Debt and Equity Securities

3 Months Ended

Mar. 31, 2019

Investments Debt And Equity Securities [Abstract]

Note 3 – Debt and Equity Securities

Investments in debt securities, classified as available-for-sale, are as follows:

(in thousands)	Amortized cost		Gross unrealized					Estimated fair value
(in thousands)	Amortized cost		Gains		Losses			Estimated fair value
March 31, 2019
U.S. Treasury bonds	$	148,860	$	1,278	$	(324	)	$	149,814
Municipal bonds		1,058,106		22,510		(2,197	)		1,078,419
Foreign government bonds		152,539		1,285		(472	)		153,352
Governmental agency bonds		352,350		2,577		(2,372	)		352,555
Governmental agency mortgage-backed securities		3,331,671		24,421		(20,810	)		3,335,282
U.S. corporate debt securities		596,614		7,677		(4,456	)		599,835
Foreign corporate debt securities		288,738		2,987		(1,637	)		290,088
	$	5,928,878	$	62,735	$	(32,268	)	$	5,959,345
December 31, 2018
U.S. Treasury bonds	$	162,904	$	741	$	(1,139	)	$	162,506
Municipal bonds		1,050,134		7,210		(12,309	)		1,045,035
Foreign government bonds		158,885		571		(2,159	)		157,297
Governmental agency bonds		319,115		1,145		(4,093	)		316,167
Governmental agency mortgage-backed securities		3,219,585		12,030		(29,016	)		3,202,599
U.S. corporate debt securities		575,646		1,113		(15,499	)		561,260
Foreign corporate debt securities		274,881		551		(6,485	)		268,947
	$	5,761,150	$	23,361	$	(70,700	)	$	5,713,811

Sales of debt securities resulted in realized gains of $3.1 million and $0.7 million, realized losses of $3.0 million and $1.2 million, and proceeds of $391.4 million and $155.7 million for the three months ended March 31, 2019 and 2018, respectively.

Gross unrealized losses on investments in debt securities are as follows:

	Less than 12 months					12 months or longer					Total
(in thousands)	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
March 31, 2019
U.S. Treasury bonds	$	2,243	$	(5	)	$	39,855	$	(319	)	$	42,098	$	(324	)
Municipal bonds		8,130		(10	)		258,588		(2,187	)		266,718		(2,197	)
Foreign government bonds		18,842		(85	)		30,536		(387	)		49,378		(472	)
Governmental agency bonds		37,180		(188	)		107,168		(2,184	)		144,348		(2,372	)
Governmental agency mortgage-backed securities		789,483		(4,251	)		1,115,558		(16,559	)		1,905,041		(20,810	)
U.S. corporate debt securities		147,143		(2,324	)		149,021		(2,132	)		296,164		(4,456	)
Foreign corporate debt securities		52,285		(469	)		79,731		(1,168	)		132,016		(1,637	)
	$	1,055,306	$	(7,332	)	$	1,780,457	$	(24,936	)	$	2,835,763	$	(32,268	)
December 31, 2018
U.S. Treasury bonds	$	19,749	$	(85	)	$	55,615	$	(1,054	)	$	75,364	$	(1,139	)
Municipal bonds		172,387		(1,772	)		369,139		(10,537	)		541,526		(12,309	)
Foreign government bonds		23,654		(1,037	)		42,119		(1,122	)		65,773		(2,159	)
Governmental agency bonds		56,270		(748	)		90,631		(3,345	)		146,901		(4,093	)
Governmental agency mortgage-backed securities		850,459		(6,955	)		982,610		(22,061	)		1,833,069		(29,016	)
U.S. corporate debt securities		374,473		(10,537	)		109,844		(4,962	)		484,317		(15,499	)
Foreign corporate debt securities		175,762		(4,575	)		50,802		(1,910	)		226,564		(6,485	)
	$	1,672,754	$	(25,709	)	$	1,700,760	$	(44,991	)	$	3,373,514	$	(70,700	)

Based on the Company’s review of its debt securities in an unrealized loss position at March 31, 2019, it determined that the losses were primarily the result of changes in interest rates, which were considered to be temporary, rather than a deterioration in credit quality. The Company does not intend to sell and it is not more likely than not that the Company will be required to sell these securities prior to recovering their amortized cost. As such, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2019.

Investments in debt securities at March 31, 2019, by contractual maturities, are as follows:

