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Investments
 3 Months Ended
Mar. 31, 2020
Investments [Abstract]  
Investments Investments
(a) Our HTM fixed income securities as of March 31, 2020, represented less than 1% of our total invested assets, largely unchanged from December 31, 2019. The carry value and net unrealized/unrecognized gains were $20.4 million and $1.6 million, respectively, at March 31, 2020, and $20.8 million and $1.2 million, respectively, at December 31, 2019.

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 March 31, 2020 and December 31, 2019 was as follows:
March 31, 2020
 
 
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Allowance for Credit Losses
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
134,569

 
—

 
7,668

 
—

 
142,237

Foreign government
 
12,987

 
(21
)
 
172

 
(252
)
 
12,886

Obligations of states and political subdivisions
 
1,146,160

 
(29
)
 
52,516

 
(1,434
)
 
1,197,213

Corporate securities
 
1,911,377

 
(13,412
)
 
44,397

 
(32,858
)
 
1,909,504

Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")
 
789,240

 
(1,565
)
 
2,084

 
(67,498
)
 
722,261

Commercial mortgage-backed securities ("CMBS")
 
516,702

 
(38
)
 
26,511

 
(12,142
)
 
531,033

Residential mortgage-backed securities ("RMBS")
 
1,366,744

 
(722
)
 
66,931

 
(2,727
)
 
1,430,226

Total AFS fixed income securities
 
$
5,877,779

 
(15,787
)
 
200,279

 
(116,911
)
 
5,945,360

 
December 31, 2019
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
112,680

 
3,506

 
—

 
116,186

Foreign government
 
18,011

 
533

 
(2
)
 
18,542

Obligations of states and political subdivisions
 
1,168,185

 
62,175

 
(270
)
 
1,230,090

Corporate securities
 
1,866,881

 
81,906

 
(1,310
)
 
1,947,477

CLO and other ABS
 
790,517

 
7,929

 
(5,434
)
 
793,012

CMBS
 
514,709

 
23,902

 
(267
)
 
538,344

RMBS
 
1,409,003

 
43,421

 
(455
)
 
1,451,969

Total AFS fixed income securities
 
$
5,879,986

 
223,372

 
(7,738
)
 
6,095,620



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 OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in accumulated other comprehensive income (loss) ("AOCI") on the Consolidated Balance Sheets.

The following table provides a rollforward of the allowance for credit losses on our AFS fixed income securities for 2020:
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands)
 
Beginning Balance
 
Current Provision for Securities without Prior Allowance
 
Increase or (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities
 
Reductions for Securities Sold
 
Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period
 
Ending Balance
Foreign government
 
—

 
21

 
—

 
—

 
—

 
21

Obligations of states and political subdivisions
 
—

 
29

 
—

 
—

 
—

 
29

Corporate securities
 
—

 
13,412

 
—

 
—

 
—

 
13,412

CLO and other ABS
 
—

 
1,565

 
—

 
—

 
—

 
1,565

CMBS
 
—

 
38

 
—

 
—

 
—

 
38

RMBS
 
—

 
722

 
—

 
—

 
—

 
722

Total AFS fixed income securities
 
$
—

 
15,787

 
—

 
—

 
—

 
15,787



During 2020, we did not experience any write-offs or recoveries of our AFS fixed income securities, nor did we purchase any assets with credit deterioration, therefore these items are not included in the table above.

As disclosed in Note 1. "Basis of Presentation and Accounting Policies," we do not evaluate accrued interest on our AFS securities for credit impairment as we write-off these balance in a timely manner. As of March 31, 2020, accrued interest on AFS securities amounted to $42.8 million and we did not record any write-offs of accrued interest during First Quarter 2020.
 
(c) Quantitative information about unrealized losses on our AFS portfolio is provided below.
March 31, 2020
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
Foreign government
 
4,376

 
(252
)
 
—

 
—

 
4,376

 
(252
)
Obligations of states and political subdivisions
 
70,830

 
(1,434
)
 
—

 
—

 
70,830

 
(1,434
)
Corporate securities
 
553,419

 
(31,677
)
 
8,185

 
(1,181
)
 
561,604

 
(32,858
)
CLO and other ABS
 
445,676

 
(49,404
)
 
136,413

 
(18,094
)
 
582,089

 
(67,498
)
CMBS
 
144,010

 
(11,119
)
 
11,373

 
(1,023
)
 
