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Investments

6 Months Ended

Jun. 30, 2023

Investments [Abstract]

Investments

Investments

(a) Information regarding our AFS securities as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 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						$	313,965					—						—						(20,943)						293,022
Foreign government						11,171						(34)						—						(1,318)						9,819
Obligations of states and political subdivisions						694,734						(769)						1,607						(37,544)						658,028
Corporate securities						2,585,819						(16,149)						4,964						(189,664)						2,384,970
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")						1,739,788						(2,915)						3,353						(105,957)						1,634,269
Residential mortgage-backed securities ("RMBS")						1,520,170						(11,550)						1,024						(101,809)						1,407,835
Commercial mortgage-backed securities ("CMBS")						699,295						(8)						162						(55,044)						644,405
Total AFS fixed income securities						$	7,564,942					(31,425)						11,110						(512,279)						7,032,348

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 June 30, 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						$	36					—						—						(2)						—						—						34
Obligations of states and political subdivisions						737						67						—						(35)						—						—						769
Corporate securities						16,756						1,438						—						(1,070)						(939)						(36)						16,149
CLO and other ABS						3,895						622						—						(1,595)						(7)						—						2,915
RMBS						11,740						1						—						(50)						(141)						—						11,550
CMBS						390						—						—						(240)						(142)						—						8
Total AFS fixed income securities						$	33,554					2,128						—						(2,992)						(1,229)						(36)						31,425

Quarter ended June 30, 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						$	150					117						—						12						(14)						—						265
Obligations of states and political subdivisions						1,991						534						—						(1,166)						(153)						—						1,206
Corporate securities						23,066						8,323						—						5,732						(1,944)						(105)						35,072
CLO and other ABS						2,283						530						—						819						(9)						—						3,623
RMBS						10,029						173						—						507						(93)						—						10,616
CMBS						80						—						—						(62)						—						—						18
Total AFS fixed income securities						$	37,599					9,677						—						5,842						(2,213)						(105)						50,800

Six Months ended June 30, 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					—						—						(250)						—						—						34
Obligations of states and political subdivisions						1,024						67						—						(239)						(83)						—						769
Corporate securities						30,330						4,141						—						(14,884)						(3,387)						(51)						16,149
CLO and other ABS						2,375						677						—						(127)						(10)						—						2,915
RMBS						11,597						8						—						174						(229)						—						11,550
CMBS						111						1						—						39						(143)						—						8
Total AFS fixed income securities						$	45,721					4,894						—						(15,287)						(3,852)						(51)						31,425

Six Months ended June 30, 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					236						—						(3)						(14)						—						265
Obligations of states and political subdivisions						137						1,237						—						(4)						(164)						—						1,206
Corporate securities						6,682						28,243						—						4,542						(3,191)						(1,204)						35,072
CLO and other ABS						939						2,058						—						637						(11)						—						3,623
RMBS						1,909						174						8,318						443						(228)						—						10,616
CMBS						11						17						—						(10)						—						—						18
Total AFS fixed income securities						$	9,724					31,965						8,318						5,605						(3,608)						(1,204)						50,800

During Six Months 2023 and Six Months 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 $58.1 million as of June 30, 2023, and $56.4 million as of December 31, 2022. We did not record any (i) write-offs of accrued interest during Six Months 2023, or (ii) material write-offs of accrued interest in Six Months 2022.

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

June 30, 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						$	208,153					(2,831)						84,869						(18,112)						293,022						(20,943)
Foreign government						4,380						(247)						5,439						(1,071)						9,819						(1,318)
Obligations of states and political subdivisions						337,606						(5,554)						229,922						(31,990)						567,528						(37,544)
Corporate securities						1,101,756						(40,711)						895,497						(148,953)						1,997,253						(189,664)
CLO and other ABS						523,727						(17,268)						924,490						(88,689)						1,448,217						(105,957)
RMBS						792,885						(26,269)						538,073						(75,540)						1,330,958						(101,809)
CMBS						291,078						(12,882)						344,647						(42,162)						635,725						(55,044)
Total AFS fixed income securities						$	3,259,585					(105,762)						3,022,937						(406,517)						6,282,522						(512,279)

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 June 30, 2023, compared to December 31, 2022, was primarily driven by a tightening of credit spreads, partially offset by an increase 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 June 30, 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 June 30, 2023, by contractual maturity are shown below. The maturities of RMBS, CMBS, CLO and other ABS 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						$	369,240					443						442
Due after one year through five years						3,056,529						13,942						13,233
Due after five years through 10 years						2,912,169						9,291						8,681
Due after 10 years						694,410						—						—
Total fixed income securities						$	7,032,348					23,676						22,356

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

						June 30, 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						$	298,219					124,213						422,432						280,980						134,676						415,656
Private credit						52,379						138,691						191,070						54,866						89,481						144,347
Real assets						38,575						19,553						58,128						35,470						21,945						57,415
Total alternative investments						$	389,173					282,457						671,630						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 for the 3- and 6-month periods ended March 31:

Income Statement Information						Quarter ended June 30,												Six Months ended June 30,
($ in millions)						2023						2022						2023						2022
Net investment income (loss)						$	(70.6)					270.9						$	(141.3)					406.5
Realized gains						922.0						6,233.5						2,644.3						8,981.5
Net change in unrealized appreciation (depreciation)						3,754.0						(3,962.4)						5,197.8						1,215.9
Net income						$	4,605.4					2,542.0						$	7,700.8					10,603.9
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income						$	11.4					9.3						$	19.2					28.4

(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 June 30, 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 June 30, 2023:

($ in millions)						FHLBI Collateral						FHLBNY Collateral												State and Regulatory Deposits						Total
U.S. government and government agencies						$	—					—												19.4						19.4
Obligations of states and political subdivisions						—						—												3.5						3.5
RMBS						62.1						26.9												—						89.0
CMBS						2.9						8.7												—						11.6
Total pledged as collateral						$	65.0					35.6												22.9						123.5

(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than to certain U.S. government agencies, as of June 30, 2023, or December 31, 2022.

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

						Quarter ended June 30,												Six Months ended June 30,
($ in thousands)						2023						2022						2023						2022
Fixed income securities						$	83,916					62,144						$	164,003					116,069
Commercial mortgage loans ("CMLs")						2,199						1,192						4,164						2,162
Equity securities						2,236						2,639						3,441						5,057
Short-term investments						2,892						407						7,542						508
Alternative investments						11,396						9,274						19,164						28,402
Other investments						188						(214)						231						(37)
Investment expenses						(5,131)						(5,220)						(9,343)						(9,337)
Net investment income earned						$	97,696					70,222						$	189,202					142,824

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

						Quarter ended June 30,												Six Months ended June 30,
($ in thousands)						2023						2022						2023						2022
Gross gains on sales						$	1,156					14,552						$	4,940					16,749
Gross losses on sales						(11,952)						(19,345)						(24,882)						(32,905)
Net realized gains (losses) on disposals						(10,796)						(4,793)						(19,942)						(16,156)
Net unrealized gains (losses) on equity securities						4,925						(21,860)						8,173						(24,014)
Net credit loss benefit (expense) on fixed income securities, AFS						864						(15,519)						10,393						(37,571)
Net credit loss benefit (expense) on fixed income securities, HTM						—						(6)						—						8
Net credit loss (expense) on CMLs						(78)						—						(61)						—
Losses on securities for which we have the intent to sell						(341)						(702)						(645)						(5,499)
Net realized and unrealized investment gains (losses)						$	(5,426)					(42,880)						$	(2,082)					(83,232)

Net realized and unrealized investment losses decreased $37.5 million in Second Quarter 2023 and $81.2 million in Six Months 2023 compared to the same prior-year periods, primarily due to (i) a credit loss benefit recorded on our AFS fixed income securities portfolio in both current-year periods compared to credit loss expense recorded in both prior-year periods, and (ii) an increase in valuations reflecting the current public equities market. The credit loss benefit in both current-year periods reflected the tightening of credit spreads, partially offset by rising 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 June 30,												Six Months ended June 30,
($ in thousands)						2023						2022						2023						2022
Unrealized gains (losses) recognized in income on equity securities:
On securities remaining in our portfolio at end of period						$	2,784					(13,031)						$	2,685					(14,843)
On securities sold in period						2,141						(8,829)						5,488						(9,171)
Total unrealized gains (losses) recognized in income on equity securities						$	4,925					(21,860)						$	8,173					(24,014)

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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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