XML 44 R12.htm IDEA: XBRL DOCUMENT
v3.20.4

Investments | 12 Months Ended
--- | ---
Dec. 31, 2020
Investments [Abstract] |
Investments | Investments (a) Net unrealized gains on investments included in OCI by asset class were as follows for the years ended December 31, 2020, 2019, and 2018:
($ in thousands) |  | 2020 |  | 2019 |  | 2018
AFS securities: |  |  |  |  |  |
Fixed income securities |  | $ | 386,380 |  |  | 215,634 |  |  | 2,302 |
Total AFS securities |  | 386,380 |  |  | 215,634 |  |  | 2,302 |
HTM securities: |  |  |  |  |  |
Fixed income securities |  | 7 |  |  | 31 |  |  | 89 |
Total HTM securities |  | 7 |  |  | 31 |  |  | 89 |
Short-term securities |  | 6 |  |  | 23 |  |  | — |
Total net unrealized gains |  | 386,393 |  |  | 215,688 |  |  | 2,391 |
Deferred income tax |  | (81,142) |  |  | (45,294) |  |  | (502) |
Net unrealized gains, net of deferred income tax |  | 305,251 |  |  | 170,394 |  |  | 1,889 |
Cumulative effect adjustment due to accounting change for equity unrealized 1 |  | — |  |  | — |  |  | 30,726 |
Cumulative effect adjustment due to accounting changes for stranded tax assets 1 |  | — |  |  | — |  |  | (17,920) |
Increase (decrease) in net unrealized gains in OCI, net of deferred income tax |  | $ | 134,857 |  |  | 168,505 |  |  | (65,881) |
1 Upon adoption of ASU 2016-01, we recognized a $30.7 million cumulative-effect adjustment to the opening balance of AOCI, which represents the after-tax net unrealized gain on our equity portfolio as of December 31, 2018. Additionally, upon adoption of ASU 2018-02, we recognized a one-time reclassification from AOCI to retained earnings for $17.9 million representing the stranded tax assets related to our investment portfolio that were created in AOCI from the enactment of the Tax Cuts and Jobs Act of 2017. (b) Information regarding our AFS securities as of December 31, 2020 and December 31, 2019 were as follows:
December 31, 2020 |  |  |  |  |  |  |  |  |  |
|  | Cost/ |  |  |  |  |  |  |  |
|  | Amortized |  | Allowance for |  | Unrealized |  | Unrealized |  | Fair
($ in thousands) |  | Cost |  | Credit Losses |  | Gains |  | Losses |  | Value
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 110,038 |  |  | — |  |  | 6,239 |  |  | (137) |  |  | 116,140 |
Foreign government |  | 16,801 |  |  | (1) |  |  | 1,569 |  |  | (3) |  |  | 18,366 |
Obligations of states and political subdivisions |  | 1,159,588 |  |  | (4) |  |  | 87,564 |  |  | (11) |  |  | 1,247,137 |
Corporate securities |  | 2,152,203 |  |  | (2,782) |  |  | 180,971 |  |  | (2,340) |  |  | 2,328,052 |
CLO and other ABS |  | 1,014,820 |  |  | (592) |  |  | 20,166 |  |  | (7,843) |  |  | 1,026,551 |
RMBS |  | 999,485 |  |  | (561) |  |  | 53,065 |  |  | (201) |  |  | 1,051,788 |
CMBS |  | 620,582 |  |  | (29) |  |  | 48,348 |  |  | (1,007) |  |  | 667,894 |
Total AFS fixed income securities |  | $ | 6,073,517 |  |  | (3,969) |  |  | 397,922 |  |  | (11,542) |  |  | 6,455,928 |
December 31, 2019 |  |  |  |  |  |  |  |
|  | Cost/ |  |  |  |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
($ in thousands) |  | Cost |  | Gains |  | Losses |  | 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 |
RMBS |  | 1,409,003 |  |  | 43,421 |  |  | (455) |  |  | 1,451,969 |
CMBS |  | 514,709 |  |  | 23,902 |  |  | (267) |  |  | 538,344 |
Total AFS fixed income securities |  | $ | 5,879,986 |  |  | 223,372 |  |  | (7,738) |  |  | 6,095,620 |
The following table provides a roll forward of the allowance for credit losses on our AFS fixed income securities for 2020:
2020 |  |  |  |  |  |  |  |  |  |
($ in thousands) | Beginning Balance |  | Current Provisions for Securities without Prior Allowance |  | Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirements) to Sell Securities |  | Reductions for Securities Sold |  | Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period |  | Ending Balance
Foreign Government | $ | — |  |  | 19 |  |  | — |  |  | (18) |  |  | — |  |  | 1 |
Obligations of states and political subdivisons | — |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | 4 |
Corporate Securities | — |  |  | 3,645 |  |  | — |  |  | (781) |  |  | (82) |  |  | 2,782 |
CLO and other ABS | — |  |  | 722 |  |  | — |  |  | (113) |  |  | (17) |  |  | 592 |
RMBS | — |  |  | 623 |  |  | — |  |  | (62) |  |  | — |  |  | 561 |
CMBS | — |  |  | 29 |  |  | — |  |  | — |  |  | — |  |  | 29 |
