Investments	9 Months Ended
Sep. 30, 2020
Investments [Abstract]
Investments	3. INVESTMENTS Effective January 1, 2020, the Company adopted ASU 2016-13 which modified the previous other than temporary impairment model for available for sale fixed maturity securities. The guidance requires the Company to record allowances for credit losses for securities that are deemed to have valuation deterioration due to credit related factors. The initial table below presents the amortized cost, allowance for credit losses, gross unrealized appreciation/(depreciation) and market value of fixed maturity securities as of September 30, 2020 in accordance with ASU 2016-13 guidance. The second table presents the amortized cost, gross unrealized appreciation/(depreciation), market value and other-than-temporary impairments (“OTTI”) in AOCI as of December 31, 2019, in accordance with previously applicable guidance. At September 30, 2020 Amortized Allowance for Unrealized Unrealized Market (Dollars in thousands) Cost Credit Losses Appreciation Depreciation Value Fixed maturity securities U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 1,387,482 $ - $ 67,544 $ (3,023) $ 1,452,003 Obligations of U.S. states and political subdivisions 514,787 - 30,939 (2,443) 543,283 Corporate securities 6,526,127 (17,474) 363,613 (66,917) 6,805,349 Asset-backed securities 1,326,918 - 23,191 (11,907) 1,338,202 Mortgage-backed securities Commercial 892,998 - 78,298 (1,976) 969,320 Agency residential 2,044,837 - 76,284 (2,468) 2,118,653 Non-agency residential 2,559 - - (39) 2,520 Foreign government securities 1,476,092 (119) 86,015 (26,913) 1,535,075 Foreign corporate securities 2,959,614 (2,048) 165,297 (30,891) 3,091,972 Total fixed maturity securities $ 17,131,414 (19,641) $ 891,181 $ (146,577) $ 17,856,377 At December 31, 2019 Amortized Unrealized Unrealized Market OTTI in AOCI (Dollars in thousands) Cost Appreciation Depreciation Value (a) Fixed maturity securities U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 1,489,660 $ 28,357 $ (2,214) $ 1,515,803 $ - Obligations of U.S. states and political subdivisions 507,353 29,651 (89) 536,915 - Corporate securities 6,227,661 185,052 (37,767) 6,374,946 469 Asset-backed securities 892,373 6,818 (1,858) 897,333 - Mortgage-backed securities Commercial 814,570 31,236 (1,249) 844,557 - Agency residential 2,173,099 36,361 (10,879) 2,198,581 - Non-agency residential 5,723 - (20) 5,703 - Foreign government securities 1,492,315 47,148 (33,513) 1,505,950 71 Foreign corporate securities 2,870,737 107,999 (33,580) 2,945,156 447 Total fixed maturity securities $ 16,473,491 $ 472,622 $ (121,169) $ 16,824,944 $ 987 (a) Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date. The amortized cost and market value of fixed maturity securities are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately. At September 30, 2020 At December 31, 2019 Amortized Market Amortized Market (Dollars in thousands) Cost Value Cost Value Fixed maturity securities – available for sale: Due in one year or less $ 1,475,335 $ 1,483,621 $ 1,456,960 $ 1,457,919 Due after one year through five years 6,408,491 6,624,753 6,757,107 6,869,359 Due after five years through ten years 3,878,019 4,186,765 3,471,370 3,609,816 Due after ten years 1,102,257 1,132,543 902,289 941,676 Asset-backed securities 1,326,918 1,338,202 892,373 897,333 Mortgage-backed securities: Commercial 892,998 969,320 814,570 844,557 Agency residential 2,044,837 2,118,653 2,173,099 2,198,581 Non-agency residential 2,559 2,520 5,723 5,703 Total fixed maturity securities $ 17,131,414 $ 17,856,377 $ 16,473,491 $ 16,824,944 The changes in net unrealized appreciation (depreciation) for the Company’s investments are derived from the following sources for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2020 2019 2020 2019 Increase (decrease) during the period between the market value and cost of investments carried at market value, and deferred taxes thereon: Fixed maturity securities $ 55,587 $ 103,173 $ 392,640 $ 584,333 Fixed maturity securities, other-than-temporary impairment - 72 - (1,671) Change in unrealized appreciation (depreciation), pre-tax 55,587 103,245 392,640 582,662 Deferred tax benefit (expense) (3,560) (9,984) (44,116) (62,415) Deferred tax benefit (expense), other-than-temporary impairment - (25) - 122 Change in unrealized appreciation (depreciation), net of deferred taxes, included in shareholders’ equity $ 52,027 $ 93,236 $ 348,524 $ 520,369 The Company reviews all of its fixed maturity, available for sale securities whose fair value has fallen below their amortized cost at the time of review. The Company then assesses whether the decline in value is due to non- credit related or credit related factors. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market, interest rate or foreign exchange environment does not constitute a credit impairment, but rather a non-credit related decline in market value. Non-credit related declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company intends to sell the security or is more likely than not to sell the security, the Company records the entire fair value adjustment in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). If the Company determines that the decline is credit related and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the Company establishes a credit allowance equal to the estimated credit loss and is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The amount of the allowance for a given security will generally be the difference between a discounted cash flow model and the Company’s carrying value. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company’s consolidated balance sheets. We will adjust the credit allowance account for future changes in credit loss estimates for a security and record this adjustment through net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income (loss). The Company does not create an allowance for uncollectible interest. If interest is not received when due, the interest receivable is immediately reversed and no additional interest is accrued. If future interest is received that has not been accrued, it is recorded as income at that time. Prior to the adoption of ASU 2016-13 effective January 1, 2020, estimated credit losses were recorded as adjustments to the carrying value of the security and any subsequent improvement in market value were recorded through other comprehensive income. The Company’s assessments are based on the issuers’ current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage -backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts. Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company’s asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types. The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated: Duration of Unrealized Loss at September 30, 2020 By Security Type Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation Fixed maturity securities - available for sale U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 69,055 $ (3,023) $ - $ - $ 69,055 $ (3,023) Obligations of U.S. states and political subdivisions 50,368 (2,278) 4,943 (165) 55,311 (2,443) Corporate securities 752,828 (24,799) 196,660 (42,118) 949,488 (66,917) Asset-backed securities 328,216 (8,346) 163,014 (3,561) 491,230 (11,907) Mortgage-backed securities - - Commercial 77,850 (1,524) 6,634 (452) 84,484 (1,976) Agency residential 248,155 (1,256) 65,145 (1,212) 313,300 (2,468) Non-agency residential 213 (3) 2,308 (36) 2,521 (39) Foreign government securities 83,267 (4,352) 176,739 (22,561) 260,006 (26,913) Foreign corporate securities 399,841 (11,117) 193,809 (19,774) 593,650 (30,891) Total fixed maturity securities $ 2,009,793 $ (56,698) $ 809,252 $ (89,879) $ 2,819,045 $ (146,577) Duration of Unrealized Loss at September 30, 2020 By Maturity Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation Fixed maturity securities Due in one year or less $ 76,867 $ (2,652) $ 135,762 $ (21,608) $ 212,629 $ (24,260) Due in one year through five years 675,450 (22,976) 304,410 (29,003) 979,860 (51,979) Due in five years through ten years 377,219 (12,287) 69,424 (4,266) 446,643 (16,553) Due after ten years 225,823 (7,654) 62,555 (29,741) 288,378 (37,395) Asset-backed securities 328,216 (8,346) 163,014 (3,561) 491,230 (11,907) Mortgage-backed securities 326,218 (2,783) 74,087 (1,700) 400,305 (4,483) Total fixed maturity securities $ 2,009,793 $ (56,698) $ 809,252 $ (89,879) $ 2,819,045 $ (146,577) The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at September 30, 2020 were $ 2,819,045 thousand and $ 146,577 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at September 30, 2020, did not exceed 0.1 % of the overall market value of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $ 56,698 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities, asset-backed securities and foreign government securities. Of these unrealized losses, $ 42,015 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ 89,879 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and asset-backed securities. Of these unrealized losses, $ 53,247 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments. The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity and equity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated: Duration of Unrealized Loss at December 31, 2019 By Security Type Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation Fixed maturity securities - available for sale U.S. Treasury securities and obligations of U.S. government agencies and corporations $ 85,527 $ (1,005) $ 249,371 $ (1,209) $ 334,898 $ (2,214) Obligations of U.S. states and political subdivisions 4,600 (38) 5,522 (51) 10,122 (89) Corporate securities 547,120 (9,877) 395,369 (27,890) 942,489 (37,767) Asset-backed securities 176,222 (1,027) 94,190 (831) 270,412 (1,858) Mortgage-backed securities Commercial 83,127 (689) 23,063 (560) 106,190 (1,249) Agency residential 344,267 (1,834) 488,680 (9,045) 832,947 (10,879) Non-agency residential 332 - 3,976 (20) 4,308 (20) Foreign government securities 210,766 (4,770) 283,648 (28,743) 494,414 (33,513) Foreign corporate securities 278,403 (7,553) 365,808 (26,027) 644,211 (33,580) Total fixed maturity securities $ 1,730,364 $ (26,793) $ 1,909,627 $ (94,376) $ 3,639,991 $ (121,169) Duration of Unrealized Loss at December 31, 2019 By Maturity Less than 12 months Greater than 12 months Total Gross Gross Gross Unrealized Unrealized Unrealized (Dollars in thousands) Market Value Depreciation Market Value Depreciation Market Value Depreciation Fixed maturity securities Due in one year or less $ 67,879 $ (1,237) $ 416,583 $ (23,004) $ 484,462 $ (24,241) Due in one year through five years 464,753 (7,960) 689,195 (38,138) 1,153,948 (46,098) Due in five years through ten years 495,741 (12,388) 103,612 (11,100) 599,353 (23,488) Due after ten years 98,043 (1,658) 90,328 (11,678) 188,371 (13,336) Asset-backed securities 176,222 (1,027) 94,190 (831) 270,412 (1,858) Mortgage-backed securities 427,726 (2,523) 515,719 (9,625) 943,445 (12,148) Total fixed maturity securities $ 1,730,364 $ (26,793) $ 1,909,627 $ (94,376) $ 3,639,991 $ (121,169) The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2019 were $ 3,639,991 thousand and $ 121,169 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2019, did not exceed 0.8 % of the overall market value of the Company’s fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $ 26,793 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of domestic and foreign corporate securities and foreign government securities. Of these unrealized losses, $ 23,104 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. The $ 94,376 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to domestic and foreign corporate securities, foreign government securities and agency residential mortgage-backed securities. Of these unrealized losses, $ 73,144 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating agency. There was no gross unrealized depreciation for mortgage-backed securities related to sub-prime and alt-A loans. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments. The components of net investment income are presented in the table below for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2020 2019 2020 2019 Fixed maturities $ 136,104 $ 130,139 $ 407,946 $ 383,440 Equity securities 4,402 4,147 11,585 12,250 Short-term investments and cash 494 3,899 4,356 13,497 Other invested assets Limited partnerships 88,778 43,758 22,092 100,298 Other 14,742 7,286 (1,291) 13,565 Gross investment income before adjustments 244,520 189,229 444,688 523,050 Funds held interest income (expense) 684 2,325 10,921 9,715 Future policy benefit reserve income (expense) (291) (372) (805) (965) Gross investment income 244,913 191,182 454,804 531,800 Investment expenses (10,680) (10,124) (34,688) (30,738) Net investment income $ 234,233 $ 181,058 $ 420,116 $ 501,062 The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline. The Company had contractual commitments to invest up to an additional $ 1,464,947 thousand in limited partnerships and private placement loans at September 30, 2020. These commitments will be funded when called in accordance with the partnership and loan agreements, which have investment periods that expire, unless extended, through 2026 . The Company participates in a private placement liquidity sweep facility (“the facility”). The primary purpose of the facility is to enhance the Company’s return on its short-term investments and cash positions. The facility invests in high quality, short-duration securities and permits daily liquidity. The Company consolidates its participation in the facility. As of September 30, 2020, the market value of investments in the facility consolidated within the Company’s balance sheets was $ 1,101,256 thousand. The components of net realized capital gains (losses) are presented in the tables below for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2020 2019 2020 2019 Fixed maturity securities, market value: Allowance for credit losses $ 6,196 $ - $ (19,641) $ - Other-than-temporary impairments - (7,314) - (15,404) Gains (losses) from sales 5,398 5,290 941 16,660 Fixed maturity securities, fair value: Gains (losses) from sales (1,968) - (1,968) 356 Gains (losses) from fair value adjustments 3,339 - 1,944 13 Equity securities, fair value: Gains (losses) from sales (1,317) (1,192) (12,642) 2,541 Gains (losses) from fair value adjustments 96,673 (12,008) 114,364 102,795 Other invested assets 1,084 2,098 50 2,341 Short-term investments gain (loss) 798 183 1,215 259 Total net realized capital gains (losses) $ 110,203 $ (12,943) $ 84,263 $ 109,561 Roll Forward of Allowance for Credit Losses Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Foreign Foreign Foreign Foreign Corporate Government Corporate Corporate Government Corporate Securities Securities Securities Total Securities Securities Securities Total (Dollars in thousands) Beginning Balance $ (22,253) $ (92) $ (3,492) $ (25,837) $ - $ - $ - $ - Credit losses on securities where credit losses were not previously recorded (6) - (144) (150) (27,666) (519) (4,699) (32,884) Increases in allowance on previously impaired securities (5,354) (27) (181) (5,562) (6,136) (27) (481) (6,644) Decreases in allowance on previously impaired securities 159 - 151 310 3,590 212 844 4,646 Reduction in allowance due to disposals 9,980 - 1,618 11,598 12,738 215 2,288 15,241 Balance as of September 30, 2020 $ (17,474) $ (119) $ (2,048) $ (19,641) $ (17,474) $ (119) $ (2,048) $ (19,641) The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) fair value re-measurements, allowances for credit losses per ASU 2016-13 and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis in prior years as displayed in the table above. The Company had no other-than-temporary impaired securities where the impairment had both a credit and non-credit component. The proceeds and split between gross gains and losses, from sales of fixed maturity and equity securities, are presented in the table below for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2020 2019 2020 2019 Proceeds from sales of fixed maturity securities $ 402,528 $ 271,025 $ 1,392,801 $ 2,591,938 Gross gains from sales 18,721 14,270 54,077 42,316 Gross losses from sales (15,291) (8,980) (55,104) (25,300) Proceeds from sales of equity securities $ 116,565 $ 35,924 $ 329,750 $ 185,157 Gross gains from sales 9,512 1,035 30,268 9,286 Gross losses from sales (10,829) (2,227) (42,910) (6,745)

