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Investments | 3 Months Ended
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Mar. 31, 2021
Investments [Abstract] |
Investments | Investments (a) Information about our AFS securities as of March 31, 2021, and December 31, 2020, is as follows:
March 31, 2021 |  |  |  |  |  |  |  |  |  |
($ 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 |  | $ | 134,725 |  |  | — |  |  | 3,653 |  |  | (2,104) |  |  | 136,274 |
Foreign government |  | 18,920 |  |  | (56) |  |  | 974 |  |  | (136) |  |  | 19,702 |
Obligations of states and political subdivisions |  | 1,140,442 |  |  | (201) |  |  | 74,212 |  |  | (360) |  |  | 1,214,093 |
Corporate securities |  | 2,239,066 |  |  | (6,166) |  |  | 122,761 |  |  | (9,870) |  |  | 2,345,791 |
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS") |  | 1,188,670 |  |  | (1,470) |  |  | 18,917 |  |  | (4,052) |  |  | 1,202,065 |
Residential mortgage-backed securities ("RMBS") |  | 906,266 |  |  | (864) |  |  | 43,367 |  |  | (1,229) |  |  | 947,540 |
Commercial mortgage-backed securities ("CMBS") |  | 624,988 |  |  | (24) |  |  | 33,590 |  |  | (2,378) |  |  | 656,176 |
Total AFS fixed income securities |  | $ | 6,253,077 |  |  | (8,781) |  |  | 297,474 |  |  | (20,129) |  |  | 6,521,641 |
December 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 |  | $ | 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 |
The following tables provide a roll forward of the allowance for credit losses on our AFS fixed income securities for the periods indicated:
Quarter ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Beginning Balance |  | Current Provision for Securities without Prior Allowance |  | Increase (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 |  | $ | 1 |  |  | 56 |  |  | (1) |  |  | — |  |  | — |  |  | 56 |
Obligations of states and political subdivisions |  | 4 |  |  | 186 |  |  | 11 |  |  | — |  |  | — |  |  | 201 |
Corporate securities |  | 2,782 |  |  | 4,058 |  |  | (527) |  |  | (147) |  |  | — |  |  | 6,166 |
CLO and other ABS |  | 592 |  |  | 1,001 |  |  | (106) |  |  | (17) |  |  | — |  |  | 1,470 |
RMBS |  | 561 |  |  | 356 |  |  | (39) |  |  | (14) |  |  | — |  |  | 864 |
CMBS |  | 29 |  |  | 10 |  |  | (15) |  |  | — |  |  | — |  |  | 24 |
Total AFS fixed income securities |  | $ | 3,969 |  |  | 5,667 |  |  | (677) |  |  | (178) |  |  | — |  |  | 8,781 |
Quarter ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Beginning Balance |  | Current Provision for Securities without Prior Allowance |  | Increase (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 |
RMBS |  | — |  |  | 722 |  |  | — |  |  | — |  |  | — |  |  | 722 |
CMBS |  | — |  |  | 38 |  |  | — |  |  | — |  |  | — |  |  | 38 |
Total AFS fixed income securities |  | $ | — |  |  | 15,787 |  |  | — |  |  | — |  |  | — |  |  | 15,787 |
For information on our methodology and significant inputs used to measure the amount related to credit loss, our accounting policy for recognizing write-offs of uncollectible amounts, and our treatment of accrued interest, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2020 Annual Report. Accrued interest on AFS securities was $44.7 million as of March 31, 2021, and $43.8 million as of December 31, 2020. We did not record any write-offs during 2021 or 2020. (b) Quantitative information about unrealized losses on our AFS portfolio is provided below.
