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Investments

9 Months Ended

Sep. 30, 2022

Investments [Abstract]

Investments

Investments

(a) Information regarding our AFS securities as of September 30, 2022 and December 31, 2021, were as follows:

September 30, 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						$	168,340					—						6						(20,115)						148,231
Foreign government						16,060						(320)						—						(1,960)						13,780
Obligations of states and political subdivisions						1,031,937						(1,311)						141						(63,137)						967,630
Corporate securities						2,535,367						(36,970)						1,222						(234,983)						2,264,636
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")						1,581,097						(3,114)						1,732						(112,292)						1,467,423
Residential mortgage-backed securities ("RMBS")						1,130,752						(10,603)						764						(104,856)						1,016,057
Commercial mortgage-backed securities ("CMBS")						643,458						(19)						102						(49,198)						594,343
Total AFS fixed income securities						$	7,107,011					(52,337)						3,967						(586,541)						6,472,100

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 indicated periods:

Quarter ended September 30, 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						$	265					40						—						15						—						—						320
Obligations of states and political subdivisions						1,206						313						—						(181)						(27)						—						1,311
Corporate securities						35,072						4,061						—						633						(2,733)						(63)						36,970
CLO and other ABS						3,623						35						—						(527)						(17)						—						3,114
RMBS						10,616						35						—						46						(94)						—						10,603
CMBS						18						—						—						1						—						—						19
Total AFS fixed income securities						$	50,800					4,484						—						(13)						(2,871)						(63)						52,337

Quarter ended September 30, 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						$	49					—						(2)						—						—						47
Obligations of states and political subdivisions						38						61						—						—						—						99
Corporate securities						3,477						1,307						64						(49)						(80)						4,719
CLO and other ABS						1,399						46						(517)						(2)						—						926
RMBS						1,034						248						125						(44)						—						1,363
CMBS						14						4						(3)						—						—						15
Total AFS fixed income securities						$	6,011					1,666						(333)						(95)						(80)						7,169

Nine Months ended September 30, 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					292						—						(4)						(14)						—						320
Obligations of states and political subdivisions						137						1,371						—						(6)						(191)						—						1,311
Corporate securities						6,682						33,096						—						4,384						(5,925)						(1,267)						36,970
CLO and other ABS						939						1,580						—						623						(28)						—						3,114
RMBS						1,909						225						8,318						473						(322)						—						10,603
CMBS						11						18						—						(10)						—						—						19
Total AFS fixed income securities						$	9,724					36,582						8,318						5,460						(6,480)						(1,267)						52,337

Nine Months ended September 30, 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					47						(1)						—						—						47
Obligations of states and political subdivisions						4						84						11						—						—						99
Corporate securities						2,782						3,413						(765)						(570)						(141)						4,719
CLO and other ABS						592						573						(219)						(20)						—						926
RMBS						561						1,018						(95)						(121)						—						1,363
CMBS						29						4						(18)						—						—						15
Total AFS fixed income securities						$	3,969					5,139						(1,087)						(711)						(141)						7,169

During Third Quarter and Nine Months 2022 and 2021, we had no write-offs or recoveries of our AFS fixed income securities.

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 $52.8 million as of September 30, 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 follows:

September 30, 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						$	138,136					(16,003)						9,819						(4,112)						147,955						(20,115)
Foreign government						12,069						(1,501)						1,711						(459)						13,780						(1,960)
Obligations of states and political subdivisions						921,980						(62,494)						3,886						(643)						925,866						(63,137)
Corporate securities						2,037,738						(217,328)						61,315						(17,655)						2,099,053						(234,983)
CLO and other ABS						1,107,292						(82,751)						269,902						(29,541)						1,377,194						(112,292)
RMBS						937,823						(93,871)						45,296						(10,985)						983,119						(104,856)
CMBS						538,907						(40,359)						52,313						(8,839)						591,220						(49,198)
Total AFS fixed income securities						$	5,693,945					(514,307)						444,242						(72,234)						6,138,187						(586,541)

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 currently do not intend to sell any of the securities summarized in the tables above, nor will we be required to sell any of them. The increase in gross unrealized losses as of September 30, 2022, compared to December 31, 2021, was driven by an increase in benchmark U.S. Treasury rates and a widening of credit spreads, with the increase in interest rates having the most significant impact. 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 beyond the allowance for credit loss recorded as of September 30, 2022. This conclusion reflects our current judgment about the financial position and future prospects of the entities that issued the investment security and underlying collateral.

(c) AFS and held-to-maturity ("HTM") fixed income securities at September 30, 2022, by contractual maturity are shown below. The maturities of mortgage-backed securities were calculated using each security's estimated average life. 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						$	322,189					6,577						6,595
Due after one year through five years						2,826,402						4,955						4,907
Due after five years through 10 years						2,410,981						21,476						19,980
Due after 10 years						912,528						—						—
Total fixed income securities						$	6,472,100					33,008						31,482

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

Other Investments						September 30, 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						$	284,538					126,446						410,984						273,070						99,734						372,804
Private credit						55,398						91,196						146,594						63,138						92,674						155,812
Real assets						27,885						29,103						56,988						23,524						22,579						46,103
Total alternative investments						367,821						246,745						614,566						359,732						214,987						574,719
Other securities						64,803						—						64,803						49,300						—						49,300
Total other investments						$	432,624					246,745						679,369						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 reflect this risk in the Maximum Exposure to Loss column 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 during 2022 or 2021.

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 total net income reported by these investments to all of their investors for the three and nine months ended June 30, 2022 and June 30, 2021, and (ii) the portion of these results that are included in our Third Quarter and Nine Months 2022 and 2021 results:

Income Statement Information						Quarter ended September 30,												Nine Months ended September 30,
($ in millions)						2022						2021						2022						2021
Net investment income						$	205.6					60.4						$	612.0					550.3
Realized gains						1,983.5						1,857.6						10,964.9						4,026.2
Net change in unrealized appreciation						(3,188.9)						11,188.2						(1,973.0)						20,767.9
Net income						$	(999.8)					13,106.2						$	9,603.9					25,344.4
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income						$	(5.6)					42.8						$	22.8					92.9

(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, we had certain securities on deposit with various state and regulatory agencies at September 30, 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 September 30, 2022:

($ in millions)						FHLBI Collateral						FHLBNY Collateral												State and Regulatory Deposits						Total
U.S. government and government agencies						$	—					—												18.9						18.9
Obligations of states and political subdivisions						—						—												3.6						3.6
RMBS						60.5						29.7												—						90.2
CMBS						4.8						10.0												—						14.8
Total pledged as collateral						$	65.3					39.7												22.5						127.5

(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 September 30, 2022, or December 31, 2021.

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

						Quarter ended September 30,												Nine Months ended September 30,
($ in thousands)						2022						2021						2022						2021
Fixed income securities						$	68,236					51,683						$	184,305					157,114
Commercial mortgage loans ("CMLs")						1,600						683						3,762						1,892
Equity securities						2,604						2,955						7,661						8,425
Short-term investments						1,152						64						1,660						204
Other investments						(5,469)						42,865						22,896						93,158
Investment expenses						(4,234)						(5,218)						(13,571)						(14,314)
Net investment income earned						$	63,889					93,032						$	206,713					246,479

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

						Quarter ended September 30,												Nine Months ended September 30,
($ in thousands)						2022						2021						2022						2021
Gross gains on sales						$	7,094					7,151						$	23,843					12,906
Gross losses on sales						(19,668)						(2,505)						(52,573)						(8,787)
Net realized (losses) gains on disposals						(12,574)						4,646						(28,730)						4,119
Net unrealized (losses) gains on equity securities						(7,777)						(3,111)						(31,791)						15,830
Net credit loss expense on fixed income securities, AFS						(4,471)						(1,334)						(42,042)						(4,059)
Net credit loss benefit (expense) on fixed income securities, HTM						54						6						62						(54)
Losses on securities for which we have the intent to sell						(913)						(30)						(6,412)						(483)
Net realized and unrealized (losses) gains						$	(25,681)					177						$	(108,913)					15,353

Net realized and unrealized investment gains decreased $25.9 million in Third Quarter 2022 and $124.3 million in Nine Months 2022 compared to the same prior-year periods, primarily driven by (i) a decrease in valuations reflecting the current public equities market, (ii) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (iii) 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 September 30,												Nine Months ended September 30,
($ in thousands)						2022						2021						2022						2021
Unrealized (losses) gains recognized in income on equity securities:
On securities remaining in our portfolio at end of period						$	(5,832)					269						$	(16,334)					14,767
On securities sold in period						(1,945)						(3,380)						(15,457)						1,063
Total unrealized (losses) gains recognized in income on equity securities						$	(7,777)					(3,111)						$	(31,791)					15,830

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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 https://asc.fasb.org/topic&trid=75115024

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

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

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

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X

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