INVESTMENTS

Effective January

1, 2020, the

Company adopted

ASU 2016-13 which

modified the previous

other than

temporary impairment model

for available

for sale fixed

maturity securities.

The guidance requires

the

Company to

record allowances

for credit

losses for

securities that are

deemed to have

valuation deterioration

due to

credit related

factors.

The initial table

below presents

the amortized

cost, allowance

for credit

losses,

gross unrealized

appreciation/(depreciation) and

market value

of fixed maturity

securities as of

September 30,

2020 in accordance with ASU 2016-13

guidance.

The second table presents the

amortized cost, gross unrealized

appreciation/(depreciation), market

value and

other-than-temporary impairments

(“OTTI”) in

AOCI as

December 31, 2019, in accordance with previously applicable guidance.

At September 30, 2020

Amortized

Allowance for

Unrealized

Market

(Dollars in thousands)

Cost

Credit Losses

Appreciation

Depreciation

Value

Fixed maturity securities

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

1,387,482

67,544

(3,023)

1,452,003

Obligations of U.S. states and political subdivisions

514,787

30,939

(2,443)

543,283

Corporate securities

6,526,127

(17,474)

363,613

(66,917)

6,805,349

Asset-backed securities

1,326,918

23,191

(11,907)

1,338,202

Mortgage-backed securities

Commercial

892,998

78,298

(1,976)

969,320

Agency residential

2,044,837

76,284

(2,468)

2,118,653

Non-agency residential

2,559

(39)

2,520

Foreign government securities

1,476,092

(119)

86,015

(26,913)

1,535,075

Foreign corporate securities

2,959,614

(2,048)

165,297

(30,891)

3,091,972

Total fixed maturity securities

17,131,414

(19,641)

891,181

(146,577)

17,856,377

At December 31, 2019

Amortized

Unrealized

Market

OTTI in AOCI

(Dollars in thousands)

Cost

Appreciation

Depreciation

Value

(a)

Fixed maturity securities

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

1,489,660

28,357

(2,214)

1,515,803

Obligations of U.S. states and political subdivisions

507,353

29,651

(89)

536,915

Corporate securities

6,227,661

185,052

(37,767)

6,374,946

469

Asset-backed securities

892,373

6,818

(1,858)