Total AFS fixed income securities | $ | — |  |  | 5,042 |  |  | — |  |  | (974) |  |  | (99) |  |  | 3,969 |
During 2020, we did not have any write-offs or recoveries of our AFS fixed income securities and we did not purchase any assets with credit deterioration, so these items are not included in the table above. As disclosed in Note 2. "Summary of Significant Accounting Policies," we do not evaluate accrued interest on our AFS securities for expected credit loss as we write-off these balances in a timely manner. As of December 31, 2020, accrued interest on AFS securities amounted to $43.8 million and we did not record any write-offs of accrued interest during 2020. (c) Quantitative information about unrealized losses on our AFS portfolio is provided below.
December 31, 2020 |  | Less than 12 months |  | 12 months or longer |  | Total
($ in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 11,519 |  |  | (137) |  |  | — |  |  | — |  |  | 11,519 |  |  | (137) |
Foreign government |  | 1,122 |  |  | (3) |  |  | — |  |  | — |  |  | 1,122 |  |  | (3) |
Obligations of states and political subdivisions |  | 2,223 |  |  | (11) |  |  | — |  |  | — |  |  | 2,223 |  |  | (11) |
Corporate securities |  | 65,187 |  |  | (2,152) |  |  | 2,400 |  |  | (188) |  |  | 67,587 |  |  | (2,340) |
CLO and other ABS |  | 261,746 |  |  | (2,995) |  |  | 165,661 |  |  | (4,848) |  |  | 427,407 |  |  | (7,843) |
RMBS |  | 18,227 |  |  | (194) |  |  | 1,181 |  |  | (7) |  |  | 19,408 |  |  | (201) |
CMBS |  | 55,482 |  |  | (616) |  |  | 16,093 |  |  | (391) |  |  | 71,575 |  |  | (1,007) |
Total AFS fixed income securities |  | $ | 415,506 |  |  | (6,108) |  |  | 185,335 |  |  | (5,434) |  |  | 600,841 |  |  | (11,542) |
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: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
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) |
RMBS |  | 126,089 |  |  | (425) |  |  | 5,375 |  |  | (30) |  |  | 131,464 |  |  | (455) |
CMBS |  | 62,893 |  |  | (264) |  |  | 828 |  |  | (3) |  |  | 63,721 |  |  | (267) |
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 will we be required to sell any of these securities. Considering these factors and our review of these securities under our credit loss policy as described in Note 2. “Summary of Significant Accounting Policies” of this Form 10-K, we have concluded that no ACL is required on these balances. 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 December 31, 2020, 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 December 31, 2020:
|  | AFS |  | HTM
($ in thousands) |  | Fair Value |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 433,241 |  |  | 1,132 |  |  | 1,149 |
Due after one year through five years |  | 3,639,658 |  |  | 15,692 |  |  | 16,852 |
Due after five years through 10 years |  | 1,910,480 |  |  | — |  |  | — |
Due after 10 years |  | 472,549 |  |  | — |  |  | — |
Total fixed income securities |  | $ | 6,455,928 |  |  | 16,824 |  |  | 18,001 |
(e) The following table summarizes our other investment portfolio by strategy:
Other Investments |  | December 31, 2020 |  | December 31, 2019
($ in thousands) |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1 |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1
Alternative Investments |  |  |  |  |  |  |  |  |  |  |  |
Private equity |  | $ | 157,276 |  |  | 100,905 |  |  | 258,181 |  |  | 118,352 |  |  | 93,138 |  |  | 211,490 |
Private credit |  | 54,017 |  |  | 98,330 |  |  | 152,347 |  |  | 42,532 |  |  | 105,340 |  |  | 147,872 |
Real assets |  | 19,659 |  |  | 16,493 |  |  | 36,152 |  |  | 23,256 |  |  | 20,741 |  |  | 43,997 |
Total alternative investments |  | 230,952 |  |  | 215,728 |  |  | 446,680 |  |  | 184,140 |  |  | 219,219 |  |  | 403,359 |
Other securities |  | 35,370 |  |  | — |  |  | 35,370 |  |  | 32,667 |  |  | — |  |  | 32,667 |
Total other investments |  | $ | 266,322 |  |  | 215,728 |  |  | 482,050 |  |  | 216,807 |  |  | 219,219 |  |  | 436,026 |
