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Investments
 12 Months Ended
Dec. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Investments
Investments

a)The following tables summarize the Company's available-for-sale investments. Commercial and residential mortgage-backed securities include securities issued by U.S. government-sponsored enterprises and U.S. government agencies.

 
December 31, 2018
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Estimated
Fair
Value
Fixed maturities:
 
 
 
 
 
 
 
U.S. Treasury securities
$
248,286

 
$
308

 
$
(1,952
)
 
$
246,642

U.S. government-sponsored enterprises
357,765

 
5,671

 
(4,114
)
 
359,322

Obligations of states, municipalities and political subdivisions
4,285,068

 
96,730

 
(28,868
)
 
4,352,930

Foreign governments
1,482,826

 
98,356

 
(21,578
)
 
1,559,604

Commercial mortgage-backed securities
1,691,572

 
3,154

 
(44,527
)
 
1,650,199

Residential mortgage-backed securities
886,501

 
6,170

 
(12,499
)
 
880,172

Asset-backed securities
19,614

 
7

 
(213
)
 
19,408

Corporate bonds
979,141

 
13,234

 
(17,464
)
 
974,911

Total fixed maturities
9,950,773

 
223,630

 
(131,215
)
 
10,043,188

Short-term investments
1,080,027

 
443

 
(2,774
)
 
1,077,696

Investments, available-for-sale
$
11,030,800

 
$
224,073

 
$
(133,989
)
 
$
11,120,884

 
 
 
 
 
 
 
 
 
December 31, 2017
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Estimated
Fair
Value
Fixed maturities:
 
 
 
 
 
 
 
U.S. Treasury securities
$
162,378

 
$
54

 
$
(1,819
)
 
$
160,613

U.S. government-sponsored enterprises
352,455

 
11,883

 
(818
)
 
363,520

Obligations of states, municipalities and political subdivisions
4,381,358

 
193,120

 
(7,916
)
 
4,566,562

Foreign governments
1,341,628

 
150,010

 
(2,410
)
 
1,489,228

Commercial mortgage-backed securities
1,244,777

 
6,108

 
(16,559
)
 
1,234,326

Residential mortgage-backed securities
846,916

 
14,115

 
(4,863
)
 
856,168

Asset-backed securities
34,942

 
8

 
(222
)
 
34,728

Corporate bonds
1,186,699

 
51,563

 
(2,737
)
 
1,235,525

Total fixed maturities
9,551,153

 
426,861

 
(37,344
)
 
9,940,670

Equity securities: (1)
 
 
 
 
 
 
 
Insurance, banks and other financial institutions
899,324

 
1,209,162

 
(5,453
)
 
2,103,033

Industrial, consumer and all other
1,768,337

 
2,110,959

 
(14,482
)
 
3,864,814

Total equity securities
2,667,661

 
3,320,121

 
(19,935
)
 
5,967,847

Short-term investments
2,161,017

 
26

 
(69
)
 
2,160,974

Investments, available-for-sale
$
14,379,831

 
$
3,747,008

 
$
(57,348
)
 
$
18,069,491


(1) 
Effective January 1, 2018, the Company adopted ASU No. 2016-01 and equity securities are no longer classified as available-for-sale. Prior periods have not been restated to conform to the current presentation. See note 1.


b)The following tables summarize gross unrealized investment losses on available-for-sale investments by the length of time that securities have continuously been in an unrealized loss position.

 
December 31, 2018
 
Less than 12 months
 
12 months or longer
 
Total
(dollars in thousands)
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
 
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
 
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
2,922

 
$
(83
)
 
$
156,352

 
$
(1,869
)
 
$
159,274

 
$
(1,952
)
U.S. government-sponsored enterprises
88,854

 
(1,923
)
 
96,337

 
(2,191
)
 
185,191

 
(4,114
)
Obligations of states, municipalities and political subdivisions
656,573

 
(12,455
)
 
453,736

 
(16,413
)
 
1,110,309

 
(28,868
)
Foreign governments
419,764

 
(14,461
)
 
84,776

 
(7,117
)
 
504,540

 
(21,578
)
Commercial mortgage-backed securities
653,410

 
(10,128
)
 
709,971

 
(34,399
)
 
1,363,381

 
(44,527
)
Residential mortgage-backed securities
276,777

 
(3,685
)
 
242,949

 
(8,814
)
 
519,726

 
(12,499
)
Asset-backed securities
1,645

 
(11
)
 
17,030

 
(202
)
 
18,675

 
(213
)
Corporate bonds
313,164

 
(10,965
)
 
222,761

 
(6,499
)
 
535,925

 
(17,464
)
Total fixed maturities
2,413,109

 
(53,711
)
 
1,983,912

 
(77,504
)
 
4,397,021

 
(131,215
)
Short-term investments
197,643

 
(2,774
)
 
—

 
—

 
197,643

 
(2,774
)
Total
$
2,610,752

 
$
(56,485
)
 
$
1,983,912

 
$
(77,504
)
 
$
4,594,664

 
$
(133,989
)


At December 31, 2018, the Company held 1,005 available-for-sale securities with a total estimated fair value of $4.6 billion and gross unrealized losses of $134.0 million. Of these 1,005 securities, 541 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $2.0 billion and gross unrealized losses of $77.5 million. The Company does not intend to sell or believe it will be required to sell these available-for-sale securities before recovery of their amortized cost.

