Investments | Investments (a) Information regarding our AFS securities as of March 31, 2022 and December 31, 2021 were as follows: March 31, 2022 ($ in thousands) Cost/ Allowance for Credit Losses Unrealized Unrealized Fair AFS fixed income securities: U.S. government and government agencies $ 131,986 — 490 (5,383) 127,093 Foreign government 17,160 (150) 145 (452) 16,703 Obligations of states and political subdivisions 1,122,132 (1,991) 15,329 (10,039) 1,125,431 Corporate securities 2,445,468 (23,066) 25,658 (60,320) 2,387,740 Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS") 1,444,224 (2,283) 7,974 (32,701) 1,417,214 Residential mortgage-backed securities ("RMBS") 903,800 (10,029) 6,779 (22,591) 877,959 Commercial mortgage-backed securities ("CMBS") 653,137 (80) 5,618 (11,993) 646,682 Total AFS fixed income securities $ 6,717,907 (37,599) 61,993 (143,479) 6,598,822 December 31, 2021 ($ in thousands) Cost/ Allowance for Credit Losses Unrealized Unrealized Fair AFS fixed income securities: U.S. government and government agencies $ 127,974 — 3,629 (1,145) 130,458 Foreign government 15,420 (46) 609 (123) 15,860 Obligations of states and political subdivisions 1,121,422 (137) 68,258 (235) 1,189,308 Corporate securities 2,478,348 (6,682) 106,890 (4,953) 2,573,603 CLO and other ABS 1,343,687 (939) 14,350 (6,284) 1,350,814 RMBS 756,280 (1,909) 24,813 (2,932) 776,252 CMBS 647,622 (11) 27,752 (1,682) 673,681 Total AFS fixed income securities $ 6,490,753 (9,724) 246,301 (17,354) 6,709,976 The following tables provide a roll forward of the allowance for credit losses on our AFS fixed income securities for the periods indicated: Quarter ended March 31, 2022 ($ in thousands) 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 Foreign government $ 46 103 — 1 — — 150 Obligations of states and political subdivisions 137 1,732 — 132 (10) — 1,991 Corporate securities 6,682 15,393 — 3,337 (1,247) (1,099) 23,066 CLO and other ABS 939 1,288 — 59 (3) — 2,283 RMBS 1,909 — 8,318 (63) (135) — 10,029 CMBS 11 72 — (3) — — 80 Total AFS fixed income securities $ 9,724 18,588 8,318 3,463 (1,395) (1,099) 37,599 Quarter ended March 31, 2021 ($ in thousands) Beginning Balance Current Provision for Securities without Prior Allowance 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 Foreign government $ 1 56 (1) — — 56 Obligations of states and political subdivisions 4 186 11 — — 201 Corporate securities 2,782 4,058 (527) (147) — 6,166 CLO and other ABS 592 1,001 (106) (17) — 1,470 RMBS 561 356 (39) (14) — 864 CMBS 29 10 (15) — — 24 Total AFS fixed income securities $ 3,969 5,667 (677) (178) — 8,781 During First Quarter 2022 and First Quarter 2021, we did not have any write-offs or recoveries of our AFS fixed income securities, so these items are not included in the tables above. 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 2021 Annual Report. Accrued interest on AFS securities was $46.8 million as of March 31, 2022, and $46.3 million as of December 31, 2021. We did not record any material write-offs of accrued interest during 2022 and 2021. (b) Quantitative information about unrealized losses on our AFS portfolio is provided below. March 31, 2022 Less than 12 months 12 months or longer Total ($ in thousands) Fair Value Unrealized Fair Value Unrealized Fair Value Unrealized AFS fixed income securities: U.S. government and government agencies $ 89,044 (4,410) 5,252 (973) 94,296 (5,383) Foreign government 5,394 (268) 1,996 (184) 7,390 (452) Obligations of states and political subdivisions 223,497 (9,846) 2,834 (193) 226,331 (10,039) Corporate securities 1,002,980 (59,605) 6,823 (715) 1,009,803 (60,320) CLO and other ABS 937,362 (28,658) 101,722 (4,043) 1,039,084 (32,701) RMBS 545,934 (21,444) 13,731 (1,147) 559,665 (22,591) CMBS 337,995 (9,807) 23,123 (2,186) 361,118 (11,993) Total AFS fixed income securities $ 3,142,206 (134,038) 155,481 (9,441) 3,297,687 (143,479) December 31, 2021 Less than 12 months 12 months or longer Total ($ in thousands) Fair Unrealized Fair Value Unrealized Fair Value Unrealized AFS fixed income securities: U.S. government and government agencies $ 34,857 (746) 7,827 (399) 42,684 (1,145) Foreign government 2,000 (84) 1,061 (39) 3,061 (123) Obligations of states and political subdivisions 25,837 (235) — — 25,837 (235) Corporate securities 300,549 (4,903) 2,520 (50) 303,069 (4,953) CLO and other ABS 663,976 (4,934) 53,368 (1,350) 717,344 (6,284) RMBS 236,010 (2,931) 20 (1) 236,030 (2,932) CMBS 112,899 (1,016) 20,326 (666) 133,225 (1,682) Total AFS fixed income securities $ 1,376,128 (14,849) 85,122 (2,505) 1,461,250 (17,354) We do not currently intend to sell any of the securities in the tables above, nor will we be required to sell any of these securities. The increase in gross unrealized losses at March 31, 2022 compared to December 31, 2021 was driven by an