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Investments (Tables)
 3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Components of net investment income
The components of net investment income for the following periods were:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Fixed maturity securities
 
$
59,446

 
$
84,316

Equity securities
 
1,208

 
1,198

Limited partnership interests
 
(2,699
)
 
6,451

Short-term and other investments
 
2,857

 
3,388

Investment expenses
 
(2,225
)
 
(2,553
)
Net investment income - investment portfolio
 
58,587

 
92,800

Investment income - deposit asset on reinsurance
 
23,688

 
—

Total net investment income
 
$
82,275

 
$
92,800
Schedule of net investment gains (losses)
The following table reconciles net investment gains (losses) pretax by transaction type:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Impairment write-downs
 
$
—

 
$
—

Change in intent write-downs
 
(3,692
)
 
(236
)
Net OTTI losses recognized in earnings
 
(3,692
)
 
(236
)
Sales and other, net
 
4,557

 
4,838

Change in fair value - equity securities
 
(14,486
)
 
3,506

Change in fair value and gains (losses) realized
on settlements - derivatives
 
(4,843
)
 
(691
)
Net investment gains (losses)
 
$
(18,464
)
 
$
7,417


Net investment gains (losses) for the following periods were:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Fixed maturity securities
 
$
1,102

 
$
201

Equity securities
 
(14,723
)
 
7,907

Short-term investments and other
 
(4,843
)
 
(691
)
Net investment gains (losses)
 
$
(18,464
)
 
$
7,417
Unrealized gains and losses on fixed maturities and equity securities Amortized cost, net unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
March 31, 2020
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations: (1)
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
676,322

 
$
75,985

 
$
392

 
$
751,915

Other, including U.S. Treasury securities
 
430,193

 
38,540

 
60

 
468,673

Municipal bonds
 
1,626,005

 
151,302

 
7,376

 
1,769,931

Foreign government bonds
 
42,802

 
1,804

 
754

 
43,852

Corporate bonds
 
1,649,405

 
77,572

 
41,204

 
1,685,773

Other mortgage-backed securities
 
1,228,739

 
6,068

 
111,768

 
1,123,039

Totals
 
$
5,653,466

 
$
351,271

 
$
161,554

 
$
5,843,183

 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations: (1)
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
684,543

 
$
41,263

 
$
1,487

 
$
724,319

Other, including U.S. Treasury securities
 
436,665

 
22,824

 
621

 
458,868

Municipal bonds
 
1,545,787

 
141,996

 
1,580

 
1,686,203

Foreign government bonds
 
42,801

 
2,569

 
—

 
45,370

Corporate bonds
 
1,464,444

 
118,775

 
1,795

 
1,581,424

Other mortgage-backed securities
 
1,282,740

 
20,883

 
8,131

 
1,295,492

Totals
 
$
5,456,980

 
$
348,310

 
$
13,614

 
$
5,791,676

(1) 
Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $413.3 million and $405.1 million; Federal Home Loan Mortgage Corporation (FHLMC) of $308.4 million and $283.1 million; and Government National Mortgage Association (GNMA) of $151.1 million and $147.4 million as of March 31, 2020 and December 31, 2019, respectively.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position
The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position at March 31, 2020 and December 31, 2019, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at March 31, 2020 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of March 31, 2020, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed maturity securities with unrealized losses before an anticipated recovery in value. Therefore, it was determined that the unrealized losses on the securities presented in the table below were not other-than-temporarily impaired as of March 31, 2020.
($ in thousands)
 
12 Months or Less
 
More than 12 Months
 
Total
 
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
23,168

 
$
302

 
$
1,003

 
$
90

 
$
24,171

 
$
392

Other
 
15,736

 
60

 
—

 
—

 
15,736

 
60

Municipal bonds
 
191,688

 
7,376

 
—

 
—

 
191,688

 
7,376

Foreign government bonds
 
13,225

 
754

 
—

 
—

 
13,225

 
754

Corporate bonds
 
549,628

 
39,268

 
5,761

 
1,936

 
555,389

 
41,204

Other mortgage-backed securities
 
651,595

 
71,055

 
329,304

 
40,713

 
980,899

 
111,768

Total
 
$
1,445,040

 
$
118,815

 
$
336,068

 
$
42,739

 
$
1,781,108

 
$
161,554

 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a
gross unrealized loss
 
1,080

 
 
 
104

 
 
