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Investments

9 Months Ended

Sep. 30, 2023

Investments [Abstract]

Investments

Investments

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

September 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						$	253,174					—						—						(26,445)						226,729
Foreign government						11,155						(32)						—						(1,807)						9,316
Obligations of states and political subdivisions						672,075						(892)						125						(56,557)						614,751
Corporate securities						2,684,453						(17,765)						2,003						(228,556)						2,440,135
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")						1,819,454						(3,218)						4,144						(106,665)						1,713,715
Residential mortgage-backed securities ("RMBS")						1,548,758						(11,625)						500						(153,174)						1,384,459
Commercial mortgage-backed securities ("CMBS")						700,281						(6)						—						(62,276)						637,999
Total AFS fixed income securities						$	7,689,350					(33,538)						6,772						(635,480)						7,027,104

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 September 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						$	34					—						—						(2)						—						—						32
Obligations of states and political subdivisions						769						96						—						55						(28)						—						892
Corporate securities						16,149						1,939						—						(111)						(212)						—						17,765
CLO and other ABS						2,915						148						—						167						(12)						—						3,218
RMBS						11,550						23						—						154						(102)						—						11,625
CMBS						8						—						—						(1)						(1)						—						6
Total AFS fixed income securities						$	31,425					2,206						—						262						(355)						—						33,538

Quarter ended September 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						$	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

Nine Months ended September 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					—						—						(252)						—						—						32
Obligations of states and political subdivisions						1,024						100						—						(120)						(112)						—						892
Corporate securities						30,330						6,078						—						(14,992)						(3,600)						(51)						17,765
CLO and other ABS						2,375						904						—						(40)						(21)						—						3,218
RMBS						11,597						24						—						334						(330)						—						11,625
CMBS						111						1						—						38						(144)						—						6
Total AFS fixed income securities						$	45,721					7,107						—						(15,032)						(4,207)						(51)						33,538

Nine Months ended September 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					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

During Nine Months 2023 and Nine 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 $60.7 million as of September 30, 2023, and $56.4 million as of December 31, 2022. We did not record any (i) write-offs of accrued interest during Nine Months 2023, or (ii) material write-offs of accrued interest in Nine Months 2022.

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

September 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						$	126,898					(1,428)						99,831						(25,017)						226,729						(26,445)
Foreign government						1,528						(122)						7,788						(1,685)						9,316						(1,807)
Obligations of states and political subdivisions						307,144						(8,921)						282,238						(47,636)						589,382						(56,557)
Corporate securities						808,733						(27,732)						1,392,386						(200,824)						2,201,119						(228,556)
CLO and other ABS						522,941						(13,560)						1,014,419						(93,105)						1,537,360						(106,665)
RMBS						609,952						(28,785)						725,818						(124,389)						1,335,770						(153,174)
CMBS						182,481						(8,363)						455,518						(53,913)						637,999						(62,276)
Total AFS fixed income securities						$	2,559,677					(88,911)						3,977,998						(546,569)						6,537,675						(635,480)

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 increase in gross unrealized losses as of September 30, 2023, compared to December 31, 2022, was primarily driven by an increase in benchmark U.S. Treasury rates, partially offset by a tightening 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 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 September 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 September 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						$	428,247					224						223
Due after one year through five years						3,197,277						13,833						13,179
Due after five years through 10 years						2,463,374						9,183						8,490
Due after 10 years						938,206						—						—
Total fixed income securities						$	7,027,104					23,240						21,892

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

						September 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						$	306,357					138,325						444,682						280,980						134,676						415,656
Private credit						102,373						89,809						192,182						54,866						89,481						144,347
Real assets						38,075						19,161						57,236						35,470						21,945						57,415
Total alternative investments						$	446,805					247,295						694,100						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 three- and nine-month periods ended June 30:

Income Statement Information						Quarter ended September 30,												Nine Months ended September 30,
($ in millions)						2023						2022						2023						2022
Net investment income (loss)						$	74.3					205.6						$	(66.9)					612.0
Realized gains						1,108.5						1,983.5						3,752.8						10,964.9
Net change in unrealized appreciation (depreciation)						2,216.3						(3,188.9)						7,414.1						(1,973.0)
Net income						$	3,399.1					(999.8)						$	11,100.0					9,603.9
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income						$	6.5					(5.6)						$	25.6					22.8

(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, 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 September 30, 2023:

($ in millions)						FHLBI Collateral						FHLBNY Collateral												State and Regulatory Deposits						Total
U.S. government and government agencies						$	—					—												18.7						18.7
Obligations of states and political subdivisions						—						—												3.5						3.5
RMBS						61.7						24.7												—						86.4
CMBS						2.5						8.5												—						11.0
Total pledged as collateral						$	64.2					33.2												22.2						119.6

(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 September 30, 2023, or December 31, 2022.

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

						Quarter ended September 30,												Nine Months ended September 30,
($ in thousands)						2023						2022						2023						2022
Fixed income securities						$	90,013					68,236						$	254,016					184,305
Commercial mortgage loans ("CMLs")						2,516						1,600						6,680						3,762
Equity securities						2,083						2,604						5,524						7,661
Short-term investments						3,941						1,152						11,483						1,660
Alternative investments						6,473						(5,581)						25,637						22,821
Other investments						284						112						515						75
Investment expenses						(4,447)						(4,234)						(13,790)						(13,571)
Net investment income earned						$	100,863					63,889						$	290,065					206,713

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

						Quarter ended September 30,												Nine Months ended September 30,
($ in thousands)						2023						2022						2023						2022
Gross gains on sales						$	367					7,094						$	5,307					23,843
Gross losses on sales						(5,264)						(19,668)						(30,146)						(52,573)
Net realized gains (losses) on disposals						(4,897)						(12,574)						(24,839)						(28,730)
Net unrealized gains (losses) on equity securities						489						(7,777)						8,662						(31,791)
Net credit loss benefit (expense) on fixed income securities, AFS						(2,468)						(4,471)						7,925						(42,042)
Net credit loss benefit (expense) on fixed income securities, HTM						—						54						—						62
Net credit loss (expense) on CMLs						(4)						—						(65)						—
Losses on securities for which we have the intent to sell						—						(913)						(645)						(6,412)
Net realized and unrealized investment gains (losses)						$	(6,880)					(25,681)						$	(8,962)					(108,913)

Net realized and unrealized investment losses decreased $18.8 million in Third Quarter 2023 compared to Third Quarter 2022, primarily due to (i) an increase in valuations reflecting the current public equities market, and (ii) a decrease in net realized losses on disposals from our AFS fixed income securities portfolio.

Net realized and unrealized investment losses decreased $100.0 million in Nine Months 2023 compared to Nine Months 2022, primarily due to (i) a credit loss benefit recorded on our AFS fixed income securities portfolio in Nine Months 2023 compared to credit loss expense recorded in Nine Months 2022, and (ii) an increase in valuations reflecting the current public equities market. The credit loss benefit in Nine Months 2023 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 September 30,												Nine Months ended September 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						$	200					(5,832)						$	2,744					(16,334)
On securities sold in period						289						(1,945)						5,918						(15,457)
Total unrealized gains (losses) recognized in income on equity securities						$	489					(7,777)						$	8,662					(31,791)

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The entire disclosure for investment.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//320/tableOfContent

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Name Accounting Standards Codification
-Topic 321
-Publisher FASB
-URI https://asc.fasb.org//321/tableOfContent

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

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