March 31, 2021 |  | Less than 12 months |  | 12 months or longer |  | Total
($ in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 53,796 |  |  | (2,104) |  |  | — |  |  | — |  |  | 53,796 |  |  | (2,104) |
Foreign government |  | 3,313 |  |  | (136) |  |  | — |  |  | — |  |  | 3,313 |  |  | (136) |
Obligations of states and political subdivisions |  | 18,838 |  |  | (352) |  |  | 369 |  |  | (8) |  |  | 19,207 |  |  | (360) |
Corporate securities |  | 306,052 |  |  | (8,560) |  |  | 14,025 |  |  | (1,310) |  |  | 320,077 |  |  | (9,870) |
CLO and other ABS |  | 282,939 |  |  | (1,737) |  |  | 105,261 |  |  | (2,315) |  |  | 388,200 |  |  | (4,052) |
RMBS |  | 76,684 |  |  | (1,229) |  |  | — |  |  | — |  |  | 76,684 |  |  | (1,229) |
CMBS |  | 70,510 |  |  | (2,089) |  |  | 23,474 |  |  | (289) |  |  | 93,984 |  |  | (2,378) |
Total AFS fixed income securities |  | $ | 812,132 |  |  | (16,207) |  |  | 143,129 |  |  | (3,922) |  |  | 955,261 |  |  | (20,129) |
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) |
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. The increase in gross unrealized losses during First Quarter 2021 was driven by a significant increase in longer-dated benchmark United States Treasury rates, offset in part by tightening credit spreads as a result of reduced uncertainty in the marketplace. 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 our 2020 Annual Report, we have concluded that no allowance for credit loss 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. (c) Fixed income securities at March 31, 2021 are summarized 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 |  | $ | 453,772 |  |  | 1,057 |  |  | 1,065 |
Due after one year through five years |  | 3,400,223 |  |  | 14,433 |  |  | 15,325 |
Due after five years through 10 years |  | 2,043,563 |  |  | 8,854 |  |  | 8,814 |
Due after 10 years |  | 624,083 |  |  | — |  |  | — |
Total fixed income securities |  | $ | 6,521,641 |  |  | 24,344 |  |  | 25,204 |
(d) The following table summarizes our other investment portfolio by strategy:
Other Investments |  | March 31, 2021 |  | December 31, 2020
($ in thousands) |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1 |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1
Alternative Investments |  |  |  |  |  |  |  |  |  |  |  |
Private equity |  | $ | 182,032 |  |  | 104,070 |  |  | 286,102 |  |  | 157,276 |  |  | 100,905 |  |  | 258,181 |
Private credit |  | 56,819 |  |  | 98,072 |  |  | 154,891 |  |  | 54,017 |  |  | 98,330 |  |  | 152,347 |
Real assets |  | 19,689 |  |  | 15,891 |  |  | 35,580 |  |  | 19,659 |  |  | 16,493 |  |  | 36,152 |
Total alternative investments |  | 258,540 |  |  | 218,033 |  |  | 476,573 |  |  | 230,952 |  |  | 215,728 |  |  | 446,680 |
Other securities |  | 31,613 |  |  | — |  |  | 31,613 |  |  | 35,370 |  |  | — |  |  | 35,370 |
Total other investments |  | $ | 290,153 |  |  | 218,033 |  |  | 508,186 |  |  | 266,322 |  |  | 215,728 |  |  | 482,050 |
1 The 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 stated above, but 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 2021 or 2020. 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 and report results to us on a one-quarter lag. The following table provides (i) the gross summarized financial statement information for these investments for the three-months ended December 31, and (ii) the portion of these results that are included in our First Quarter results:
Income Statement Information |  | Quarter ended March 31, |  |
($ in millions) |  | 2021 |  | 2020 |  |  |  |
Net investment income |  | $ | 481.6 |  |  | 12.7 |  |  |  |  |
Realized gains |  | 776.0 |  |  | 164.8 |  |  |  |  |
Net change in unrealized appreciation |  | 4,630.8 |  |  | 1,204.0 |  |  |  |  |
Net income |  | $ | 5,888.4 |  |  | 1,381.5 |  |  |  |  |
Insurance Subsidiaries’ alternative investments income |  | $ | 20.2 |  |  | 6.3 |  |  |  |  |