155,383

 
(12,142
)
RMBS
 
71,741

 
(2,561
)
 
1,974

 
(166
)
 
73,715

 
(2,727
)
Total AFS fixed income securities
 
$
1,290,052

 
(96,447
)
 
157,945

 
(20,464
)
 
1,447,997

 
(116,911
)

December 31, 2019
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
Foreign government
 
1,416

 
(2
)
 
—

 
—

 
1,416

 
(2
)
Obligations of states and political subdivisions
 
35,838

 
(270
)
 
—

 
—

 
35,838

 
(270
)
Corporate securities
 
84,832

 
(480
)
 
20,182

 
(830
)
 
105,014

 
(1,310
)
CLO and other ABS
 
205,191

 
(1,938
)
 
204,385

 
(3,496
)
 
409,576

 
(5,434
)
CMBS
 
62,893

 
(264
)
 
828

 
(3
)
 
63,721

 
(267
)
RMBS
 
126,089

 
(425
)
 
5,375

 
(30
)
 
131,464

 
(455
)
Total AFS fixed income securities
 
$
516,259

 
(3,379
)
 
230,770

 
(4,359
)
 
747,029

 
(7,738
)
 
We do not currently intend to sell any of the securities in the tables above, nor is it likely we will be required to sell any of these securities. Considering these factors and our review of these securities under our methodology for analyzing OTTI, 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.

The COVID-19-related governmental orders have caused uncertainty and extreme volatility in the financial markets. Consequently, our gross unrealized losses on our AFS fixed income securities portfolio increased to $116.9 million from $7.7
million at December 31, 2019. The increase in total unrealized losses was driven by widening credit spreads as a result of the uncertainty in the marketplace, and partially offset by a significant decline in benchmark risk-free rates.
(d) Fixed income securities at March 31, 2020, are shown below by contractual maturity. 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. 
 
 
AFS
 
HTM
($ in thousands)
 
Fair Value
 
Carrying Value
 
Fair Value
Due in one year or less
 
$
295,885

 
929

 
965

Due after one year through five years
 
3,471,503

 
13,943

 
15,115

Due after five years through 10 years
 
1,925,970

 
5,508

 
5,841

Due after 10 years
 
252,002

 
—

 
—

Total fixed income securities
 
$
5,945,360

 
20,380

 
21,921

  
(e) The following table summarizes our other investment portfolio by strategy:
Other Investments
 
March 31, 2020
 
December 31, 2019
($ in thousands)
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
Alternative Investments
 
 

 
 

 
 
 
 
 
 
 
 
   Private equity
 
$
131,936

 
102,801

 
234,737

 
118,352

 
93,138

 
211,490

   Private credit
 
46,515

 
101,587

 
148,102

 
42,532

 
105,340

 
147,872

   Real assets
 
23,385

 
23,406

 
46,791

 
23,256

 
20,741

 
43,997

Total alternative investments
 
201,836

 
227,794

 
429,630

 
184,140

 
219,219

 
403,359

Other securities
 
43,098

 
—

 
43,098

 
32,667

 
—

 
32,667

Total other investments
 
$
244,934

 
227,794

 
472,728

 
216,807

 
219,219

 
436,026


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 2020 or 2019.

The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. 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 December 31 is included in our First Quarter results. This information is as follows:
Income Statement Information
 
Quarter Ended March 31,
($ in millions)
 
2020
 
2019
Net investment (loss) income
 
$
12.7


(150.0
)
Realized (losses) gains
 
164.8


143.3

Net change in unrealized appreciation (depreciation)
 
1,204.0


554.3

Net income
 
$
1,381.5


547.6

Insurance Subsidiaries’ alternative investments income
 
$
6.3

 
0.6


 
As noted above, the $6.3 million of income associated with our alternative investment portfolio is largely recorded on a one-quarter lag, so the carry value of $201.8 million at March 31, 2020, does not reflect the significant COVID-19-related financial market volatility. Refer to Note 16. "Subsequent Events" below for additional information regarding our estimate of the results of our alternative investments portfolio to be recorded in the second quarter of 2020.
 