(in thousands)	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
U.S. Treasury bonds
Amortized cost	$	77,616	$	59,440	$	109	$	11,695	$	148,860
Estimated fair value	$	77,629	$	59,405	$	135	$	12,645	$	149,814
Municipal bonds
Amortized cost	$	70,623	$	172,540	$	250,240	$	564,703	$	1,058,106
Estimated fair value	$	70,741	$	173,669	$	255,697	$	578,312	$	1,078,419
Foreign government bonds
Amortized cost	$	12,427	$	110,708	$	21,071	$	8,333	$	152,539
Estimated fair value	$	12,419	$	111,507	$	21,321	$	8,105	$	153,352
Governmental agency bonds
Amortized cost	$	24,404	$	123,819	$	151,773	$	52,354	$	352,350
Estimated fair value	$	24,297	$	123,194	$	153,607	$	51,457	$	352,555
U.S. corporate debt securities
Amortized cost	$	40,749	$	284,110	$	246,706	$	25,049	$	596,614
Estimated fair value	$	40,671	$	285,483	$	247,694	$	25,987	$	599,835
Foreign corporate debt securities
Amortized cost	$	26,900	$	170,011	$	80,814	$	11,013	$	288,738
Estimated fair value	$	26,880	$	170,424	$	81,624	$	11,160	$	290,088
Total debt securities excluding mortgage-backed securities
Amortized cost	$	252,719	$	920,628	$	750,713	$	673,147	$	2,597,207
Estimated fair value	$	252,637	$	923,682	$	760,078	$	687,666	$	2,624,063
Total mortgage-backed securities
Amortized cost									$	3,331,671
Estimated fair value									$	3,335,282
Total debt securities
Amortized cost									$	5,928,878
Estimated fair value									$	5,959,345

Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity as borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

Investments in equity securities are as follows:

(in thousands)	Cost		Estimated fair value
March 31, 2019
Preferred stocks	$	17,082	$	13,888
Common stocks		305,857		330,902
	$	322,939	$	344,790
December 31, 2018
Preferred stocks	$	16,892	$	14,162
Common stocks		341,460		339,373
	$	358,352	$	353,535

Net gains (realized and unrealized) of $32.5 million and net losses (realized and unrealized) of $5.9 million were recognized for the three months ended March 31, 2019 and 2018, respectively, as a result of changes in the fair values of equity securities. Included in net gains during the three months ended March 31, 2019 were net unrealized gains of $29.0 million related to equity securities still held at March 31, 2019, and included in net losses during the three months ended March 31, 2018 were net unrealized losses of $6.5 million related to equity securities still held at March 31, 2018.

The composition of the investment portfolio at March 31, 2019, by credit rating, is as follows:

	A- or higher				BBB+ to BBB-				Non-Investment Grade				Total
(in thousands, except percentages)	Estimated fair value		Percentage		Estimated fair value		Percentage		Estimated fair value		Percentage		Estimated fair value		Percentage
Debt securities:
U.S. Treasury bonds	$	149,814		100.0	$	—		—	$	—		—	$	149,814		100.0
Municipal bonds		1,028,992		95.4		43,349		4.0		6,078		0.6		1,078,419		100.0
Foreign government bonds		132,570		86.5		17,369		11.3		3,413		2.2		153,352		100.0
Governmental agency bonds		352,555		100.0		—		—		—		—		352,555		100.0
Governmental agency mortgage-backed securities		3,335,282		100.0		—		—		—		—		3,335,282		100.0
U.S. corporate debt securities		249,623		41.6		196,564		32.8		153,648		25.6		599,835		100.0
Foreign corporate debt securities		121,150		41.7		140,931		48.6		28,007		9.7		290,088		100.0
Total debt securities		5,369,986		90.1		398,213		6.7		191,146		3.2		5,959,345		100.0
Preferred stocks		49		0.4		12,629		90.9		1,210		8.7		13,888		100.0
Total	$	5,370,035		89.9	$	410,842		6.9	$	192,356		3.2	$	5,973,233		100.0

Included in debt securities at March 31, 2019, were bank loans totaling $148.9 million, of which $136.4 million were non-investment grade; high yield corporate debt securities totaling $38.7 million, all of which were non-investment grade; and emerging market debt securities totaling $69.8 million, of which $10.0 million were non-investment grade.

The composition of the debt securities portfolio in an unrealized loss position at March 31, 2019, by credit rating, is as follows:

	A- or higher				BBB+ to BBB-				Non-Investment Grade				Total
(in thousands, except percentages)	Estimated fair value		Percentage		Estimated fair value		Percentage		Estimated fair value		Percentage		Estimated fair value		Percentage
U.S. Treasury bonds	$	42,098		100.0	$	—		—	$	—		—	$	42,098		100.0
Municipal bonds		261,506		98.1		2,970		1.1		2,242		0.8		266,718		100.0
Foreign government bonds		33,358		67.5		14,643		29.7		1,377		2.8		49,378		100.0
Governmental agency bonds		144,348		100.0		—		—		—		—		144,348		100.0
Governmental agency mortgage-backed securities		1,905,041		100.0		—		—		—		—		1,905,041		100.0
U.S. corporate debt securities		104,171		35.1		72,752		24.6		119,241		40.3		296,164		100.0
Foreign corporate debt securities		47,648		36.1		64,909		49.2		19,459		14.7		132,016		100.0
Total	$	2,538,170		89.5	$	155,274		5.5	$	142,319		5.0	$	2,835,763		100.0

Debt securities in an unrealized loss position at March 31, 2019, included bank loans totaling $134.9 million, of which $124.8 million were non-investment grade; high yield corporate debt securities totaling $11.2 million, all of which were non-investment grade; and emerging market debt securities totaling $29.5 million, of which $4.1 million were non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency mortgage-backed securities are not rated by any of the ratings agencies; however, these securities have been included in the above table in the “A- or higher” rating category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.