1 In addition to the amounts in this table, previously recognized tax credits are subject to the risk of recapture. We do not consider this significant and therefore do not include in this table. We have reviewed various investments included in the table above and have concluded that they are VIEs, but that we are not the primary beneficiary and therefore, consolidation is not required. We do not have a future obligation to fund losses or debts on behalf of these investments; however, we are contractually committed to make additional investments up to the remaining commitment outlined above. We did not provide any non-contractual financial support at any time during 2020 or 2019. The following is a description of our alternative investment strategies: Our private equity strategy includes the following: •Primary Private Equity: This strategy makes private equity investments, primarily in established large and middle market companies across diverse industries globally, with an emphasis on North America. •Secondary Private Equity: This strategy purchases seasoned private equity funds from investors desiring liquidity prior to normal fund termination. Investments are made across all sectors of the private equity market, including leveraged buyouts ("LBO"), venture capital, distressed securities, mezzanine financing, real estate, and infrastructure. •Venture Capital: In general, these investments are made principally by investing in equity securities of startup companies and small-to-medium sized privately-held corporations with strong long-term growth potential. This strategy makes private equity investments in seed stage, early stage, late stage, and growth equity partnerships. Our private credit strategy includes the following: •Direct Lending: This strategy provides privately negotiated loans to U.S. middle market companies. Typically, these are floating rate, senior secured loans diversified across industries. Loans are made to companies that may or may not have private equity sponsors to finance LBOs, recapitalizations, and acquisitions. •Mezzanine Financing: This strategy provides privately-negotiated fixed income securities, generally with an equity component, to LBO firms and private and publicly-traded large, mid, and small-cap companies to finance LBOs, recapitalizations, and acquisitions. •Opportunistic and Distressed Debt: This strategy makes investments in debt and equity securities of companies that are experiencing financial distress, operational issues, or dislocated pricing of publicly-traded securities. Investments include buying indebtedness of bankrupt or financially-troubled companies, small balance loan portfolios, special situations and capital structure arbitrage trades, commercial real estate mortgages, and similar non-U.S. securities and debt obligations. Our real assets strategy includes the following: •Infrastructure: This strategy invests in the equity or debt of cash flow generating assets, diversified across a variety of industries, including transportation, energy infrastructure, renewable power, such as wind and solar, social infrastructure, power generation, water, telecom, and other regulated entities principally located in North America and Western Europe. •Real Estate: This strategy invests in real estate in North America, Europe, and Asia via direct property ownership, joint ventures, mortgages, and investments in equity and debt instruments. Our alternative investment strategies may employ leverage and may use hedging to reduce foreign exchange or interest rate volatility. At this time, our alternative investment strategies do not include hedge funds. We typically cannot redeem our investments with the general partners of these investments; however, occasionally these partnerships can be traded on the secondary market. Once liquidation is triggered by clauses within the limited partnership agreements or at the funds’ stated end date, we will receive our final allocation of capital and any earned appreciation of the underlying investments, assuming we have not divested ourselves of our partnership interests prior to that time. We currently receive distributions from these alternative investments through the realization of the underlying investments or income generated in the limited partnerships. The following tables show gross summarized financial information for our other investments portfolio, including the portion we do not own. The investments are carried under the equity method of accounting. The last line in the income statement information table below reflects our portion of the aggregate results that are 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 is as of, and for the 12-month period ended, September 30:
Balance Sheet Information |  |  |  |
December 31, |  |  |  |
($ in millions) |  | 2020 |  | 2019
