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Investments

3 Months Ended

Mar. 31, 2022

Investments [Abstract]

Investments

Investments

(a) Information regarding our AFS securities as of March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022
($ 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						$	131,986					—						490						(5,383)						127,093
Foreign government						17,160						(150)						145						(452)						16,703
Obligations of states and political subdivisions						1,122,132						(1,991)						15,329						(10,039)						1,125,431
Corporate securities						2,445,468						(23,066)						25,658						(60,320)						2,387,740
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")						1,444,224						(2,283)						7,974						(32,701)						1,417,214
Residential mortgage-backed securities ("RMBS")						903,800						(10,029)						6,779						(22,591)						877,959
Commercial mortgage-backed securities ("CMBS")						653,137						(80)						5,618						(11,993)						646,682
Total AFS fixed income securities						$	6,717,907					(37,599)						61,993						(143,479)						6,598,822

December 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						$	127,974					—						3,629						(1,145)						130,458
Foreign government						15,420						(46)						609						(123)						15,860
Obligations of states and political subdivisions						1,121,422						(137)						68,258						(235)						1,189,308
Corporate securities						2,478,348						(6,682)						106,890						(4,953)						2,573,603
CLO and other ABS						1,343,687						(939)						14,350						(6,284)						1,350,814
RMBS						756,280						(1,909)						24,813						(2,932)						776,252
CMBS						647,622						(11)						27,752						(1,682)						673,681
Total AFS fixed income securities						$	6,490,753					(9,724)						246,301						(17,354)						6,709,976

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, 2022
($ in thousands)						Beginning Balance						Current Provision for Securities without Prior Allowance						Initial Allowance for Purchased Credit Deteriorated Assets with Credit Deterioration						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						$	46					103						—						1						—						—						150
Obligations of states and political subdivisions						137						1,732						—						132						(10)						—						1,991
Corporate securities						6,682						15,393						—						3,337						(1,247)						(1,099)						23,066
CLO and other ABS						939						1,288						—						59						(3)						—						2,283
RMBS						1,909						—						8,318						(63)						(135)						—						10,029
CMBS						11						72						—						(3)						—						—						80
Total AFS fixed income securities						$	9,724					18,588						8,318						3,463						(1,395)						(1,099)						37,599

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

During First Quarter 2022 and First Quarter 2021, we did not have any write-offs or recoveries of our AFS fixed income securities, so these items are not included in the tables above.

For information on our methodology and significant inputs used to measure expected credit losses, 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 2021 Annual Report. Accrued interest on AFS securities was $46.8 million as of March 31, 2022, and $46.3 million as of December 31, 2021. We did not record any material write-offs of accrued interest during 2022 and 2021.

(b) Quantitative information about unrealized losses on our AFS portfolio is provided below.

March 31, 2022						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						$	89,044					(4,410)						5,252						(973)						94,296						(5,383)
Foreign government						5,394						(268)						1,996						(184)						7,390						(452)
Obligations of states and political subdivisions						223,497						(9,846)						2,834						(193)						226,331						(10,039)
Corporate securities						1,002,980						(59,605)						6,823						(715)						1,009,803						(60,320)
CLO and other ABS						937,362						(28,658)						101,722						(4,043)						1,039,084						(32,701)
RMBS						545,934						(21,444)						13,731						(1,147)						559,665						(22,591)
CMBS						337,995						(9,807)						23,123						(2,186)						361,118						(11,993)
Total AFS fixed income securities						$	3,142,206					(134,038)						155,481						(9,441)						3,297,687						(143,479)

December 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						$	34,857					(746)						7,827						(399)						42,684						(1,145)
Foreign government						2,000						(84)						1,061						(39)						3,061						(123)
Obligations of states and political subdivisions						25,837						(235)						—						—						25,837						(235)
Corporate securities						300,549						(4,903)						2,520						(50)						303,069						(4,953)
CLO and other ABS						663,976						(4,934)						53,368						(1,350)						717,344						(6,284)
RMBS						236,010						(2,931)						20						(1)						236,030						(2,932)
CMBS						112,899						(1,016)						20,326						(666)						133,225						(1,682)
Total AFS fixed income securities						$	1,376,128					(14,849)						85,122						(2,505)						1,461,250						(17,354)

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 at March 31, 2022 compared to December 31, 2021 was driven by an increase in benchmark U.S. Treasury rates and a widening of credit spreads. Considering these factors and our review of these securities under our credit loss policy as described in Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report, we have concluded that no allowance for credit loss is required on these balances. This conclusion reflects our current judgment about the financial position and future prospects of the entity that issued the investment security and underlying collateral.

