
202,270

 
381,208


1The maximum exposure to loss includes both the carry value of these investments and the related remaining commitments. In addition, tax credits that have been previously recognized in Other securities are subject to the risk of recapture, which we do not consider significant. 

We are contractually committed to make additional investments up to the remaining commitments outlined above; however, we do not have a future obligation to fund losses or debts on behalf of these investments. We have not provided any non-contractual financial support at any time during 2019 or 2018.
The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The majority of these investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income or loss, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information for the three-month period ended June 30 is included in our Third Quarter results. This information is as follows:
Income Statement Information
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in millions)
 
2019
 
2018
 
2019
 
2018
Net investment (loss) income
 
$
(14.0
)

11.9

 
10.1

 
(29.9
)
Realized gains
 
121.1


124.8

 
370.4

 
1,348.3

Net change in unrealized appreciation (depreciation)
 
1,739.4


1,434.3

 
4,517.4

 
695.8

Net income
 
$
1,846.5


1,571.0

 
4,897.9

 
2,014.2

Insurance subsidiaries’ alternative investments income
 
$
5.2

 
7.1

 
13.0

 
10.6


 
(f) We have pledged certain AFS fixed income securities as collateral related to our relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, certain securities were on deposit with various state and regulatory agencies at September 30, 2019 to comply with insurance laws. We retain all rights regarding all securities pledged as collateral.

The following table summarizes the market value of these securities at September 30, 2019:
($ in millions)
 
FHLBI Collateral
 
FHLBNY Collateral
 
State and Regulatory Deposits
 
Total
U.S. government and government agencies
 
$
—

 
—

 
22.9

 
22.9

Obligations of states and political subdivisions
 
—

 
—

 
3.9

 
3.9

Corporate securities
 
—

 
—

 
0.3

 
0.3

CMBS
 
7.3

 
19.6

 
—

 
26.9

RMBS
 
57.4

 
81.1

 
—

 
138.5

Total pledged as collateral
 
$
64.7

 
100.7

 
27.1


192.5


 
(g) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government-backed investments, as of September 30, 2019 or December 31, 2018.

(h) The components of pre-tax net investment income earned were as follows:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2019
 
2018
 
2019
 
2018
Fixed income securities
 
$
50,749


45,088

 
150,689

 
130,903

Equity securities
 
1,885


2,079

 
5,265

 
5,876

Short-term investments
 
1,410


867

 
5,213

 
2,001

Other investments
 
5,267


7,211

 
13,421

 
10,868

Investment expenses
 
(3,485
)

(2,802
)
 
(9,639
)
 
(8,421
)
Net investment income earned
 
$
55,826

 
52,443

 
164,949

 
141,227


(i) OTTI charges were $2.3 million and $1.4 million in Third Quarter 2019 and Third Quarter 2018, respectively, and $3.4 million and $5.5 million in Nine Months 2019 and Nine Months 2018, respectively. All of these charges were related to securities for which we had the intent to sell. For a discussion of our evaluation for OTTI, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2018 Annual Report.

(j) Net realized and unrealized gains and losses (excluding OTTI charges) for Third Quarter 2019 and 2018 included the following:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2019
 
2018
 
2019
 
2018
Net realized gains (losses) on the disposals of securities:
 
 
 
 
 
 
 
 
Fixed income securities
 
$
(1,141
)
 
(9,413
)
 
2,063

 
(13,922
)
Equity securities
 
21,602

 
8,665

 
24,733

 
17,960

Short-term investments
 
(36
)
 
2

 
(21
)
 
1

Other investments
 
—

 
(5
)
 
(23
)
 
(5
)
Net realized gains (losses) on the disposal of securities
 
20,425

 
(751
)
 
26,752

 
4,034

OTTI charges
 
(2,291
)
 
(1,426
)
 
(3,366
)
 
(5,459
)
Net realized gains (losses)
 
18,134

 
(2,177
)
 
23,386

 
(1,425
)
Unrealized (losses) recognized in income on equity securities
 
(20,317
)
 
(2,610
)
 
(8,091
)
 
(15,563
)
Total net realized and unrealized investment (losses) gains
 
$
(2,183
)
 
(4,787
)
 
$
15,295

 
(16,988
)


Unrealized (losses) recognized in income on equity securities, as reflected in the table above, include the following:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2019
 
2018
 
2019
 
2018
Unrealized gains (losses) recognized in income on equity securities:
 
 
 
 
 
 
 
 
On securities remaining in our portfolio at September 30, 2019
 
$
1,109

 
5,476

 
1,805

 
4,199

On securities sold in each respective period
 
(21,426
)
 
(8,086
)
 
(9,896
)
 
(19,762
)
Total unrealized (losses) recognized in income on equity securities
 
$
(20,317
)
 
(2,610
)
 
$
(8,091
)

(15,563
)


The components of net realized gains on disposals of securities for the periods indicated were as follows:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2019
 
2018
 
2019
 
2018
HTM fixed income securities
 
 
 
 
 
 
 
 
Gains
 
$
—

 
—

 
1

 
2

Losses
 
—

 
—

 
(15
)
 
—

AFS fixed income securities
 
 

 
 

 
 
 
 
Gains
 
1,078

 
462

 
5,565

 
5,056

Losses
 
(2,219
)
 
(9,875
)
 
(3,488
)
 
(18,980
)
Equity securities
 
 

 
 

 
 
 
 
Gains
 
21,630

 
10,584

 
24,868

 
20,209

Losses
 
(28
)
 
(1,919
)
 
(135
)
 
(2,249
)
Short-term investments
 
 
 
 
 
 
 
 
Gains
 
2

 
3

 
18

 
6

Losses
 
(38
)
 
(1
)
 
(39
)
 
(5
)
Other investments
 
 
 
 
 
 
 
 
Gains
 
—

 
—

 
7

 
—

      Losses
 
—


(5
)
 
(30
)
 
(5
)
Total net realized gains on disposals of securities
 
$
20,425


(751
)
 
26,752

 
4,034



Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold.
Proceeds from the sales of AFS fixed income securities were $89.7 million and $444.4 million in Third Quarter 2019 and Third Quarter 2018, respectively, and $461.8 million and $1,382.7 million in Nine Months 2019 and Nine Months 2018, respectively. Proceeds from the sales of equity securities were $95.2 million and $36.1 million in Third Quarter 2019 and Third Quarter 2018, respectively, and $125.3 million and $79.7 million in Nine Months 2019 and Nine Months 2018, respectively.