 
December 31, 2017
 
Less than 12 months
 
12 months or longer
 
Total
(dollars in thousands)
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
 
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
 
Estimated
Fair
Value
 
Gross 
Unrealized
Holding
Losses
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
78,756

 
$
(659
)
 
$
78,298

 
$
(1,160
)
 
$
157,054

 
$
(1,819
)
U.S. government-sponsored enterprises
11,593

 
(79
)
 
89,194

 
(739
)
 
100,787

 
(818
)
Obligations of states, municipalities and political subdivisions
80,654

 
(789
)
 
404,814

 
(7,127
)
 
485,468

 
(7,916
)
Foreign governments
31,752

 
(452
)
 
63,406

 
(1,958
)
 
95,158

 
(2,410
)
Commercial mortgage-backed securities
253,936

 
(1,980
)
 
481,216

 
(14,579
)
 
735,152

 
(16,559
)
Residential mortgage-backed securities
157,508

 
(1,345
)
 
148,960

 
(3,518
)
 
306,468

 
(4,863
)
Asset-backed securities
14,263

 
(123
)
 
15,165

 
(99
)
 
29,428

 
(222
)
Corporate bonds
149,345

 
(863
)
 
187,754

 
(1,874
)
 
337,099

 
(2,737
)
Total fixed maturities
777,807

 
(6,290
)
 
1,468,807

 
(31,054
)
 
2,246,614

 
(37,344
)
Equity securities: (1)
 
 
 
 
 
 
 
 
 
 
 
Insurance, banks and other financial institutions
60,848

 
(4,843
)
 
1,291

 
(610
)
 
62,139

 
(5,453
)
Industrial, consumer and all other
78,552

 
(11,798
)
 
11,243

 
(2,684
)
 
89,795

 
(14,482
)
Total equity securities
139,400

 
(16,641
)
 
12,534

 
(3,294
)
 
151,934

 
(19,935
)
Short-term investments
369,104

 
(69
)
 
—

 
—

 
369,104

 
(69
)
Total
$
1,286,311

 
$
(23,000
)
 
$
1,481,341

 
$
(34,348
)
 
$
2,767,652

 
$
(57,348
)

(1) 
Effective January 1, 2018, the Company adopted ASU No. 2016-01 and equity securities are no longer classified as available-for-sale. Prior periods have not been restated to conform to the current presentation. See note 1.

At December 31, 2017, the Company held 739 securities with a total estimated fair value of $2.8 billion and gross unrealized losses of $57.3 million. Of these 739 securities, 272 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $1.5 billion and gross unrealized losses of $34.3 million. Of these securities, 258 securities were fixed maturities and 14 were equity securities.

The Company completes a detailed analysis each quarter to assess whether the decline in the fair value of any investment below its cost basis is deemed other-than-temporary. All available-for-sale securities with unrealized losses are reviewed. The Company considers many factors in completing its quarterly review of securities with unrealized losses for other-than-temporary impairment, including the length of time and the extent to which fair value has been below cost and the financial condition and near-term prospects of the issuer.

For fixed maturities, the Company considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery, the implied yield-to-maturity, the credit quality of the issuer and the ability to recover all amounts outstanding when contractually due. For fixed maturities where the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, a decline in fair value is considered to be other-than-temporary and is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. If the decline in fair value of a fixed maturity below its amortized cost is considered to be other-than-temporary based upon other considerations, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the other-than-temporary impairment, which is recognized in net income, resulting in a new cost basis for the security. Any remaining decline in fair value represents the non-credit portion of the other-than-temporary impairment, which is recognized in other comprehensive income.

Prior to the adoption of ASU No. 2016-01, equity securities were considered available-for-sale and were included in the analysis of other than temporary impairments. For equity securities, the ability and intent to hold the security for a period of time sufficient to allow for anticipated recovery was considered. A decline in fair value of equity securities that was considered to be other-than-temporary was recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

c)The amortized cost and estimated fair value of fixed maturities at December 31, 2018 are shown below by contractual maturity.

(dollars in thousands)
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
377,745

 
$
376,564

Due after one year through five years
1,293,384

 
1,298,995

Due after five years through ten years
2,103,596

 
2,137,866

Due after ten years
3,578,361

 
3,679,984

 
7,353,086

 
7,493,409

Commercial mortgage-backed securities
1,691,572

 
1,650,199

Residential mortgage-backed securities
886,501

 
880,172

Asset-backed securities
19,614

 
19,408

Total fixed maturities
$
9,950,773

 
$
10,043,188



Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower. Based on expected maturities, the estimated average duration of fixed maturities at December 31, 2018 was 6.1 years.

d)The following table presents the components of net investment income.

 
Years Ended December 31,
(dollars in thousands)
2018
 
2017
 
2016
Interest:
 
 
 
 
 
Municipal bonds (tax-exempt)
$
80,016

 
$
87,768

 
$
88,654

Municipal bonds (taxable)
73,058

 
70,771

 
65,749

Other taxable bonds
159,329

 
145,085

 
144,752

Short-term investments, including overnight deposits
48,765

 
26,772

 
11,177

Dividends on equity securities
90,840

 
82,096

 
70,577

Income (loss) from equity method investments
(1,924
)
 
11,076

 
6,852

Other
881

 
(828
)
 
2,676

 
450,965

 
422,740

 
390,437

Investment expenses
(16,750
)
 
(17,031
)
 
(17,207
)
Net investment income
$
434,215

 
$
405,709

 
$
373,230



e)Cumulative credit losses recognized in net income on fixed maturities where other-than-temporary impairment was identified and a portion of the other-than-temporary impairment was included in other comprehensive income were $10.7 million for the year ended December 31, 2016. There were no such losses included in other comprehensive income (loss) for the years ended December 31, 2018 and 2017.

f)The following table presents net investment gains (losses) and the change in net unrealized gains on available-for-sale investments.

 
Years Ended December 31,
(dollars in thousands)
2018
 
2017
 
2016
Realized gains:
 
 
 
 
 
Sales and maturities of fixed maturities
$
4,221

 
$
5,525

 
$
5,160

Sales of equity securities (1)
—

 
40,113

 
70,177

Sales and maturities of short-term investments
1,604

 
—

 
—

Other
1,281

 
6,644

 
1,415

Total realized gains
7,106

 
52,282

 
76,752

Realized losses:
 
 
 
 
 
Sales and maturities of fixed maturities
(5,768
)
 
(1,983
)
 
(704
)
Sales of equity securities (1)
—

 
(1,830
)
 
(6,988
)
Sales and maturities of short-term investments
(10,545
)
 
(699
)
 
(522
)
Other-than-temporary impairments
—

 
(7,589
)
 
(18,355
)
Other
(2,767
)
 
(596
)
 
(1,827
)
Total realized losses
(19,080
)
 
(12,697
)
 
(28,396
)
Net realized investment gains (losses)
(11,974
)
 
39,585

 
48,356

Change in fair value of equity securities: (1)
 
 
 
 
 
Change in fair value of equity securities sold during the period
20,177

 
6,989

 
(3,990
)
Change in fair value of equity securities held at the end of the period
(445,799
)
 
(51,877
)
 
20,781

Change in fair value of equity securities (1)
(425,622
)
 
(44,888
)
 
16,791

Net investment gains (losses)
$
(437,596
)
 
$
(5,303
)
 
$
65,147

Change in net unrealized gains on available-for-sale investments included in other comprehensive income (loss):
 
 
 
 
 
Fixed maturities
$
(297,158
)
 
$
89,741

 
$
(56,534
)
Equity securities (1)
—

 
1,035,793

 
398,752

Short-term investments
(2,288
)
 
(94
)
 
(107
)
Net increase (decrease)
$
(299,446
)
 
$
1,125,440

 
$
342,111


(1) 
Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, equity securities are no longer classified as available-for-sale with unrealized gains and losses recognized in other comprehensive income; rather, all changes in the fair value of equity securities are now recognized in net income. Prior periods have not been restated to conform to the current presentation. See note 1. Prior to adopting ASU No. 2016-01, the Company recorded certain investments in equity securities at estimated fair value with changes in fair value recorded in net income.

g)Total restricted assets are included on the Company's consolidated balance sheets as follows.

 
December 31,
(dollars in thousands)
2018
 
2017
Investments
$
4,781,566

 
$
4,672,073

Restricted cash and cash equivalents
382,264

 
302,387

Total
$
5,163,830

 
$
4,974,460



The following table presents the components of restricted assets.
 
December 31,
(dollars in thousands)
2018
 
2017
Restricted assets held in trust or on deposit to support underwriting activities
$
4,780,613

 
$
4,624,998

Investments and cash and cash equivalents pledged as security for letters of credit
383,217

 
349,462

Total
$
5,163,830

 
$
4,974,460



h)At December 31, 2018 and 2017, investments in securities issued by the U.S. Treasury, U.S. government agencies and U.S. government-sponsored enterprises were the only investments in any one issuer that exceeded 10% of shareholders' equity.

At December 31, 2018, the Company's ten largest equity holdings represented $2.3 billion, or 41%, of the equity portfolio. Investments in the property and casualty insurance industry represented $1.0 billion, or 18%, of the equity portfolio at December 31, 2018. Investments in the property and casualty insurance industry included a $645.9 million investment in the common stock of Berkshire Hathaway Inc.