Investments | 9 Months Ended |
Sep. 30, 2014 |
Investments [Abstract] | ' |
Investments | ' |
Investments |
(a) The amortized cost, net unrealized gains and losses, carrying value, unrecognized holding gains and losses, and fair value of HTM fixed income securities as of September 30, 2014 and December 31, 2013 were as follows: |
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September 30, 2014 | | | | | | | | | | | | |
($ in thousands) | | Amortized | | Net | | Carrying | | Unrecognized | | Unrecognized Holding | | Fair |
Cost | Unrealized Gains | Value | Holding | Losses | Value |
| (Losses) | | Gains | | |
Foreign government | | $ | 5,292 | | | 68 | | | 5,360 | | | 47 | | | — | | | 5,407 | |
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Obligations of state and political subdivisions | | 301,216 | | | 2,472 | | | 303,688 | | | 13,921 | | | — | | | 317,609 | |
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Corporate securities | | 20,303 | | | (325 | ) | | 19,978 | | | 2,749 | | | (1 | ) | | 22,726 | |
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Asset-backed securities (“ABS”) | | 3,111 | | | (530 | ) | | 2,581 | | | 543 | | | — | | | 3,124 | |
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Commercial mortgage-backed securities (“CMBS”) | | 4,953 | | | (478 | ) | | 4,475 | | | 849 | | | — | | | 5,324 | |
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Total HTM fixed income securities | | $ | 334,875 | | | 1,207 | | | 336,082 | | | 18,109 | | | (1 | ) | | 354,190 | |
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December 31, 2013 | | | | | | | | | | | | |
($ in thousands) | | Amortized | | Net | | Carrying | | Unrecognized | | Unrecognized Holding | | Fair |
Cost | Unrealized Gains | Value | Holding | Losses | Value |
| (Losses) | | Gains | | |
Foreign government | | $ | 5,292 | | | 131 | | | 5,423 | | | 168 | | | — | | | 5,591 | |
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Obligations of state and political subdivisions | | 348,109 | | | 4,013 | | | 352,122 | | | 17,634 | | | — | | | 369,756 | |
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Corporate securities | | 28,174 | | | (346 | ) | | 27,828 | | | 2,446 | | | — | | | 30,274 | |
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ABS | | 3,413 | | | (655 | ) | | 2,758 | | | 657 | | | — | | | 3,415 | |
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CMBS | | 5,634 | | | (886 | ) | | 4,748 | | | 3,197 | | | — | | | 7,945 | |
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Total HTM fixed income securities | | $ | 390,622 | | | 2,257 | | | 392,879 | | | 24,102 | | | — | | | 416,981 | |
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Unrecognized holding gains and losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an other-than-temporary impairment (“OTTI”) charge is recognized on an HTM security, through the date of the balance sheet. Our HTM securities had an average duration of 2.0 years as of September 30, 2014. |
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(b) The cost/amortized cost, unrealized gains and losses, and fair value of AFS securities as of September 30, 2014 and December 31, 2013 were as follows: |
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September 30, 2014 | | | | | | | | | | | | | | |
($ in thousands) | | Cost/ | | Unrealized | | Unrealized | | Fair | | | | | | |
Amortized | Gains | Losses | Value | | | | | | |
Cost | | | | | | | | | |
U.S. government and government agencies | | $ | 143,742 | | | 8,210 | | | (263 | ) | | 151,689 | | | | | | | |
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Foreign government | | 27,041 | | | 832 | | | (6 | ) | | 27,867 | | | | | | | |
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Obligations of states and political subdivisions | | 1,196,478 | | | 34,533 | | | (1,777 | ) | | 1,229,234 | | | | | | | |
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Corporate securities | | 1,725,290 | | | 44,571 | | | (6,631 | ) | | 1,763,230 | | | | | | | |
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ABS | | 146,557 | | | 791 | | | (382 | ) | | 146,966 | | | | | | | |
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CMBS1 | | 164,934 | | | 2,077 | | | (1,493 | ) | | 165,518 | | | | | | | |
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Residential mortgage-backed | | 480,210 | | | 7,664 | | | (4,740 | ) | | 483,134 | | | | | | | |
securities (“RMBS”)2 | | | | | | |
AFS fixed income securities | | 3,884,252 | | | 98,678 | | | (15,292 | ) | | 3,967,638 | | | | | | | |
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AFS equity securities | | 180,419 | | | 34,797 | | | (3,950 | ) | | 211,266 | | | | | | | |
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Total AFS securities | | $ | 4,064,671 | | | 133,475 | | | (19,242 | ) | | 4,178,904 | | | | | | | |
