XML 23 R10.htm IDEA: XBRL DOCUMENT v3.23.1
Investments
 3 Months Ended
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Investments

3. Investments

A. Fixed maturities

The amortized cost and fair value of available-for-sale fixed maturities were as follows:

 

 

March 31, 2023

 

 

 

 

 

 

 

 

 

Amortized Cost,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance

 

 

Net of Allowance

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

for Credit

 

 

for Credit

 

 

Unrealized

 

 

Unrealized

 

 

 

 

(in millions)

 

Cost

 

 

Losses

 

 

Losses

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasury and government agencies

 

$

484.0

 

 

$

—

 

 

$

484.0

 

 

$

0.8

 

 

$

51.9

 

 

$

432.9

 

Foreign government

 

 

2.2

 

 

 

—

 

 

 

2.2

 

 

 

—

 

 

 

—

 

 

 

2.2

 

Municipal

 

 

1,258.0

 

 

 

—

 

 

 

1,258.0

 

 

 

2.2

 

 

 

134.4

 

 

 

1,125.8

 

Corporate

 

 

4,063.3

 

 

 

(2.4

)

 

 

4,060.9

 

 

 

7.7

 

 

 

288.7

 

 

 

3,779.9

 

Residential mortgage-backed

 

 

1,278.0

 

 

 

—

 

 

 

1,278.0

 

 

 

1.3

 

 

 

126.2

 

 

 

1,153.1

 

Commercial mortgage-backed

 

 

925.9

 

 

 

—

 

 

 

925.9

 

 

 

—

 

 

 

83.4

 

 

 

842.5

 

Other asset-backed

 

 

364.2

 

 

 

—

 

 

 

364.2

 

 

 

0.1

 

 

 

22.5

 

 

 

341.8

 

Total fixed maturities

 

$

8,375.6

 

 

$

(2.4

)

 

$

8,373.2

 

 

$

12.1

 

 

$

707.1

 

 

$

7,678.2

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

Amortized Cost,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance

 

 

Net of Allowance

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

for Credit

 

 

for Credit

 

 

Unrealized

 

 

Unrealized

 

 

 

 

(in millions)

 

Cost

 

 

Losses

 

 

Losses

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasury and government agencies

 

$

478.9

 

 

$

—

 

 

$

478.9

 

 

$

0.2

 

 

$

58.9

 

 

$

420.2

 

Foreign government

 

 

2.3

 

 

 

—

 

 

 

2.3

 

 

 

—

 

 

 

0.1

 

 

 

2.2

 

Municipal

 

 

1,239.5

 

 

 

—

 

 

 

1,239.5

 

 

 

0.8

 

 

 

164.2

 

 

 

1,076.1

 

Corporate

 

 

4,066.4

 

 

 

(2.1

)

 

 

4,064.3

 

 

 

3.3

 

 

 

337.7

 

 

 

3,729.9

 

Residential mortgage-backed

 

 

1,215.3

 

 

 

—

 

 

 

1,215.3

 

 

 

0.6

 

 

 

142.1

 

 

 

1,073.8

 

Commercial mortgage-backed

 

 

924.1

 

 

 

—

 

 

 

924.1

 

 

 

—

 

 

 

87.7

 

 

 

836.4

 

Other asset-backed

 

 

370.1

 

 

 

—

 

 

 

370.1

 

 

 

0.1

 

 

 

27.0

 

 

 

343.2

 

Total fixed maturities

 

$

8,296.6

 

 

$

(2.1

)

 

$

8,294.5

 

 

$

5.0

 

 

$

817.7

 

 

$

7,481.8

 

 

The Company deposits funds with various state and governmental authorities. For a discussion of the Company’s deposits with state and governmental authorities, see also Note 2 – “Investments” in the Notes to Consolidated Financial Statements in the Company’s 2022 Annual Report on Form 10-K.