(f) Certain Insurance Subsidiaries have pledged certain AFS fixed income securities as collateral as members of the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, we had certain securities deposited with various state and regulatory agencies at March 31, 2020, 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 March 31, 2020:
($ in millions)
 
FHLBI Collateral
 
FHLBNY Collateral
 
State and Regulatory Deposits
 
Total
U.S. government and government agencies
 
$
—

 
—

 
23.4

 
23.4

Obligations of states and political subdivisions
 
—

 
—

 
4.0

 
4.0

Corporate securities
 
—

 
—

 
0.3

 
0.3

CMBS
 
7.1

 
28.1

 
—

 
35.2

RMBS
 
139.7

 
225.7

 
—

 
365.4

Total pledged as collateral
 
$
146.8

 
253.8

 
27.7


428.3


 
(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 March 31, 2020, or December 31, 2019.

(h) The components of pre-tax net investment income earned were as follows:
 
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
Fixed income securities
 
$
50,253


49,033

CMLs
 
62

 
—

Equity securities
 
1,552


1,640

Short-term investments
 
1,166


2,044

Other investments
 
6,342


660

Investment expenses
 
(3,408
)

(2,759
)
Net investment income earned
 
$
55,967

 
50,618


(i) The following table summarizes OTTI by asset type for the periods indicated:
 
 
Quarter Ended March 31,
 
 
2020
 
2019
($ in thousands)
 
Credit Loss Expense
 
Other Impairment Charges
 
Recognized in Earnings
 
Recognized in Earnings
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
—

 
14

 
14

 
—

Foreign government
 
21

 
—

 
21

 
—

Obligations of states and political subdivisions
 
29

 
62

 
91

 
65

Corporate securities
 
13,412

 
11,603

 
25,015

 
—

CLO and other ABS
 
1,565

 
2,000

 
3,565

 
—

CMBS
 
38

 
1,852

 
1,890

 
—

RMBS
 
722

 
71

 
793

 
—

Total AFS fixed income securities
 
15,787

 
15,602

 
31,389

 
65

CMLs
 
240

 
—

 
240

 
—

Other Investments
 
—

 
—

 
—

 
39

Total OTTI
 
16,027

 
15,602

 
31,629

 
104



The $31.6 million of OTTI during First Quarter 2020 was a $31.5 million increase from First Quarter 2019. Included in the $31.6 million of First Quarter 2020 OTTI are $15.6 million of other impairment charges, which represent securities that are in an unrealized loss position that we intend to sell. This provided our investment managers significant flexibility to trade and optimize our investment portfolio in the COVID-19-related financial market volatility.

(j) Net realized and unrealized gains and losses (excluding OTTI charges) for First Quarter 2020 and 2019 included the following:
 
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
Net realized gains (losses) on the disposals of securities:
 
 
 
 
Fixed income securities
 
$
4,276

 
1,143

Equity securities
 
(3
)
 
2,280

Short-term investments
 
(168
)
 
14

Other investments
 
(5
)
 
7

Net realized gains (losses) on the disposal of securities
 
4,100

 
3,444

OTTI charges
 
(31,629
)
 
(104
)
Net realized gains (losses)
 
(27,529
)
 
3,340

Unrealized (losses) gains recognized in income on equity securities
 
(17,137
)
 
10,111

Total net realized and unrealized investment (losses) gains
 
$
(44,666
)
 
13,451



The $58.1 million increase in net realized and unrealized investment losses was primarily driven by the increase in OTTI discussed above, coupled with a $27.2 million increase in unrealized losses on our equity securities in First Quarter 2020, related to the COVID-19-related financial market disruption.

Unrealized (losses) recognized in income on equity securities, as reflected in the table above, include the following:
 
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
Unrealized (losses) gains recognized in income on equity securities:
 
 
 
 
On securities remaining in our portfolio at March 31, 2020
 
$
(17,140
)
 
12,055

On securities sold in each respective period
 
3

 
(1,944
)
Total unrealized (losses) gains recognized in income on equity securities
 
$
(17,137
)
 
10,111



The components of net realized gains on disposals of securities for the periods indicated were as follows:
 
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
HTM fixed income securities
 
 
 
 
Gains
 
$
1

 
—

Losses
 
—

 
—

AFS fixed income securities
 
 

 
 

Gains
 
5,653

 
1,844

Losses
 
(1,378
)
 
(701
)
Equity securities
 
 

 
 

Gains
 
—

 
2,280

Losses
 
(3
)
 
—

Short-term investments
 
 
 
 
Gains
 
22

 
14

Losses
 
(190
)
 
—

Other investments
 
 
 
 
Gains
 
—

 
7

Losses
 
(5
)

—

Total net realized gains on disposals of securities
 
$
4,100


3,444



Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold.