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Investments

3 Months Ended

Mar. 31, 2023

Investments [Abstract]

Investments

Investments

(a) Information regarding our AFS securities as of March 31, 2023 and December 31, 2022, were as follows:

March 31, 2023						Cost/ Amortized Cost						Allowance for Credit Losses						Unrealized Gains						Unrealized Losses						Fair Value
($ in thousands)
AFS fixed income securities:
U.S. government and government agencies						$	360,176					—						1,347						(18,153)						343,370
Foreign government						11,185						(36)						—						(1,262)						9,887
Obligations of states and political subdivisions						713,515						(737)						3,048						(33,743)						682,083
Corporate securities						2,631,373						(16,756)						8,375						(175,042)						2,447,950
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")						1,631,305						(3,895)						4,765						(102,040)						1,530,135
Residential mortgage-backed securities ("RMBS")						1,396,241						(11,740)						2,543						(85,388)						1,301,656
Commercial mortgage-backed securities ("CMBS")						697,253						(390)						383						(47,811)						649,435
Total AFS fixed income securities						$	7,441,048					(33,554)						20,461						(463,439)						6,964,516

December 31, 2022						Cost/ Amortized Cost						Allowance for Credit Losses						Unrealized Gains						Unrealized Losses						Fair Value
($ in thousands)
AFS fixed income securities:
U.S. government and government agencies						$	209,528					—						37						(20,326)						189,239
Foreign government						11,199						(284)						—						(1,307)						9,608
Obligations of states and political subdivisions						965,231						(1,024)						1,812						(48,001)						918,018
Corporate securities						2,558,655						(30,330)						3,509						(196,809)						2,335,025
CLO and other ABS						1,607,660						(2,375)						2,408						(121,720)						1,485,973
RMBS						1,169,546						(11,597)						1,148						(99,265)						1,059,832
CMBS						663,935						(111)						348						(49,760)						614,412
Total AFS fixed income securities						$	7,185,754					(45,721)						9,262						(537,188)						6,612,107

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 March 31, 2023						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
($ in thousands)
Foreign government						$	284					—						—						(248)						—						—						36
Obligations of states and political subdivisions						1,024						50						—						(254)						(83)						—						737
Corporate securities						30,330						2,854						—						(13,964)						(2,453)						(11)						16,756
CLO and other ABS						2,375						787						—						736						(3)						—						3,895
RMBS						11,597						12						—						219						(88)						—						11,740
CMBS						111						27						—						252						—						—						390
Total AFS fixed income securities						$	45,721					3,730						—						(13,259)						(2,627)						(11)						33,554

Quarter ended March 31, 2022						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
($ in thousands)
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

During First Quarter 2023 and 2022, 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 2022 Annual Report. Accrued interest on AFS securities was $55.9 million as of March 31, 2023, and $56.4 million as of December 31, 2022. We did not record any (i) write-offs of accrued interest during First Quarter 2023, and (ii) material write-offs of accrued interest in First Quarter 2022.

(b) Quantitative information about unrealized losses on our AFS portfolio follows:

March 31, 2023						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						$	30,947					(1,069)						82,522						(17,084)						113,469						(18,153)
Foreign government						5,135						(354)						4,752						(908)						9,887						(1,262)
Obligations of states and political subdivisions						256,332						(7,836)						179,924						(25,907)						436,256						(33,743)
Corporate securities						1,251,275						(60,040)						664,923						(115,002)						1,916,198						(175,042)
CLO and other ABS						492,148						(22,463)						780,530						(79,577)						1,272,678						(102,040)
RMBS						598,559						(25,403)						445,561						(59,985)						1,044,120						(85,388)
CMBS						354,433						(16,702)						253,708						(31,109)						608,141						(47,811)
Total AFS fixed income securities						$	2,988,829					(133,867)						2,411,920						(329,572)						5,400,749						(463,439)

December 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						$	166,975					(13,658)						16,011						(6,668)						182,986						(20,326)
Foreign government						5,573						(608)						2,456						(699)						8,029						(1,307)
Obligations of states and political subdivisions						681,795						(43,767)						16,618						(4,234)						698,413						(48,001)
Corporate securities						1,889,492						(164,197)						133,223						(32,612)						2,022,715						(196,809)
CLO and other ABS						916,423						(69,155)						411,283						(52,565)						1,327,706						(121,720)
RMBS						887,229						(76,432)						108,041						(22,833)						995,270						(99,265)
CMBS						512,953						(37,815)						77,181						(11,945)						590,134						(49,760)
Total AFS fixed income securities						$	5,060,440					(405,632)						764,813						(131,556)						5,825,253						(537,188)