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December 31, 2013 | | | | | | | | | | | | | | |
($ in thousands) | | Cost/ | | Unrealized | | Unrealized | | Fair | | | | | | |
Amortized | Gains | Losses | Value | | | | | | |
Cost | | | | | | | | | |
U.S. government and government agencies | | $ | 163,218 | | | 10,661 | | | (504 | ) | | 173,375 | | | | | | | |
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Foreign government | | 29,781 | | | 906 | | | (72 | ) | | 30,615 | | | | | | | |
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Obligations of states and political subdivisions | | 946,455 | | | 25,194 | | | (20,025 | ) | | 951,624 | | | | | | | |
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Corporate securities | | 1,707,928 | | | 44,004 | | | (17,049 | ) | | 1,734,883 | | | | | | | |
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ABS | | 140,430 | | | 934 | | | (468 | ) | | 140,896 | | | | | | | |
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CMBS1 | | 172,288 | | | 2,462 | | | (3,466 | ) | | 171,284 | | | | | | | |
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RMBS2 | | 515,877 | | | 7,273 | | | (10,291 | ) | | 512,859 | | | | | | | |
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AFS fixed income securities | | 3,675,977 | | | 91,434 | | | (51,875 | ) | | 3,715,536 | | | | | | | |
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AFS equity securities | | 155,350 | | | 37,517 | | | (96 | ) | | 192,771 | | | | | | | |
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Total AFS securities | | $ | 3,831,327 | | | 128,951 | | | (51,971 | ) | | 3,908,307 | | | | | | | |
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1 CMBS includes government guaranteed agency securities with a fair value of $17.6 million at September 30, 2014 and $30.0 million at December 31, 2013. |
2 RMBS includes government guaranteed agency securities with a fair value of $35.9 million at September 30, 2014 and $55.2 million at December 31, 2013. |
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Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in Accumulated other comprehensive income ("AOCI") on the Consolidated Balance Sheets. |
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(c) The following tables summarize, for all securities in a net unrealized/unrecognized loss position at September 30, 2014 and December 31, 2013, the fair value and gross pre-tax net unrealized/unrecognized loss by asset class and by length of time those securities have been in a net loss position: |
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September 30, 2014 | | Less than 12 months | | 12 months or longer | | | | | | |
($ in thousands) | | Fair Value | | Unrealized | | Fair Value | | Unrealized | | | | | | |
Losses1 | Losses1 | | | | | | |
AFS securities | | | | | | | | | | | | | | | | | | |
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U.S. government and government agencies | | $ | 1,001 | | | — | | | 13,219 | | | (263 | ) | | | | | | |
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Foreign government | | 4,755 | | | (6 | ) | | — | | | — | | | | | | | |
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Obligations of states and political subdivisions | | 121,728 | | | (292 | ) | | 98,944 | | | (1,485 | ) | | | | | | |
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Corporate securities | | 274,501 | | | (1,529 | ) | | 158,127 | | | (5,102 | ) | | | | | | |
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ABS | | 47,542 | | | (134 | ) | | 14,149 | | | (248 | ) | | | | | | |
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CMBS | | 16,969 | | | (89 | ) | | 57,634 | | | (1,404 | ) | | | | | | |
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RMBS | | 30,958 | | | (101 | ) | | 163,237 | | | (4,639 | ) | | | | | | |
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Total fixed income securities | | 497,454 | | | (2,151 | ) | | 505,310 | | | (13,141 | ) | | | | | | |
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Equity securities | | 35,229 | | | (3,950 | ) | | — | | | — | | | | | | | |
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Subtotal | | $ | 532,683 | | | (6,101 | ) | | 505,310 | | | (13,141 | ) | | | | | | |
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| | Less than 12 months | | 12 months or longer |
($ in thousands) | | Fair | | Unrealized | | Unrecognized | | Fair | | Unrealized | | Unrecognized |
Value | Losses1 | Gains2 | Value | Losses1 | Gains2 |
HTM securities | | | | | | | | | | | | | | | | | | |
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Obligations of states and political subdivisions | | 460 | | | (9 | ) | | 8 | | | — | | | — | | | — | |
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ABS | | — | | | — | | | — | | | 2,428 | | | (530 | ) | | 516 | |
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Subtotal | | $ | 460 | | | (9 | ) | | 8 | | | 2,428 | | | (530 | ) | | 516 | |
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Total AFS and HTM | | $ | 533,143 | | | (6,110 | ) | | 8 | | | 507,738 | | | (13,671 | ) | | 516 | |
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December 31, 2013 | | Less than 12 months | | 12 months or longer | | | | | | |
($ in thousands) | | Fair | | Unrealized | | Fair Value | | Unrealized | | | | | | |
Value | Losses1 | Losses1 | | | | | | |
AFS securities | | | | | | | | | | | | | | | | | | |
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U.S. government and government agencies | | $ | 16,955 | | | (500 | ) | | 507 | | | (4 | ) | | | | | | |
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Foreign government | | 2,029 | | | (30 | ) | | 2,955 | | | (42 | ) | | | | | | |
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Obligations of states and political subdivisions | | 442,531 | | | (19,120 | ) | | 13,530 | | | (905 | ) | | | | | | |
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Corporate securities | | 511,100 | | | (15,911 | ) | | 14,771 | | | (1,138 | ) | | | | | | |
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ABS | | 68,725 | | | (468 | ) | | — | | | — | | | | | | | |
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CMBS | | 100,396 | | | (2,950 | ) | | 6,298 | | | (516 | ) | | | | | | |
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RMBS | | 268,943 | | | (10,031 | ) | | 2,670 | | | (260 | ) | | | | | | |
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Total fixed income securities | | 1,410,679 | | | (49,010 | ) | | 40,731 | | | (2,865 | ) | | | | | | |
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Equity securities | | 1,124 | | | (96 | ) | | — | | | — | | | | | | | |
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Subtotal | | $ | 1,411,803 | | | (49,106 | ) | | 40,731 | | | (2,865 | ) | | | | | | |
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| | Less than 12 months | | 12 months or longer |
($ in thousands) | | Fair | | Unrealized | | Unrecognized | | Fair | | Unrealized | | Unrecognized |
Value | Losses1 | Gains2 | Value | Losses1 | Gains2 |
HTM securities | | | | | | | | | | | | | | | | | | |
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Obligations of states and political subdivisions | | $ | 65 | | | (5 | ) | | 5 | | | 441 | | | (20 | ) | | 14 | |
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ABS | | — | | | — | | | — | | | 2,490 | | | (655 | ) | | 621 | |
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Subtotal | | 65 | | | (5 | ) | | 5 | | | 2,931 | | | (675 | ) | | 635 | |
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Total AFS and HTM | | $ | 1,411,868 | | | (49,111 | ) | | 5 | | | 43,662 | | | (3,540 | ) | | 635 | |
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1 Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. In addition, this column includes remaining unrealized gain or loss amounts on securities that were transferred to an HTM designation in the first quarter of 2009 for those securities that are in a net unrealized/unrecognized loss position. |
2 Unrecognized gains represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an OTTI charge is recognized on an HTM security. |
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The table below provides our net unrealized/unrecognized loss positions by impairment severity as of September 30, 2014 compared to December 31, 2013: |
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($ in thousands) | | | | | | | | | |
September 30, 2014 | | December 31, 2013 | | | | | | | |
Number of | % of Market/Book | Unrealized/ | | Number of | % of | Unrealized/ | | | | | | | |
Issues | Unrecognized Loss | Issues | Market/Book | Unrecognized Loss | | | | | | | |
404 | | 80% - 99% | $ | 16,417 | | | 556 | | 80% - 99% | $ | 51,835 | | | | | | | | |
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2 | | 60% - 79% | 2,840 | | | 1 | | 60% - 79% | 176 | | | | | | | | |
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— | | 40% - 59% | — | | | — | | 40% - 59% | — | | | | | | | | |
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— | | 20% - 39% | — | | | — | | 20% - 39% | — | | | | | | | | |
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— | | 0% - 19% | — | | | — | | 0% - 19% | — | | | | | | | | |
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| | | $ | 19,257 | | | | | | $ | 52,011 | | | | | | | | |
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At September 30, 2014, we had 406 securities in an aggregate unrealized/unrecognized loss position of $19.3 million, compared to 557 securities in an aggregate unrealized/unrecognized loss position of $52.0 million at December 31, 2013. This improvement was mainly driven by a lower interest rate environment. Fixed income security pricing in the marketplace has improved reflecting the 54 basis point decrease in 10-year U.S. Treasury Note yields during Nine Months 2014. |
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At September 30, 2014, $13.2 million of the aggregate unrealized/unrecognized losses related to securities that have been in a loss position for more than 12 months, while at December 31, 2013, these losses amounted to $2.9 million. Despite these securities being in a loss position, the nature of the loss is interest-rate related as opposed to credit-related concerns, as was evidenced by the fact that the severity of impairment on these securities improved from an average of 6% of amortized cost at year end to an average of 3% of amortized cost at the end of the third quarter. This movement is reflective of the overall interest rate decline experienced during the year. |
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For a discussion regarding the impact of interest rate movements on our fixed income securities portfolio, refer to Item 7A. "Quantitative and Qualitative Disclosures About Market Risk." in our 2013 Annual Report. |
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We have reviewed the securities in the tables above in accordance with our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” in Item 8. “Financial Statements and Supplementary Data.” of our 2013 Annual Report. |
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In addition, we do not intend to sell any securities in an unrealized/unrecognized loss position, nor do we believe we will be required to sell these securities, and therefore we have concluded that they are temporarily impaired as of September 30, 2014. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral. If our judgment about an individual security changes in the future, we may ultimately record a credit loss after having originally concluded that one did not exist, which could have a material impact on our net income and financial position in future periods. |
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(d) Fixed income securities at September 30, 2014, by contractual maturity, are shown below. Mortgage-backed securities ("MBS") are included in the maturity tables using the estimated average life of each security. 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. |
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Listed below are HTM fixed income securities at September 30, 2014: |
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($ in thousands) | | Carrying Value | | Fair Value | | | | | | | | | | | | |
Due in one year or less | | $ | 99,364 | | | 100,786 | | | | | | | | | | | | | |
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Due after one year through five years | | 220,937 | | | 235,038 | | | | | | | | | | | | | |
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Due after five years through 10 years | | 15,781 | | | 18,366 | | | | | | | | | | | | | |
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Total HTM fixed income securities | | $ | 336,082 | | | 354,190 | | | | | | | | | | | | | |
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Listed below are AFS fixed income securities at September 30, 2014: |
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($ in thousands) | | Fair Value | | | | | | | | | | | | | | | |
Due in one year or less | | $ | 435,053 | | | | | | | | | | | | | | | | |
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Due after one year through five years | | 1,915,327 | | | | | | | | | | | | | | | | |
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Due after five years through 10 years | | 1,507,315 | | | | | | | | | | | | | | | | |
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Due after 10 years | | 109,943 | | | | | | | | | | | | | | | | |
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Total AFS fixed income securities | | $ | 3,967,638 | | | | | | | | | | | | | | | | |
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(e) The following table summarizes our other investment portfolio by strategy and the remaining commitment amount associated with each strategy: |
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Other Investments | | Carrying Value | | September 30, | | | | | | | | | |
2014 | | | | | | | | | |
($ in thousands) | | September 30, | | December 31, | | Remaining Commitment | | | | | | | | | |
2014 | 2013 | | | | | | | | | |
Alternative Investments | | | | | | | | | | | | | | | | | | |
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Secondary private equity | | $ | 23,064 | | | 25,618 | | | 6,978 | | | | | | | | | | |
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Private equity | | 21,569 | | | 20,192 | | | 9,181 | | | | | | | | | | |
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Energy/power generation | | 16,659 | | | 17,361 | | | 6,984 | | | | | | | | | | |