(c) Fixed income securities at March 31, 2022 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 March 31, 2022:

						AFS						HTM
($ in thousands)						Fair Value						Carrying Value						Fair Value
Due in one year or less						$	396,074					6,727						6,899
Due after one year through five years						2,915,421						5,977						6,012
Due after five years through 10 years						2,425,811						20,331						19,714
Due after 10 years						861,516						—						—
Total fixed income securities						$	6,598,822					33,035						32,625

(d) The following table summarizes our other investment portfolio by strategy:

Other Investments						March 31, 2022																		December 31, 2021
($ in thousands)						Carrying Value						Remaining Commitment						Maximum Exposure to Loss1						Carrying Value						Remaining Commitment						Maximum Exposure to Loss1
Alternative Investments
Private equity						$	281,352					124,761						406,113						273,070						99,734						372,804
Private credit						60,476						92,279						152,755						63,138						92,674						155,812
Real assets						26,159						20,914						47,073						23,524						22,579						46,103
Total alternative investments						367,987						237,954						605,941						359,732						214,987						574,719
Other securities						57,679						—						57,679						49,300						—						49,300
Total other investments						$	425,666					237,954						663,620						409,032						214,987						624,019

1In addition to the amounts in this table, previously recognized tax credits are subject to the risk of recapture. We do not consider the risk of recapture to be significant and therefore do not include in this table.

We are contractually committed to make additional investments up to the remaining commitments stated above. We did not provide any non-contractual financial support at any time during 2022 or 2021.

The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. As the majority of these investments are carried under the equity method of accounting and report results to us on a one-quarter lag, the summarized financial statement information is for the three-month period ended, December 31:

Income Statement Information						Quarter ended March 31,
($ in millions)						2022						2021
Net investment income						$	135.5					481.6
Realized gains						2,748.0						776.0
Net change in unrealized appreciation						5,178.2						4,630.8
Net income						$	8,061.7					5,888.4
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income						$	19.1					20.2

(e) We have pledged certain AFS fixed income securities as collateral related to our borrowing 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 March 31, 2022 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, 2022:

($ in millions)						FHLBI Collateral						FHLBNY Collateral												State and Regulatory Deposits						Total
U.S. government and government agencies						$	—					—												20.3						20.3
Obligations of states and political subdivisions						—						—												3.8						3.8
RMBS						63.1						35.9												—						99.0
CMBS						5.8						12.8												—						18.6
Total pledged as collateral						$	68.9					48.7												24.1						141.7

(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 March 31, 2022, or December 31, 2021.

(g) The components of pre-tax net investment income earned were as follows:

						Quarter ended March 31,
($ in thousands)						2022						2021
Fixed income securities						$	53,925					52,823
Commercial mortgage loans ("CMLs")						970						514
Equity securities						2,418						2,488
Short-term investments						101						85
Other investments						19,305						17,433
Investment expenses						(4,117)						(3,627)
Net investment income earned						$	72,602					69,716

(h) The following table summarizes net realized and unrealized gains and losses for the periods indicated:

						Quarter ended March 31,
($ in thousands)						2022						2021
Gross gains on sales						$	2,197					3,676
Gross losses on sales						(13,560)						(4,471)
Net realized losses on disposals						(11,363)						(795)
Net unrealized (losses) gains on equity securities						(2,154)						11,280
Net credit loss expense on fixed income securities, AFS						(22,052)						(4,997)
Net credit loss benefit (expense) on fixed income securities, HTM						14						(7)
Losses on securities for which we have the intent to sell						(4,797)						(362)
Net realized and unrealized (losses) gains						$	(40,352)					5,119

Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021 primarily driven by (i) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.

Net unrealized losses and gains recognized in income on equity securities, as reflected in the table above, included the following:

						Quarter ended March 31,
($ in thousands)						2022						2021
Unrealized (losses) gains recognized in income on equity securities:
On securities remaining in our portfolio at end of period						$	(2,220)					10,097
On securities sold in period						66						1,183
Total unrealized (losses) gains recognized in income on equity securities						$	(2,154)					11,280

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The entire disclosure for investment.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 321
-URI http://asc.fasb.org/topic&trid=75115024

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-URI http://asc.fasb.org/topic&trid=2196928

Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 325
-URI http://asc.fasb.org/topic&trid=2197064

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-URI http://asc.fasb.org/topic&trid=2196965

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