increase in benchmark U.S. Treasury rates and a widening 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 2021 Annual Report, we have concluded that no allowance for credit loss is required on these balances. This conclusion reflects our current judgment about the financial position and future prospects of the entity that issued the investment security and underlying collateral. (c) Fixed income securities at March 31, 2022 by contractual maturity are shown below. Mortgage-backed securities 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. Listed below are the contractual maturities of fixed income securities at March 31, 2022: AFS HTM ($ in thousands) Fair Value Carrying Value Fair Value Due in one year or less $ 396,074 6,727 6,899 Due after one year through five years 2,915,421 5,977 6,012 Due after five years through 10 years 2,425,811 20,331 19,714 Due after 10 years 861,516 — — Total fixed income securities $ 6,598,822 33,035 32,625 (d) The following table summarizes our other investment portfolio by strategy: Other Investments March 31, 2022 December 31, 2021 ($ in thousands) Carrying Value Remaining Commitment Maximum Exposure to Loss 1 Carrying Value Remaining Commitment Maximum Exposure to Loss 1 Alternative Investments Private equity $ 281,352 124,761 406,113 273,070 99,734 372,804 Private credit 60,476 92,279 152,755 63,138 92,674 155,812 Real assets 26,159 20,914 47,073 23,524 22,579 46,103 Total alternative investments 367,987 237,954 605,941 359,732 214,987 574,719 Other securities 57,679 — 57,679 49,300 — 49,300 Total other investments $ 425,666 237,954 663,620 409,032 214,987 624,019 1 In addition to the amounts in this table, previously recognized tax credits are subject to the risk of recapture. We do not consider the risk of recapture to be significant and therefore do not include in this table. We are contractually committed to make additional investments up to the remaining commitments stated above. We did not provide any non-contractual financial support at any time during 2022 or 2021. The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. As the majority of these investments are carried under the equity method of accounting and report results to us on a one-quarter lag, the summarized financial statement information is for the three-month period ended, December 31: Income Statement Information Quarter ended March 31, ($ in millions) 2022 2021 Net investment income $ 135.5 481.6 Realized gains 2,748.0 776.0 Net change in unrealized appreciation 5,178.2 4,630.8 Net income $ 8,061.7 5,888.4 Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income $ 19.1 20.2 (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, certain securities were on deposit with various state and regulatory agencies at March 31, 2022 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 March 31, 2022: ($ in millions) FHLBI Collateral FHLBNY Collateral State and Total U.S. government and government agencies $ — — 20.3 20.3 Obligations of states and political subdivisions — — 3.8 3.8 RMBS 63.1 35.9 — 99.0 CMBS 5.8 12.8 — 18.6 Total pledged as collateral $ 68.9 48.7 24.1 141.7 (f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government agencies, as of March 31, 2022, or December 31, 2021. (g) The components of pre-tax net investment income earned were as follows: Quarter ended March 31, ($ in thousands) 2022 2021 Fixed income securities $ 53,925 52,823 Commercial mortgage loans ("CMLs") 970 514 Equity securities 2,418 2,488 Short-term investments 101 85 Other investments 19,305 17,433 Investment expenses (4,117) (3,627) Net investment income earned $ 72,602 69,716 (h) The following table summarizes net realized and unrealized gains and losses for the periods indicated: Quarter ended March 31, ($ in thousands) 2022 2021 Gross gains on sales $ 2,197 3,676 Gross losses on sales (13,560) (4,471) Net realized losses on disposals (11,363) (795) Net unrealized (losses) gains on equity securities (2,154) 11,280 Net credit loss expense on fixed income securities, AFS (22,052) (4,997) Net credit loss benefit (expense) on fixed income securities, HTM 14 (7) Losses on securities for which we have the intent to sell (4,797) (362) Net realized and unrealized (losses) gains $ (40,352) 5,119 Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021 primarily driven by (i) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio. Net unrealized losses and gains recognized in income on equity securities, as reflected in the table above, included the following: Quarter ended March 31, ($ in thousands) 2022 2021 Unrealized (losses) gains recognized in income on equity securities: On securities remaining in our portfolio at end of period $ (2,220) 10,097 On securities sold in period 66 1,183 Total unrealized (losses) gains recognized in income on equity securities $ (2,154) 11,280 |