The amortized cost and fair value by maturity periods for fixed maturities are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

 

 

 

March 31, 2023

 

 

 

Amortized Cost, Net

 

 

 

 

 

 

of Allowance for

 

 

Fair

 

(in millions)

 

Credit Losses

 

 

Value

 

Due in one year or less

 

$

340.3

 

 

$

336.6

 

Due after one year through five years

 

 

2,536.5

 

 

 

2,439.5

 

Due after five years through ten years

 

 

2,539.5

 

 

 

2,231.8

 

Due after ten years

 

 

388.8

 

 

 

332.9

 

 

 

5,805.1

 

 

 

5,340.8

 

Mortgage-backed and other asset-backed securities

 

 

2,568.1

 

 

 

2,337.4

 

Total fixed maturities

 

$

8,373.2

 

 

$

7,678.2

 

 

B. Fixed maturity securities in an unrealized loss position

The following tables provide information about the Company’s available-for-sale fixed maturity securities that were in an unrealized loss position at March 31, 2023 and December 31, 2022, including the length of time the securities have been in an unrealized loss position:

 

 

 

March 31, 2023

 

 

 

12 months or less

 

 

Greater than 12 months

 

 

Total

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

(in millions)

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

$

3.8

 

 

$

113.5

 

 

$

48.1

 

 

$

261.5

 

 

$

51.9

 

 

$

375.0

 

Foreign governments

 

 

—

 

 

 

2.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.0

 

Municipal

 

 

12.8

 

 

 

288.3

 

 

 

121.6

 

 

 

718.1

 

 

 

134.4

 

 

 

1,006.4

 

Corporate

 

 

44.3

 

 

 

1,480.5

 

 

 

230.9

 

 

 

1,710.4

 

 

 

275.2

 

 

 

3,190.9

 

Residential mortgage-backed

 

 

13.8

 

 

 

393.0

 

 

 

112.4

 

 

 

640.0

 

 

 

126.2

 

 

 

1,033.0

 

Commercial mortgage-backed

 

 

12.0

 

 

 

284.5

 

 

 

71.4

 

 

 

557.9

 

 

 

83.4

 

 

 

842.4

 

Other asset-backed

 

 

4.4

 

 

 

206.5

 

 

 

18.1

 

 

 

118.9

 

 

 

22.5

 

 

 

325.4

 

Total investment grade

 

 

91.1

 

 

 

2,768.3

 

 

 

602.5

 

 

 

4,006.8

 

 

 

693.6

 

 

 

6,775.1

 

Below investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

4.3

 

 

 

120.3

 

 

 

9.2

 

 

 

68.5

 

 

 

13.5

 

 

 

188.8

 

Total fixed maturities

 

$

95.4

 

 

$

2,888.6

 

 

$

611.7

 

 

$

4,075.3

 

 

$

707.1

 

 

$

6,963.9

 

 

 

 

 

December 31, 2022

 

 

 

12 months or less

 

 

Greater than 12 months

 

 

Total

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

(in millions)

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

$

15.8

 

 

$

237.3

 

 

$

43.1

 

 

$

160.7

 

 

$

58.9

 

 

$

398.0

 

Foreign governments

 

 

0.1

 

 

 

1.9

 

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

1.9

 

Municipal

 

 

64.9

 

 

 

595.5

 

 

 

99.3

 

 

 

386.6

 

 

 

164.2

 

 

 

982.1

 

Corporate

 

 

202.2

 

 

 

2,786.2

 

 

 

118.2

 

 

 

489.8

 

 

 

320.4

 

 

 

3,276.0

 

Residential mortgage-backed

 

 

51.6

 

 

 

642.0

 

 

 

90.5

 

 

 

387.6

 

 

 

142.1

 

 

 

1,029.6

 

Commercial mortgage-backed

 

 

48.7

 

 

 

663.2

 

 

 

39.0

 

 

 

164.4

 

 

 

87.7

 

 

 

827.6

 

Other asset-backed

 

 

11.0

 

 

 

234.8

 

 

 

16.0

 

 

 

75.1

 

 

 

27.0

 

 

 

309.9

 

Total investment grade

 

 

394.3

 

 

 

5,160.9

 

 

 

406.1

 

 

 

1,664.2

 