897,333

Mortgage-backed securities

Commercial

814,570

31,236

(1,249)

844,557

Agency residential

2,173,099

36,361

(10,879)

2,198,581

Non-agency residential

5,723

(20)

5,703

Foreign government securities

1,492,315

47,148

(33,513)

1,505,950

Foreign corporate securities

2,870,737

107,999

(33,580)

2,945,156

447

Total fixed maturity securities

16,473,491

472,622

(121,169)

16,824,944

987

At September 30, 2020

At December 31, 2019

Amortized

Market

Amortized

Market

(Dollars in thousands)

Cost

Value

Cost

Value

Fixed maturity securities – available for sale:

Due in one year or less

1,475,335

1,483,621

1,456,960

1,457,919

Due after one year through five years

6,408,491

6,624,753

6,757,107

6,869,359

Due after five years through ten years

3,878,019

4,186,765

3,471,370

3,609,816

Due after ten years

1,102,257

1,132,543

902,289

941,676

Asset-backed securities

1,326,918

1,338,202

892,373

897,333

Mortgage-backed securities:

Commercial

892,998

969,320

814,570

844,557

Agency residential

2,044,837

2,118,653

2,173,099

2,198,581

Non-agency residential

2,559

2,520

5,723

5,703

Total fixed

maturity securities

17,131,414

17,856,377

16,473,491

16,824,944

Three Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Increase (decrease) during the period between the market value and cost

of investments carried at market value, and deferred

taxes thereon:

Fixed maturity securities

55,587

103,173

392,640

584,333

Fixed maturity securities, other-than-temporary impairment

(1,671)

Change in unrealized appreciation (depreciation), pre-tax

55,587

103,245

392,640

582,662

Deferred tax benefit (expense)

(3,560)

(9,984)

(44,116)

(62,415)

Deferred tax benefit (expense), other-than-temporary

impairment

(25)

122

Change in unrealized appreciation (depreciation),

net of deferred taxes, included in shareholders’

equity

52,027

93,236

348,524

520,369

The Company reviews all of

its fixed maturity,

available for sale securities whose

fair value has fallen

below their

amortized cost

at the time

of review.

The Company then

assesses whether the

decline in value

is due to

non-

credit related or credit related factors.

In making its assessment, the Company evaluates the current market

and

interest rate

environment as well as

specific issuer information.

Generally, a

change in a security’s

value caused

by a change

in the market,

interest rate

or foreign exchange

environment does not

constitute a credit

impairment, but rather a non-credit related

decline in market value.

Non-credit related declines in market

value

are recorded as unrealized

losses in accumulated other comprehensive income (loss).

If the Company intends to

sell the

security or

is more

likely than

not to

sell the

security, the

Company records

the entire

fair value

adjustment in

net realized

capital gains

(losses) in

the Company’s

consolidated statements

of operations

and

comprehensive income

(loss).

If the Company

determines that

the decline is

credit related

and the Company

does not have the intent

to sell the security; and it

is more likely than

not that the Company will not

have to sell

the security before recovery

of its cost basis, the Company

establishes a credit allowance equal

to the estimated

credit loss

and is

recorded in

net realized

capital gains

(losses) in

the Company’s

consolidated statements

operations and comprehensive income

(loss).

The amount of the allowance for

a given security will generally be

the difference between a discounted

cash flow model and the Company’s

carrying value.

The fair value

adjustment that is

non-credit related is

recorded as a

component of other

comprehensive income (loss),

net of

tax, and is

included in accumulated

other comprehensive income

(loss) in the

Company’s consolidated

balance

sheets. We will adjust

the credit allowance account

for future changes in

credit loss estimates for

a security and

record this

adjustment through

net realized

capital gains

(losses) in the

Company’s consolidated

statements of

operations and comprehensive income (loss).

The Company does

not create an

allowance for uncollectible

interest.

If interest is

not received when

due, the

interest receivable

is immediately

reversed and

no additional

interest is

accrued. If

future interest

is received

that has not been accrued, it is recorded as income at that time.

Prior to

the adoption

of ASU

2016-13 effective

January 1,

2020, estimated

credit losses

were recorded

adjustments to

the carrying

value of

the security

and any

subsequent improvement

in market

value were

recorded through other comprehensive income.