 
1,184

 
 
Fair value as a percentage of total fixed maturity securities fair value
 
24.7
%
 
 
 
5.8
%
 
 
 
30.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
72,422

 
$
1,282

 
$
2,620

 
$
205

 
$
75,042

 
$
1,487

Other
 
38,341

 
619

 
1,527

 
2

 
39,868

 
621

Municipal bonds
 
91,195

 
977

 
9,160

 
603

 
100,355

 
1,580

Foreign government bonds
 
—

 
—

 
—

 
—

 
—

 
—

Corporate bonds
 
58,198

 
886

 
16,622

 
909

 
74,820

 
1,795

Other mortgage-backed securities
 
218,710

 
1,970

 
442,791

 
6,161

 
661,501

 
8,131

Total
 
$
478,866

 
$
5,734

 
$
472,720

 
$
7,880

 
$
951,586

 
$
13,614

 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a
gross unrealized loss
 
330

 
 
 
137

 
 
 
467

 
 
Fair value as a percentage of total fixed maturity securities fair value
 
8.3
%
 
 
 
8.2
%
 
 
 
16.5
%
 
 
Summary of cumulative credit losses
The following table summarizes the cumulative amounts related to the Company's credit loss component of other-than-temporary impairment (OTTI) losses on fixed maturity securities held as of March 31, 2020 and 2019 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before an anticipated recovery in value, for which the non-credit portions of OTTI losses were recognized in OCI:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Cumulative credit loss (1)
 
 
 
 
Beginning of period
 
$
1,529

 
$
1,529

New credit losses
 
185

 
—

Increases to previously recognized credit losses
 
—

 
—

Losses related to securities sold or paid down during the period
 
—

 
—

 
 
$
1,714

 
$
1,529

(1) 
The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before an anticipated recovery of value.
Distribution of the Company's fixed maturity portfolio by estimated expected maturity
The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other mortgage-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in thousands)
 
Percent of Total Fair Value
 
March 31, 2020
 
 
March 31, 2020
 
December 31, 2019
 
Fair
Value
 
Amortized
Cost
Estimated expected maturity:
 
 
 
 
 
 
 
 
Due in 1 year or less
 
4.0
%
 
3.6
%
 
$
230,397

 
$
233,386

Due after 1 year through 5 years
 
26.3
%
 
27.4
%
 
1,535,965

 
1,572,373

Due after 5 years through 10 years
 
29.4
%
 
29.6
%
 
1,719,303

 
1,661,161

Due after 10 years through 20 years
 
26.5
%
 
26.1
%
 
1,550,562

 
1,435,920

Due after 20 years
 
13.8
%
 
13.3
%
 
806,956

 
750,626

Total
 
100.0
%
 
100.0
%
 
$
5,843,183

 
$
5,653,466

 
 
 
 
 
 
 
 
 
Average option-adjusted duration, in years
 
6.1

 
6.0

 
 
 
 
Proceeds received from sales of fixed maturities and equity securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Fixed maturity securities
 
 
 
 
Proceeds received
 
$
98,158

 
$
59,724

Gross gains realized
 
4,779

 
542

Gross losses realized
 
(268
)
 
(105
)
 
 
 
 
 
Equity securities
 
 
 
 
Proceeds received
 
$
1,457

 
$
15,489

Gross gains realized
 
319

 
4,745

Gross losses realized
 
(556
)
 
(344
)
Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities
The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in AOCI, before the impact of DAC:
($ in thousands)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Net unrealized investment gains (losses)
on fixed maturity securities, net of tax
 
 
 
 
Beginning of period
 
$
264,410

 
$
111,712

Change in net unrealized investment gains
(losses) on fixed maturity securities
 
(103,773
)
 
140,012

Reclassification of net investment (gains) losses
on securities to net income
 
(10,761
)
 
(6,405
)
End of period
 
$
149,876

 
$
245,319
Offsetting assets and liability
The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in thousands)
 
 
 
Gross
Amounts
Offset in the
Consolidated
Balance
Sheets
 
Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance
Sheets


 
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
 
 
 
 
Gross
Amounts
 
 
 
Financial
Instruments
 
Cash
Collateral
Received
 
Net
Amount
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
$
2,622

 
$
—

 
$
2,622

 
$
1,688

 
$
1,060

 
$
(126
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
13,239

 
—

 
13,239

 
7,687

 
6,640

 
(1,088
)