 

 

800.4

 

 

 

6,825.1

 

Below investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

13.5

 

 

 

253.2

 

 

 

3.8

 

 

 

17.3

 

 

 

17.3

 

 

 

270.5

 

Total fixed maturities

 

$

407.8

 

 

$

5,414.1

 

 

$

409.9

 

 

$

1,681.5

 

 

$

817.7

 

 

$

7,095.6

 

 

The Company views gross unrealized losses on fixed maturities as non-credit related and through its assessment of unrealized losses has determined that these securities will recover, allowing the Company to realize the anticipated long-term economic value. The Company currently does not intend to sell, nor does it expect to be required to sell these securities before recovery of their amortized cost. The Company employs a systematic methodology to evaluate declines in fair value below amortized cost for fixed maturity securities. In determining impairments, the Company evaluates several factors and circumstances, including the issuer’s overall financial condition; the issuer’s credit and financial strength ratings; the issuer’s financial performance, including earnings trends and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the degree to which the fair value of an issuer’s securities is below the Company’s amortized cost. The Company also considers any factors that might raise doubt about the issuer’s ability to make contractual payments as they come due and whether the Company expects to recover the entire amortized cost basis of the security.

C. Proceeds from sales

The proceeds from sales of available-for-sale fixed maturities and gross realized gains and gross realized losses on those sales were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

(in millions)

 

 

 

 

 

 

Proceeds from sales

 

$

27.6

 

 

$

68.6

 

Gross gains

 

 

0.1

 

 

 

1.6

 

Gross losses

 

 

1.4

 

 

 

0.5

 

 

D. Impairments

For the three months ended March 31, 2023, the Company recognized net impairments of $14.8 million, primarily consisting of $10.3 million of intent to sell fixed maturity securities and $4.1 million of estimated credit losses on mortgage loans. For the three months ended March 31, 2022, the Company recognized $0.9 million on impairments of fixed maturity securities.

At March 31, 2023 and December 31, 2022, the allowance for credit losses on mortgage loans was $7.2 million and $3.2 million respectively, and the allowance for credit losses on available-for-sale debt securities was $2.4 million and $2.1 million, respectively. The following table provides a rollforward of the allowance for credit losses on mortgage loans:

 

 

Three Months Ended March 31,

 

(in millions)

2023

 

 

2022

 

Allowance for credit losses as of the beginning of the period

$

3.2

 

 

$

7.1

 

Additional credit losses on investments for which an allowance
   was previously recognized

 

4.1

 

 

 

—

 

Recoveries

 

(0.1

)

 

 

—

 

Allowance for credit losses as of the end of the period

$

7.2

 

 

$

7.1

 

 

The methodology and significant inputs used to measure the amount of credit losses were as follows:

Fixed maturities, Corporate bonds – the Company utilized a financial model that derives expected cash flows based on probability-of-default factors by credit rating and asset duration, and loss-given-default factors based on security type. These factors are based on historical data provided by an independent third-party rating agency. In addition, other qualitative market data relevant to the realizability of contractual cash flows may be considered, including current conditions and reasonable and supportable forecasts.

Mortgage loans – the Company estimated losses by applying expected loss rates, which are based on historical data. Embedded in expected loss rates are mortgage risk ratings and risk factors associated with property type such as office, retail, lodging, multi-family and industrial. Risk ratings, based on property characteristics and metrics including the geographic market, are predominantly driven by estimates of loan-to-value and debt service coverage ratios. Ratings may be adjusted to reflect current conditions and to incorporate reasonable and supportable forecasts, such as volatility of cash flows and valuation.

E. Equity securities

The following table provides pre-tax net realized and unrealized gains (losses) on equity securities:

 

Three Months Ended March 31,

 

(in millions)

2023

 

 

2022

 

Net losses recognized during the period

$

(7.1

)

 

$

(18.0

)

Less: net gains recognized on equity securities sold during
     the period

 

—

 

 

 

0.5

 

Net unrealized losses recognized during the period on equity
     securities still held

$

(7.1

)

 

$

(18.5

)