Investments |  | $ | 55,145 |  |  | 43,857 |
Total assets |  | 58,819 |  |  | 45,432 |
Total liabilities |  | 6,744 |  |  | 5,670 |
Total partners’ capital |  | 52,075 |  |  | 39,762 |
Income Statement Information |  |  |  |  |  |
12 months ended September 30, |  |  |  |  |  |
($ in millions) |  | 2020 |  | 2019 |  | 2018
Net investment (loss) income |  | $ | (26) |  |  | (8) |  |  | 134 |
Realized gains |  | 1,452 |  |  | 695 |  |  | 1,981 |
Net change in unrealized appreciation |  | 4,898 |  |  | 5,543 |  |  | 1,303 |
Net income before tax |  | $ | 6,324 |  |  | 6,230 |  |  | 3,418 |
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income |  | 26.5 |  |  | 17.9 |  |  | 17.6 |
(f) 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 agencies, as of December 31, 2020 or December 31, 2019. (g) 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 December 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 December 31, 2020:
($ in millions) |  | FHLBI Collateral |  | FHLBNY Collateral |  | State and Regulatory Deposits |  | Total
U.S. government and government agencies |  | $ | — |  |  | — |  |  | 20.1 |  |  | 20.1 |
Obligations of states and political subdivisions |  | — |  |  | — |  |  | 5.1 |  |  | 5.1 |
RMBS |  | 125.0 |  |  | 178.1 |  |  | — |  |  | 303.1 |
CMBS |  | 7.0 |  |  | 36.3 |  |  | — |  |  | 43.3 |
Total pledged as collateral |  | $ | 132.0 |  |  | 214.4 |  |  | 25.2 |  |  | 371.6 |
(h) The components of pre-tax net investment income earned were as follows:
($ in thousands) |  | 2020 |  | 2019 |  | 2018
Fixed income securities |  | $ | 203,926 |  |  | 203,255 |  |  | 178,104 |
CMLs |  | 844 |  |  | — |  |  | — |
Equity securities |  | 9,286 |  |  | 6,996 |  |  | 7,764 |
Short-term investments |  | 1,821 |  |  | 6,653 |  |  | 3,472 |
Other investments |  | 26,922 |  |  | 18,778 |  |  | 17,799 |
Investment expenses |  | (15,692) |  |  | (13,139) |  |  | (11,803) |
Net investment income earned |  | $ | 227,107 |  |  | 222,543 |  |  | 195,336 |
(i) The following tables summarize net realized and unrealized investment gains and losses for the periods indicated:
($ in thousands) |  | 2020 |  | 2019 |  | 2018
Gross gains on sales |  | $ | 18,893 |  |  | 31,910 |  |  | 28,672 |
Gross losses on sales |  | (9,745) |  |  | (5,195) |  |  | (47,647) |
Net realized gains (losses) on disposals |  | 9,148 |  |  | 26,715 |  |  | (18,975) |
Net unrealized gains (losses) on equity securities |  | 7,939 |  |  | (8,649) |  |  | (29,369) |
Net credit loss (expense) benefit on fixed maturities, AFS |  | (5,042) |  |  |  |  |
Net credit loss benefit (expense) on fixed maturities, HTM |  | 4 |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (16,266) |  |  |  |  |
Net OTTI losses recognized in earnings |  |  |  | (3,644) |  |  | (6,579) |
Net realized and unrealized gains (losses) |  | $ | (4,217) |  |  | 14,422 |  |  | (54,923) |
Unrealized (losses) recognized in income on equity securities, as reflected in the table above, include the following:
($ in thousands) |  | 2020 |  | 2019 |  | 2018
Unrealized gains (losses) recognized in income on equity securities: |  |  |  |  |  |
On securities remaining in our portfolio at end of period |  | $ | 7,936 |  |  | 1,219 |  |  | (3,098) |
On securities sold in period |  | 3 |  |  | (9,868) |  |  | (26,271) |
Total unrealized (losses) recognized in income on equity securities |  | $ | 7,939 |  |  | (8,649) |  |  | (29,369) |
Proceeds from the sales of AFS fixed income securities were $487.1 million, $594.7 million, and $2,030.7 million in 2020, 2019, and 2018, respectively. Proceeds from the sales of equity securities were $1.3 million, $137.3 million, and $113.3 million in 2020, 2019, and 2018, respectively. Net realized gains (losses) on disposals in the table above were driven by the following: •2020: Active management of the fixed income securities portfolio. •2019: Opportunistic sales in our equity portfolio. •2018: Higher trading volume driven by opportunistic sales in both our fixed income securities and equity portfolios. Losses on securities for which we have the intent to sell of $16.3 million were recorded in 2020 to provide our investment managers flexibility to trade and optimize our investment portfolio. Corporate securities accounted for $12.1 million of the losses on securities for which we have the intent to sell.

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration