Settlement Assets and Obligations

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

8. Settlement Assets and Obligations

Settlement assets represent funds received or to be received from agents and others for unsettled money transfers, money orders, and consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money transfers, money orders, and consumer payment service arrangements. Settlement assets and obligations also include amounts receivable from, and payable to, customers for the value of their cross-currency payment transactions related to the Business Solutions segment.

Settlement assets and obligations consisted of the following (in millions):


	December 31, 2022
Settlement assets:
Cash and cash equivalents	$	708.1
Receivables from agents, Business Solutions customers, and others		1,533.2
Less: Allowance for credit losses		(13.0	)
Receivables from agents, Business Solutions customers, and others, net		1,520.2
Investment securities		1,333.7
Less: Allowance for credit losses		(0.3	)
Investment securities, net		1,333.4
Total settlement assets(a)	$	3,561.7
Settlement obligations:
Money transfer, money order, and payment service payables	$	2,843.3
Payables to agents		718.4
Total settlement obligations(a)	$	3,561.7

	December 31, 2021
Settlement assets:
Cash and cash equivalents	$	835.5
Receivables from agents, Business Solutions customers, and others		1,198.8
Less: Allowance for credit losses		(23.7	)
Receivables from agents, Business Solutions customers, and others, net		1,175.1
Investment securities		1,398.9
Total settlement assets(a)	$	3,409.5
Settlement obligations:
Money transfer, money order, and payment service payables	$	2,838.9
Payables to agents		570.6
Total settlement obligations(a)	$	3,409.5

(a)

As of December 31, 2022 and 2021, both Settlement assets and Settlement obligations include $74.9 million and $566.0 million, respectively, classified as Assets held for sale and Liabilities associated with assets held for sale (see Note 5).

Allowance for Credit Losses

On January 1, 2020, the Company adopted a new accounting standard related to the estimation of the allowance for credit losses, as discussed in Note 2. However, due to the short-term nature of the Company’s receivables and the Company’s historical and expected collections practice, the adoption did not have a material impact on the Company’s financial position or results of operations.

Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $1,508.5 million and $1,125.9 million as of December 31, 2022 and 2021, respectively. Cash received by Western Union agents generally becomes available to the Company within one week after initial receipt by the agent. Western Union has a large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. The Company performs ongoing credit evaluations of its agents’ financial condition and credit worthiness.

Receivables from Business Solutions customers arise from cross-currency payment transactions in the Business Solutions segment. Business Solutions receivables totaled $11.7 million and $49.2 million as of December 31, 2022 and 2021, respectively. Receivables occur when funds have been paid out to a beneficiary but not yet received from the customer. Collection of these receivables ordinarily occurs within a few days. To mitigate risk associated with potential Business Solutions customer defaults, the Company performs credit reviews on an ongoing basis.

The Company establishes and monitors an allowance for credit losses related to receivables from agents and others, and Business Solutions customers. The Company has estimated the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions based on information known as of December 31, 2022.

The following tables summarize the activity in the allowance for credit losses on receivables from agents and others, and Business Solutions customers (in millions):


	Agents and			Business Solutions
	Others			Customers
Allowance for credit losses as of January 1, 2022	$	18.0		$	5.7
Current period provision for expected credit losses(a)		14.1			3.8
Write-offs charged against the allowance		(20.9	)		(1.5	)
Recoveries of amounts previously written off		4.7			—
Impacts of foreign currency exchange rates, divestitures, and other		(4.5	)		(6.4	)
Allowance for credit losses as of December 31, 2022	$	11.4		$	1.6


	Agents and			Business Solutions
	Others			Customers
Allowance for credit losses as of January 1, 2021	$	49.3		$	3.9
Current period provision for expected credit losses(a)		8.9			4.2
Write-offs charged against the allowance		(44.8	)		(2.1	)
Recoveries of amounts previously written off		6.8			—
Impacts of foreign currency exchange rates and other		(2.2	)		(0.3	)
Allowance for credit losses as of December 31, 2021	$	18.0		$	5.7


	Agents and			Business Solutions
	Others			Customers
Allowance for credit losses as of January 1, 2020	$	20.4		$	4.5
Current period provision for expected credit losses(a)		39.9			2.0
Write-offs charged against the allowance		(11.9	)		(3.1	)
Recoveries of amounts previously written off		2.3			—
Impacts of foreign currency exchange rates and other		(1.4	)		0.5
Allowance for credit losses as of December 31, 2020	$	49.3		$	3.9

(a)

Provision does not include losses from chargebacks or fraud associated with transactions initiated through the Company’s digital channels, as these losses are not credit-related. The Company recognized losses that were not credit-related of $37.5 million, $51.4 million, and $41.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

In addition, from time to time, the Company has made advances to its agents. The Company generally owes settlement funds payable to these agents that offset these advances. These amounts advanced to agents are included within Other assets in the accompanying Consolidated Balance Sheets. As of December 31, 2022 and 2021, amounts advanced to agents were $154.9 million and $146.9 million, respectively, and the related allowances for credit losses were immaterial.

Investment Securities

Investment securities included in Settlement assets in the Company’s Consolidated Balance Sheets consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes. Variable-rate demand note securities can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week but have varying maturities through 2052. These securities may be used by the Company for short-term liquidity needs and held for short periods of time. Investment securities are exposed to market risk due to changes in interest rates and credit risk. The Company is required to hold highly-rated, investment grade securities, and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable regulatory requirements.

The Company’s investment securities are classified as available-for-sale and recorded at fair value. Western Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through investment diversification.

Unrealized gains on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes. Available-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related factors or noncredit-related factors. Factors that could indicate a credit loss exists include but are not limited to: (i) negative earnings performance, (ii) credit rating downgrades, or (iii) adverse changes in the regulatory or economic environment of the asset. Any impairment that is not credit-related is excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes, unless the Company intends to sell the impaired security or it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. Credit-related impairments are recognized immediately as an adjustment to earnings, regardless of whether the Company has the ability or intent to hold the security to maturity, and are limited to the difference between fair value and the amortized cost basis. As of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021, and 2020, the Company’s allowance for credit losses and provision for credit losses on its available-for-sale securities were immaterial. The Company did not intend to sell and did not expect it would be required to sell investment securities prior to recovering the amortized cost basis of those securities, as of December 31, 2022.

The components of investment securities are as follows (in millions):


					Gross		Gross			Net
	Amortized		Fair		Unrealized		Unrealized			Unrealized
December 31, 2022	Cost		Value		Gains		Losses (b)			Gains/(Losses)
Settlement assets:
Cash and cash equivalents:
Money market funds	$	11.7	$	11.7	$	—	$	—		$	—
Available-for-sale securities:
State and municipal debt securities(a)		1,010.5		933.3		0.3		(77.5	)		(77.2	)
Asset-backed securities		183.4		184.1		0.8		(0.1	)		0.7
Corporate debt securities		153.5		146.9		0.3		(6.9	)		(6.6	)
State and municipal variable-rate demand notes		48.9		48.9		—		—			—
United States government agency mortgage-backed securities		21.5		20.5		—		(1.0	)		(1.0	)
Total available-for-sale securities		1,417.8		1,333.7		1.4		(85.5	)		(84.1	)
Total investment securities	$	1,429.5	$	1,345.4	$	1.4	$	(85.5	)	$	(84.1	)


					Gross		Gross			Net
	Amortized		Fair		Unrealized		Unrealized			Unrealized
December 31, 2021	Cost		Value		Gains		Losses			Gains/(Losses)
Settlement assets:
Cash and cash equivalents:
Money market funds	$	7.9	$	7.9	$	—	$	—		$	—
Available-for-sale securities:
State and municipal debt securities(a)		1,182.6		1,219.9		39.8		(2.5	)		37.3
State and municipal variable-rate demand notes		84.8		84.8		—		—			—
Corporate and other debt securities		58.1		57.8		0.2		(0.5	)		(0.3	)
United States government agency mortgage-backed securities		35.6		36.4		0.8		—			0.8
Total available-for-sale securities		1,361.1		1,398.9		40.8		(3.0	)		37.8
Total investment securities	$	1,369.0	$	1,406.8	$	40.8	$	(3.0	)	$	37.8

(a)

The majority of these securities are fixed-rate instruments.

(b)

As of December 31, 2022, the Company held 432 investment securities that were in an unrealized loss position, 324 of which have a total fair value of $871.9 million and unrealized losses of $57.2 million and have been in a loss position for less than twelve months and 108 of which have a total fair value of $186.6 million and unrealized losses of $28.3 million and have been in a loss position for greater than twelve months. As discussed above, the Company's provision for credit losses on its investment securities for the year ended December 31, 2022, and the related allowance for credit losses as of December 31, 2022 were immaterial, as the increase in unrealized losses was driven by a rise in U.S. Treasury interest rates over the year ended December 31, 2022.

There were no investments with a single issuer or individual securities representing greater than 10% of total investment securities as of December 31, 2022 and 2021.

The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of December 31, 2022 (in millions):


	Fair Value
Due within 1 year	$	116.5
Due after 1 year through 5 years		593.2
Due after 5 years through 10 years		476.8
Due after 10 years		147.2
Total	$	1,333.7

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations, or the Company may have the right to put the obligation prior to its contractual maturity, as with variable-rate demand notes. Variable-rate demand notes, having a fair value of $48.9 million are included in the "Due after 10 years" category, respectively, in the table above.