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Mezzanine financing | | 11,273 | | | 12,738 | | | 13,774 | | | | | | | | | | |
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Real estate | | 11,212 | | | 11,698 | | | 10,061 | | | | | | | | | | |
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Distressed debt | | 9,205 | | | 11,579 | | | 2,981 | | | | | | | | | | |
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Venture capital | | 7,115 | | | 7,025 | | | 350 | | | | | | | | | | |
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Total alternative investments | | 100,097 | | | 106,211 | | | 50,309 | | | | | | | | | | |
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Other securities | | 6,451 | | | 1,664 | | | — | | | | | | | | | | |
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Total other investments | | $ | 106,548 | | | 107,875 | | | 50,309 | | | | | | | | | | |
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For a description of our seven alternative investment strategies, as well as information regarding redemption, restrictions, and fund liquidations, refer to Note 5. “Investments” in Item 8. “Financial Statements and Supplementary Data.” of our 2013 Annual Report. |
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The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information for the three and nine-month periods ended September 30 is based on the investments' results through June 30 and is as follows: |
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Income Statement Information | | Quarter ended September 30,1 | | Nine Months ended September 30,2 | | | | | |
($ in millions) | | 2014 | | 2013 | | 2014 | | 2013 | | | | | |
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Net investment income | | $ | 81.3 | | | 97.8 | | | $ | 167 | | | 352.8 | | | | | | |
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Realized (losses) gains | | (26.1 | ) | | 162.8 | | | 171.5 | | | 762.5 | | | | | | |
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Net change in unrealized appreciation | | 628.6 | | | 104.8 | | | 1,471.00 | | | 85.9 | | | | | | |
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Net income | | $ | 683.8 | | | 365.4 | | | $ | 1,809.50 | | | 1,201.20 | | | | | | |
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Selective’s insurance subsidiaries’ other investments income | | $ | 3.9 | | | 2.6 | | | $ | 12.7 | | | 10.1 | | | | | | |
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1 The majority of these results are for the second quarter of each respective year. |
2 The majority of these results are for the nine months ended June 30 of each respective year. |
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(f) We have pledged certain AFS fixed income securities as collateral related to: (i) our outstanding borrowing of $58 million with the Federal Home Loan Bank of Indianapolis ("FHLBI"); and (ii) our reinsurance obligations related to our 2011 acquisition of our E&S book of business. In addition, certain securities were on deposit with various state and regulatory agencies to comply with insurance laws. We retain all rights regarding all securities pledged as collateral. |
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The following table summarizes the market value of these securities at September 30, 2014: |
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($ in millions) | | FHLBI Collateral | | Reinsurance Collateral | | State and Regulatory Deposits | | Total | | | | | | |
U.S. government and government agencies | | $ | 22.8 | | | — | | | 25.6 | | | 48.4 | | | | | | | |
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Obligations of states and political subdivisions | | — | | | 5.7 | | | — | | | 5.7 | | | | | | | |
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Corporate securities | | — | | | 5.3 | | | — | | | 5.3 | | | | | | | |
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ABS | | — | | | 2 | | | — | | | 2 | | | | | | | |
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CMBS | | 1.2 | | | — | | | — | | | 1.2 | | | | | | | |
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RMBS | | 37.6 | | | 2.3 | | | — | | | 39.9 | | | | | | | |
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Total pledged as collateral | | $ | 61.6 | | | 15.3 | | | 25.6 | | | 102.5 | | | | | | | |
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(g) The components of pre-tax net investment income earned for the periods indicated were as follows: |
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| | Quarter ended September 30, | | Nine Months ended September 30, | | | | |
($ in thousands) | | 2014 | | 2013 | | 2014 | | 2013 | | | | |
Fixed income securities | | $ | 30,706 | | | 30,569 | | | $ | 95,515 | | | $ | 90,956 | | | | | |
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Equity securities | | 1,909 | | | 1,341 | | | 5,094 | | | 4,422 | | | | | |
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Short-term investments | | 15 | | | 21 | | | 48 | | | 102 | | | | | |
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Other investments | | 3,906 | | | 2,639 | | | 12,677 | | | 10,110 | | | | | |
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Investment expenses | | (2,244 | ) | | (2,113 | ) | | (6,734 | ) | | (6,260 | ) | | | | |
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Net investment income earned | | $ | 34,292 | | | 32,457 | | | 106,600 | | | 99,330 | | | | | |
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(h) The following tables summarize OTTI by asset type for the periods indicated. We had no OTTI charges in Third Quarter 2014: |
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Third Quarter 2013 | | Gross | | Included in Other Comprehensive Income ("OCI") | | Recognized in Earnings | | | | | | | | | |
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($ in thousands) | | | | | | | | | | | | |
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AFS securities | | | | | | | | | | | | | | | | | | |
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Equity securities | | $ | 680 | | | — | | | 680 | | | | | | | | | | |
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OTTI losses | | $ | 680 | | | — | | | 680 | | | | | | | | | | |
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Nine Months 2014 | | Gross | | Included in OCI | | Recognized in | | | | | | | | | |
($ in thousands) | | | | Earnings | | | | | | | | | |
AFS securities | | | | | | | | | | | | | | | |
Equity securities | | $ | 1,382 | | | — | | | 1,382 | | | | | | | | | | |
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OTTI losses | | $ | 1,382 | | | — | | | 1,382 | | | | | | | | | | |
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Nine Months 2013 | | Gross | | Included in OCI | | Recognized in Earnings | | | | | | | | | |
($ in thousands) | | | | | | | | | | | | |
HTM fixed income securities | | | | | | | | | | | | | | | |
ABS | | $ | (44 | ) | | (47 | ) | | 3 | | | | | | | | | | |
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Total HTM fixed income securities | | (44 | ) | | (47 | ) | | 3 | | | | | | | | | | |
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AFS fixed income securities | | | | | | | | | | | | | | | | | | |
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RMBS | | (22 | ) | | (30 | ) | | 8 | | | | | | | | | | |
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Total AFS fixed income securities | | (22 | ) | | (30 | ) | | 8 | | | | | | | | | | |
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Equity securities | | 1,326 | | | — | | | 1,326 | | | | | | | | | | |
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Total AFS securities | | 1,304 | | | (30 | ) | | 1,334 | | | | | | | | | | |
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Other investments | | 1,847 | | | — | | | 1,847 | | | | | | | | | | |
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OTTI losses | | $ | 3,107 | | | (77 | ) | | 3,184 | | | | | | | | | | |
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For a discussion of our evaluation for OTTI of fixed income securities, short-term investments, equity securities, and other investments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2013 Annual Report. |
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The following tables set forth, for the periods indicated, credit loss impairments on fixed income securities for which a portionof the OTTI charge was recognized in OCI, and the corresponding changes in such amounts: |
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| | Quarter ended September 30, | | | | | | | | | | | | |
($ in thousands) | | 2014 | | 2013 | | | | | | | | | | | | |
Balance, beginning of period | | $ | 5,534 | | | 7,488 | | | | | | | | | | | | | |
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Addition for the amount related to credit loss for which an OTTI was not previously recognized | | — | | | — | | | | | | | | | | | | | |
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Reductions for securities sold during the period | | (90 | ) | | — | | | | | | | | | | | | | |
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Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost | | — | | | — | | | | | | | | | | | | | |
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Reductions for securities for which the entire amount previously recognized in OCI was recognized in earnings due to a decrease in cash flows expected | | — | | | — | | | | | | | | | | | | | |
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Additional increases to the amount related to credit loss for which an OTTI was previously recognized | | — | | | — | | | | | | | | | | | | | |
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Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected | | — | | | — | | | | | | | | | | | | | |
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Balance, end of period | | $ | 5,444 | | | 7,488 | | | | | | | | | | | | | |
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| | Nine Months ended September 30, | | | | | | | | | | | | |
($ in thousands) | | 2014 | | 2013 | | | | | | | | | | | | |
Balance, beginning of period | | $ | 7,488 | | | 7,477 | | | | | | | | | | | | | |
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Addition for the amount related to credit loss for which an OTTI was not previously recognized | | — | | | — | | | | | | | | | | | | | |
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Reductions for securities sold during the period | | (2,044 | ) | | — | | | | | | | | | | | | | |
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Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost | | — | | | — | | | | | | | | | | | | | |
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Reductions for securities for which the entire amount previously recognized in OCI was recognized in earnings due to a decrease in cash flows expected | | — | | | — | | | | | | | | | | | | | |
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Additional increases to the amount related to credit loss for which an OTTI was previously recognized | | — | | | 11 | | | | | | | | | | | | | |
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Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected | | — | | | — | | | | | | | | | | | | | |
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Balance, end of period | | $ | 5,444 | | | 7,488 | | | | | | | | | | | | | |
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(i) The components of net realized gains, excluding OTTI charges, for the periods indicated were as follows: |
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| | Quarter ended September 30, | Nine Months ended September 30, | | | | | | | |
($ in thousands) | | 2014 | | 2013 | 2014 | | 2013 | | | | | | | |
HTM fixed income securities | | | | | | | | | | | | | | |
Gains | | $ | — | | | 32 | | 3 | | | 35 | | | | | | | | |
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Losses | | (4 | ) | | (37 | ) | (18 | ) | | (86 | ) | | | | | | | |
AFS fixed income securities | | | | | | | | | | | | | | | | | | |
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Gains | | 695 | | | 662 | | 1,633 | | | 2,580 | | | | | | | | |
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Losses | | (29 | ) | | (31 | ) | (172 | ) | | (330 | ) | | | | | | | |
AFS equity securities | | | | | | | | | | | | | | | | | | |
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Gains | | 14,576 | | | 13,801 | | 27,255 | | | 24,272 | | | | | | | | |
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Losses | | (8 | ) | | (236 | ) | (332 | ) | | (407 | ) | | | | | | | |
Other investments | | | | | | | | | | | | | | | | |
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Gains | | 1 | | | — | | 1 | | | — | | | | | | | | |
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Losses | | — | | | (80 | ) | — | | | (940 | ) | | | | | | | |
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Total other net realized investment gains | | 15,231 | | | 14,111 | | 28,370 | | | 25,124 | | | | | | | | |
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Total OTTI charges recognized in earnings | | — | | | (680 | ) | (1,382 | ) | | (3,184 | ) | | | | | | | |
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Total net realized gains | | $ | 15,231 | | | 13,431 | | 26,988 | | | 21,940 | | | | | | | | |
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Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold. The $15.2 million and $28.4 million in net realized gains in Third Quarter and Nine Months 2014, respectively, were primarily related to the sale of AFS equity securities due to the rebalancing of our high dividend yield strategy holdings within our equity portfolio. |
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Of the $14.1 million and $25.1 million in net realized gains in Third Quarter and Nine Months 2013, $13.5 million and $19.1 million, respectively, were related to the sale of AFS equity securities due to the rebalancing of our high dividend yield strategy holdings within our equity portfolio. In addition, $4.7 million in net realized gains in Nine Months 2013, was related to the sale of a private equity security due to the acquisition of this investment by a third party. |
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Proceeds from the sale of AFS securities were $89.9 million in Third Quarter 2014 and $221.5 million in Nine Months 2014, and $67.2 million and $116.3 million in the same periods a year ago. |