(e) Certain Insurance Subsidiaries, as members of the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"), have pledged certain AFS fixed income securities as collateral. Additionally, to comply with insurance laws, certain Insurance Subsidiaries have deposited certain securities with various state and regulatory agencies at March 31, 2021. We retain all rights regarding all securities pledged as collateral. The following table summarizes the market value of these securities at March 31, 2021:
($ in millions) |  | FHLBI Collateral |  | FHLBNY Collateral |  |  |  | State and Regulatory Deposits |  | Total
U.S. government and government agencies |  | $ | — |  |  | — |  |  |  |  | 21.0 |  |  | 21.0 |
Obligations of states and political subdivisions |  | — |  |  | — |  |  |  |  | 5.0 |  |  | 5.0 |
RMBS |  | 93.7 |  |  | 155.5 |  |  |  |  | — |  |  | 249.2 |
CMBS |  | 6.9 |  |  | 35.1 |  |  |  |  | — |  |  | 42.0 |
Total pledged as collateral |  | $ | 100.6 |  |  | 190.6 |  |  |  |  | 26.0 |  |  | 317.2 |
(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-backed investments, as of March 31, 2021, or December 31, 2020. (g) The components of pre-tax net investment income earned were as follows:
|  | Quarter ended March 31, |  |
($ in thousands) |  | 2021 |  | 2020 |  |  |  |
Fixed income securities |  | $ | 52,823 |  |  | 50,253 |  |  |  |  |
Commercial mortgage loans ("CMLs") |  | 514 |  |  | 62 |  |  |  |  |
Equity securities |  | 2,488 |  |  | 1,552 |  |  |  |  |
Short-term investments |  | 85 |  |  | 1,166 |  |  |  |  |
Other investments |  | 17,433 |  |  | 6,342 |  |  |  |  |
Investment expenses |  | (3,627) |  |  | (3,408) |  |  |  |  |
Net investment income earned |  | $ | 69,716 |  |  | 55,967 |  |  |  |  |
The increase in net investment income earned in First Quarter 2021 compared to First Quarter 2020 was driven by the alternative investments in our other investments portfolio, and it reflects the improvement in the equity markets in the fourth quarter of 2020 as our results on these holdings are recorded on a one-quarter lag. (h) The following table summarizes net realized and unrealized gains and losses for the periods indicated:
|  | Quarter ended March 31, |  |
($ in thousands) |  | 2021 |  | 2020 |  |  |  |
Gross gains on sales |  | $ | 3,676 |  |  | 5,676 |  |  |  |  |
Gross losses on sales |  | (4,471) |  |  | (1,576) |  |  |  |  |
Net realized gains (losses) on disposals |  | (795) |  |  | 4,100 |  |  |  |  |
Net unrealized gains (losses) on equity securities |  | 11,280 |  |  | (17,137) |  |  |  |  |
Net credit loss expense on fixed income securities, AFS |  | (4,997) |  |  | (15,787) |  |  |  |  |
Net credit loss expense on fixed income securities, HTM |  | (7) |  |  | — |  |  |  |  |
Net credit loss expense on CMLs |  | — |  |  | (240) |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (362) |  |  | (15,602) |  |  |  |  |
Net realized and unrealized gains (losses) |  | $ | 5,119 |  |  | (44,666) |  |  |  |  |
Unrealized gains (losses) recognized in income on equity securities, as reflected in the table above, include the following:
|  | Quarter ended March 31, |  |
($ in thousands) |  | 2021 |  | 2020 |  |  |  |
Unrealized gains (losses) recognized in income on equity securities: |  |  |  |  |  |  |  |
On securities remaining in our portfolio at March 31, 2021 |  | $ | 10,097 |  |  | (17,140) |  |  |  |  |
On securities sold during period |  | 1,183 |  |  | 3 |  |  |  |  |
Total unrealized gains (losses) recognized in income on equity securities |  | $ | 11,280 |  |  | (17,137) |  |  |  |  |
The improvement in net realized and unrealized gains was primarily driven by (i) unrealized gains on our equity securities compared to unrealized losses last year, which were driven by COVID-19-related market disruption, and (ii) lower intent-to-sell losses as we provided our investment managers significant trading flexibility last year given market conditions.

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