The Company’s assessments

are based on the

issuers’ current and

expected future financial

position, timeliness

with respect to interest and/or principal payments,

speed of repayments and any applicable credit

enhancements or breakeven

constant default

rates on mortgage

-backed and asset-backed

securities, as well

relevant information provided by rating

agencies, investment advisors and analysts.

Retrospective adjustments

are employed to

recalculate the values

of asset-backed

securities.

All of the

Company’s asset-backed

and mortgage-backed

securities have a

pass-through structure.

Each acquisition lot

reviewed to

recalculate the

effective yield.

The recalculated

effective yield

is used to

derive a book

value as if

the new yield were applied

at the time of acquisition.

Outstanding principal factors

from the time of acquisition

to the

adjustment date

are used

to calculate

the prepayment

history for

all applicable

securities.

Conditional

prepayment rates,

computed with life

to date factor

histories and weighted

average maturities, are

used in the

calculation of projected prepayments for pass-through security types.

The tables below display

the aggregate market

value and gross unrealized

depreciation of fixed maturity

securities, by

security type and

contractual maturity,

in each case

subdivided according

to length

of time that

individual securities had been in a continuous unrealized loss position for the periods indicated:

Duration of Unrealized Loss at September 30, 2020 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities - available for sale

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

69,055

(3,023)

69,055

(3,023)

Obligations of U.S. states and political subdivisions

50,368

(2,278)

4,943

(165)

55,311

(2,443)

Corporate securities

752,828

(24,799)

196,660

(42,118)

949,488

(66,917)

Asset-backed securities

328,216

(8,346)

163,014

(3,561)

491,230

(11,907)

Mortgage-backed securities

Commercial

77,850

(1,524)

6,634

(452)

84,484

(1,976)

Agency residential

248,155

(1,256)

65,145

(1,212)

313,300

(2,468)

Non-agency residential

213

(3)

2,308

(36)

2,521

(39)

Foreign government securities

83,267

(4,352)

176,739

(22,561)

260,006

(26,913)

Foreign corporate securities

399,841

(11,117)

193,809

(19,774)

593,650

(30,891)

Total fixed maturity securities

2,009,793

(56,698)

809,252

(89,879)

2,819,045

(146,577)

Duration of Unrealized Loss at September 30, 2020 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities

Due in one year or less

76,867

(2,652)

135,762

(21,608)

212,629

(24,260)

Due in one year through five years

675,450

(22,976)

304,410

(29,003)

979,860

(51,979)

Due in five years through ten years

377,219

(12,287)

69,424

(4,266)

446,643

(16,553)

Due after ten years

225,823

(7,654)

62,555

(29,741)

288,378

(37,395)

Asset-backed securities

328,216

(8,346)

163,014

(3,561)

491,230

(11,907)

Mortgage-backed securities

326,218

(2,783)

74,087

(1,700)

400,305

(4,483)

Total fixed maturity securities

2,009,793

(56,698)

809,252

(89,879)

2,819,045

(146,577)

The aggregate market

value and gross

unrealized losses related

to investments

in an unrealized

loss position at

September 30, 2020

were $

2,819,045

thousand and

146,577

thousand, respectively.

The market

value of

securities for the

single issuer whose securities

comprised the largest

unrealized loss position

at September 30,

2020, did not exceed

0.1

% of the overall market value

of the Company’s fixed maturity securities.

In addition, as

indicated on

the above

table, there

was no

significant concentration

of unrealized

losses in

any one

market

sector.

The $

56,698

thousand of

unrealized losses

related to

fixed maturity

securities that

have been

in an

unrealized loss

position for

less than

one year

were generally

comprised of

domestic and

foreign corporate

securities, asset-backed securities and

foreign government securities.

Of these unrealized losses, $

42,015

thousand were

related to

securities that

were rated

investment grade

by at

least one

nationally recognized

statistical rating

agency.

The $

89,879

thousand of

unrealized losses

related to

fixed maturity

securities in

unrealized loss

position for more

than one year

related primarily to

domestic and foreign

corporate securities,

foreign government

securities and asset-backed

securities.

Of these unrealized

losses, $

53,247

thousand were

related to

securities that

were rated

investment grade

by at

least one

nationally recognized

statistical rating

agency.

There was

gross unrealized

depreciation for

mortgage-backed securities

related to

sub-prime and

alt-A loans.

In all instances,

there were

no projected

cash flow shortfalls

to recover

the full book

value of the

investments and the

related interest obligations.

The mortgage-backed securities

still have excess

credit

coverage and are current on interest and principal payments.

The Company,

given the

size of

its investment

portfolio and

capital position,

does not

have the

intent to

sell

these securities; and it is more likely than not that the Company

will not have to sell the security before

recovery

of its

cost basis.

In addition,

all securities

currently in

an unrealized

loss position

are current

with respect

principal and interest payments.

Duration of Unrealized Loss at December 31, 2019 By Security Type

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities - available for sale

U.S. Treasury securities and obligations of

U.S. government agencies and corporations

85,527

(1,005)

249,371

(1,209)

334,898

(2,214)

Obligations of U.S. states and political subdivisions

4,600

(38)

5,522

(51)

10,122

(89)

Corporate securities

547,120

(9,877)

395,369

(27,890)

942,489

(37,767)

Asset-backed securities

176,222

(1,027)

94,190

(831)

270,412

(1,858)

Mortgage-backed securities

Commercial

83,127

(689)

23,063

(560)

106,190

(1,249)

Agency residential

344,267

(1,834)

488,680

(9,045)

832,947

(10,879)

Non-agency residential

332

3,976

(20)

4,308

(20)

Foreign government securities

210,766

(4,770)

283,648

(28,743)

494,414

(33,513)

Foreign corporate securities

278,403

(7,553)

365,808

(26,027)

644,211

(33,580)

Total fixed maturity securities

1,730,364

(26,793)

1,909,627

(94,376)

3,639,991

(121,169)

Duration of Unrealized Loss at December 31, 2019 By Maturity

Less than 12 months

Greater than 12 months

Total

Gross

Unrealized

(Dollars in thousands)

Market Value

Depreciation

Market Value

Depreciation

Market Value

Depreciation

Fixed maturity securities

Due in one year or less

67,879

(1,237)

416,583

(23,004)

484,462

(24,241)

Due in one year through five years

464,753

(7,960)

689,195

(38,138)

1,153,948

(46,098)

Due in five years through ten years

495,741

(12,388)

103,612

(11,100)

599,353

(23,488)

Due after ten years

98,043

(1,658)

90,328

(11,678)

188,371

(13,336)

Asset-backed securities

176,222

(1,027)

94,190

(831)

270,412

(1,858)

Mortgage-backed securities

427,726

(2,523)

515,719

(9,625)

943,445

(12,148)

Total fixed maturity securities

1,730,364

(26,793)

1,909,627

(94,376)

3,639,991

(121,169)

The aggregate market

value and gross

unrealized losses related

to investments

in an unrealized

loss position at

December 31,

2019 were

3,639,991

thousand and

121,169

thousand, respectively.

The market

value of

securities for the

single issuer whose

securities comprised the

largest unrealized

loss position at

December 31,

2019, did not exceed

0.8

% of the overall market value

of the Company’s fixed maturity securities.

In addition, as

indicated on

the above

table, there

was no

significant concentration

of unrealized

losses in

any one

market

sector.

The $

26,793

thousand of

unrealized losses

related to

fixed maturity

securities that

have been

in an

unrealized loss

position for

less than

one year

were generally

comprised of

domestic and

foreign corporate

securities and

foreign government

securities.

Of these

unrealized losses,

23,104

thousand were

related to

securities that were

rated investment

grade by at

least one nationally

recognized statistical

rating agency.

The

94,376

thousand of unrealized losses related

to fixed maturity securities in

an unrealized loss position for

than one year related

primarily to domestic and

foreign corporate

securities, foreign government

securities and

agency residential

mortgage-backed securities.

Of these

unrealized losses,

73,144

thousand were

related to

securities that were rated investment

grade by at least one nationally recognized

statistical rating agency.

There

was

gross unrealized depreciation

for mortgage-backed securities

related to sub-prime and

alt-A loans.

In all

instances, there were no

projected cash flow shortfalls to

recover the full book value

of the investments and the

related interest obligations.

The mortgage-backed securities still have

excess credit coverage

and are current on

interest and principal payments.

Three Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Fixed maturities

136,104

130,139

407,946

383,440

Equity securities

4,402

4,147

11,585

12,250

Short-term investments and cash

494

3,899

4,356

13,497

Other invested assets

Limited partnerships

88,778

43,758

22,092

100,298

Other

14,742

7,286

(1,291)

13,565

Gross investment income before

adjustments

244,520

189,229

444,688

523,050

Funds held interest

income (expense)

684

2,325

10,921

9,715

Future policy benefit reserve income (expense)

(291)

(372)

(805)

(965)

Gross investment income

244,913

191,182

454,804

531,800

Investment expenses

(10,680)

(10,124)

(34,688)

(30,738)

Net investment income

234,233

181,058

420,116

501,062

The Company

records results

from limited

partnership investments

on the

equity method

of accounting

with

changes in value

reported through net

investment income.

Due to the

timing of receiving

financial information

from these

partnerships, the

results are

generally reported

on a

one month

or quarter

lag.

If the

Company

determines there has been a significant

decline in value of a limited partnership

during this lag period, a loss will

be recorded in the period in which the Company identifies the decline.

The Company had contractual commitments to

invest up to an additional $

1,464,947

thousand in limited

partnerships and

private placement

loans at

September 30,

2020.

These commitments

will be

funded when

called in

accordance with

the partnership

and loan

agreements, which

have investment

periods that

expire,

unless extended, through

2026

The Company participates in

a private placement

liquidity sweep facility (“the

facility”).

The primary purpose of

the facility

is to

enhance the Company’s

return on

its short-term

investments and

cash positions.

The facility

invests in high quality,

short-duration securities and

permits daily liquidity.

The Company consolidates its

participation in the

facility.

As of September

30, 2020, the

market value of

investments in

the facility

consolidated within the Company’s balance sheets was $

1,101,256

thousand.

The components of net realized capital gains (losses) are presented in the tables below for

the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Fixed maturity securities, market value:

Allowance for credit losses

6,196

(19,641)

Other-than-temporary impairments

(7,314)

(15,404)

Gains (losses) from sales

5,398

5,290

941

16,660

Fixed maturity securities, fair value:

Gains (losses) from sales

(1,968)

356

Gains (losses) from fair value adjustments

3,339

1,944

Equity securities, fair value:

Gains (losses) from sales

(1,317)

(1,192)

(12,642)

2,541

Gains (losses) from fair value adjustments

96,673

(12,008)

114,364

102,795

Other invested assets

1,084

2,098

2,341

Short-term investments gain

(loss)

798

183

1,215

259

Total net realized

capital gains (losses)

110,203

(12,943)

84,263

109,561

Roll Forward of Allowance for Credit Losses

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Foreign

Corporate

Government

Corporate

Government

Corporate

Securities

Total

Securities

Total

(Dollars in thousands)

Beginning Balance

(22,253)

(92)

(3,492)

(25,837)

Credit losses on securities where credit

losses were not previously recorded

(6)

(144)

(150)

(27,666)

(519)

(4,699)

(32,884)

Increases in allowance on previously

impaired securities

(5,354)

(27)

(181)

(5,562)

(6,136)

(27)

(481)

(6,644)

Decreases in allowance on previously

impaired securities

159

151

310

3,590

212

844

4,646

Reduction in allowance due to disposals

9,980

1,618

11,598

12,738

215

2,288

15,241

Balance as of September 30, 2020

(17,474)

(119)

(2,048)

(19,641)

(17,474)

(119)

(2,048)

(19,641)

The Company

recorded as

net realized

capital gains

(losses) in the

consolidated statements

of operations

and

comprehensive income

(loss) fair

value re-measurements,

allowances for

credit losses

per ASU

2016-13 and

write-downs in the value of securities deemed to

be impaired on an other-than-temporary basis in prior years

displayed in the table

above.

The Company had no other-than-temporary

impaired securities where the

impairment had both a credit and non-credit component.

The proceeds

and split

between gross

gains and

losses, from

sales of fixed

maturity and

equity securities, are

presented in the table below for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Proceeds from sales of fixed maturity securities

402,528

271,025

1,392,801

2,591,938

Gross gains from sales

18,721

14,270

54,077

42,316

Gross losses from sales

(15,291)

(8,980)

(55,104)

(25,300)

Proceeds from sales of equity securities

116,565

35,924

329,750

185,157

Gross gains from sales

9,512

1,035

30,268

9,286

Gross losses from sales

(10,829)

(2,227)

(42,910)

(6,745)