We currently do not intend to sell any of the securities summarized in the tables above, nor do we believe we will be required to sell any of them. The decrease in gross unrealized losses as of March 31, 2023, compared to December 31, 2022, was primarily driven by a decrease in benchmark U.S. Treasury rates. 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 2022 Annual Report, we have concluded that no additional allowance for credit loss is required on these balances beyond the allowance for credit loss recorded as of March 31, 2023. 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 March 31, 2023, 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						$	348,132					658						657
Due after one year through five years						3,062,605						14,597						13,944
Due after five years through 10 years						2,814,604						9,395						8,921
Due after 10 years						739,175						—						—
Total fixed income securities						$	6,964,516					24,650						23,522

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

						March 31, 2023																		December 31, 2022
($ in thousands)						Carrying Value						Remaining Commitment						Maximum Exposure to Loss						Carrying Value						Remaining Commitment						Maximum Exposure to Loss
Alternative Investments
Private equity						$	289,598					129,839						419,437						280,980						134,676						415,656
Private credit						53,445						89,002						142,447						54,866						89,481						144,347
Real assets						36,985						20,738						57,723						35,470						21,945						57,415
Total alternative investments						380,028						239,579						619,607						371,316						246,102						617,418

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 2023 or 2022.

The following table shows gross summarized financial information for our alternative investments portfolio, including the portion we do not own. 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 3-month period ended, December 31:

Income Statement Information						Quarter ended March 31,
($ in millions)						2023						2022
Net investment income (loss)						$	(70.7)					135.5
Realized gains						1,722.3						2,748.0
Net change in unrealized appreciation						1,443.7						5,178.2
Net income						$	3,095.3					8,061.7
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income						$	7.8					19.1

(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 March 31, 2023 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, 2023:

($ in millions)						FHLBI Collateral						FHLBNY Collateral												State and Regulatory Deposits						Total
U.S. government and government agencies						$	—					—												19.9						19.9
Obligations of states and political subdivisions						—						—												3.5						3.5
RMBS						61.2						28.4												—						89.6
CMBS						4.5						9.6												—						14.1
Total pledged as collateral						$	65.7					38.0												23.4						127.1

(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than to certain U.S. government agencies, as of March 31, 2023, or December 31, 2022.

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

						Quarter ended March 31,
($ in thousands)						2023						2022
Fixed income securities						$	80,087					53,925
Commercial mortgage loans ("CMLs")						1,965						970
Equity securities						1,205						2,418
Short-term investments						4,650						101
Alternative investments						7,768						19,128
Other investments						43						177
Investment expenses						(4,212)						(4,117)
Net investment income earned						$	91,506					72,602

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

						Quarter ended March 31,
($ in thousands)						2023						2022
Gross gains on sales						$	3,784					2,197
Gross losses on sales						(12,930)						(13,560)
Net realized gains (losses) on disposals						(9,146)						(11,363)
Net unrealized gains (losses) on equity securities						3,248						(2,154)
Net credit loss benefit (expense) on fixed income securities, AFS						9,529						(22,052)
Net credit loss benefit (expense) on fixed income securities, HTM						—						14
Net credit loss benefit (expense) on CMLs						17						—
Losses on securities for which we have the intent to sell						(304)						(4,797)
Net realized and unrealized investment gains (losses)						$	3,344					(40,352)

Net realized and unrealized investment gains (losses) increased $43.7 million in First Quarter 2023 compared to First Quarter 2022, primarily driven by lower credit loss expense on our AFS fixed income securities portfolio resulting from a decline in benchmark U.S. Treasury rates.

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

						Quarter ended March 31,
($ in thousands)						2023						2022
Unrealized gains (losses) recognized in income on equity securities:
On securities remaining in our portfolio at end of period						$	(142)					(2,220)
On securities sold in period						3,390						66
Total unrealized gains (losses) recognized in income on equity securities						$	3,248					(2,154)

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- Definition

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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