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Debt and Equity Securities
 9 Months Ended
Sep. 30, 2019
Investments Debt And Equity Securities [Abstract]  
Debt and Equity Securities

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

 

 

 

 

Gains

 

 

Losses

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bonds

 

$

208,873

 

 

$

984

 

 

$

(283

)

 

$

209,574

 

Municipal bonds

 

 

1,041,195

 

 

 

49,524

 

 

 

(129

)

 

 

1,090,590

 

Foreign government bonds

 

 

159,039

 

 

 

2,437

 

 

 

(116

)

 

 

161,360

 

Governmental agency bonds

 

 

364,815

 

 

 

8,736

 

 

 

(115

)

 

 

373,436

 

Governmental agency mortgage-backed securities

 

 

3,155,538

 

 

 

40,519

 

 

 

(9,900

)

 

 

3,186,157

 

U.S. corporate debt securities

 

 

564,505

 

 

 

19,278

 

 

 

(1,179

)

 

 

582,604

 

Foreign corporate debt securities

 

 

270,978

 

 

 

8,106

 

 

 

(384

)

 

 

278,700

 

 

 

$

5,764,943

 

 

$

129,584

 

 

$

(12,106

)

 

$

5,882,421

 

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 $3.3 million and $8.2 million, realized losses of $0.5 million and $5.2 million, and proceeds of $229.4 million and $852.1 million for the three and nine months ended September 30, 2019, respectively, and realized gains of $0.6 million and $1.9 million, realized losses of $3.1 million and $6.9 million, and proceeds of $183.1 million and $525.4 million for the three and nine months ended September 30, 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

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bonds

 

$

42,776

 

 

$

(271

)

 

$

4,925

 

 

$

(12

)

 

$

47,701

 

 

$

(283

)

Municipal bonds

 

 

42,084

 

 

 

(111

)

 

 

3,397

 

 

 

(18

)

 

 

45,481

 

 

 

(129

)

Foreign government bonds

 

 

26,049

 

 

 

(78

)

 

 

10,801

 

 

 

(38

)

 

 

36,850

 

 

 

(116

)

Governmental agency bonds

 

 

14,935

 

 

 

(32

)

 

 

32,537

 

 

 

(83

)

 

 

47,472

 

 

 

(115

)

Governmental agency mortgage-backed securities

 

 

581,727

 

 

 

(3,900

)

 

 

683,684

 

 

 

(6,000

)

 

 

1,265,411

 

 

 

(9,900

)

U.S. corporate debt securities

 

 

69,127

 

 

 

(668

)

 

 

13,933

 

 

 

(511

)

 

 

83,060

 

 

 

(1,179

)

Foreign corporate debt securities

 

 

18,494

 

 

 

(148

)

 

 

12,077

 

 

 

(236

)

 

 

30,571

 

 

 

(384

)

 

 

$

795,192

 

 

$

(5,208

)

 

$

761,354

 

 

$

(6,898

)

 

$

1,556,546

 

 

$

(12,106

)

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 September 30, 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 September 30, 2019.

 

Investments in debt securities at September 30, 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

 

$

76,388

 

 

$

103,981

 

 

$

24,067

 

 

$

4,437

 

 

$

208,873

 

Estimated fair value

 

$

76,438

 

 

$

104,782

 

 

$

24,035

 

 

$

4,319

 

 

$

209,574

 

Municipal bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

74,855

 

 

$

156,509

 

 

$

303,603

 

 

$

506,228

 

 

$

1,041,195

 

Estimated fair value

 

$

75,082

 

 

$

158,756

 

 

$

318,688

 

 

$

538,064

 

 

$

1,090,590

 

Foreign government bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

12,967

 

 

$

81,436

 

 

$

56,338

 

 

$

8,298

 

 

$

159,039

 

Estimated fair value

 

$

12,928

 

 

$

82,186

 

 

$

57,367

 

 

$

8,879

 

 

$

161,360

 

Governmental agency bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

30,394

 

 

$

119,642

 

 

$

140,215

 

 

$

74,564

 

 

$

364,815

 

Estimated fair value

 

$

30,427

 

 

$

120,701

 

 

$

144,471

 

 

$

77,837

 

 

$

373,436

 

U.S. corporate debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

45,800

 

 

$

300,810

 

 

$

184,908

 

 

$

32,987

 

 

$

564,505

 

Estimated fair value

 

$

45,867

 

 

$

308,609

 

 

$

192,169

 

 

$

35,959

 

 

$

582,604

 

Foreign corporate debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

25,623

 

 

$

169,666

 

 

$

66,489

 

 

$

9,200

 

 

$

270,978

 

Estimated fair value

 

$

25,656

 

 

$

172,679

 

 

$

70,301

 

 

$

10,064

 

 

$

278,700

 

Total debt securities excluding mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

$

266,027

 

 

$

932,044

 

 

$

775,620

 

 

$

635,714

 

 

$

2,609,405

 

Estimated fair value

 

$

266,398

 

 

$

947,713

 

 

$

807,031

 

 

$

675,122

 

 

$

2,696,264

 

Total mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,155,538

 

Estimated fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,186,157

 

Total debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,764,943

 

Estimated fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

5,882,421

 

 

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

 

September 30, 2019

 

 

 

 

 

 

 

 

Preferred stocks

 

$

18,487

 

 

$

14,262

 

Common stocks

 

 

369,852

 

 

 

402,226

 

 

 

$

388,339

 

 

$

416,488

 

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 $0.2 million and $41.6 million were recognized for the three and nine months ended September 30, 2019, respectively, as a result of changes in the fair values of equity securities.  Included in net gains during the three and nine months ended September 30, 2019, were net unrealized losses of $1.5 million and net unrealized gains of $35.9 million, respectively, related to equity securities still held at September 30, 2019.  Net gains of $14.2 million and $16.0 million were recognized for the three and nine months ended September 30, 2018, respectively, as a result of changes in the fair values of equity securities.  Included in net gains during the three and nine months ended September 30, 2018, were net unrealized gains of $14.1 million and $15.9 million, respectively, related to equity securities still held at September 30, 2018.  

The composition of the investment portfolio at September 30, 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

 

$

209,574

 

 

 

100.0

 

 

$

—

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

209,574

 

 

 

100.0

 

Municipal bonds

 

 

1,048,526

 

 

 

96.2

 

 

 

40,686

 

 

 

3.7

 

 

 

1,378

 

 

 

0.1

 

 

 

1,090,590

 

 

 

100.0

 

Foreign government bonds

 

 

141,959

 

 

 

87.9

 

 

 

13,820

 

 

 

8.6

 

 

 

5,581

 

 

 

3.5

 

 

 

161,360

 

 

 

100.0

 

Governmental agency bonds

 

 

373,436

 

 

 

100.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

373,436

 

 

 

100.0

 

Governmental agency mortgage-backed securities

 

 

3,186,157

 

 

 

100.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,186,157

 

 

 

100.0

 

U.S. corporate debt securities

 

 

251,999

 

 

 

43.2

 

 

 

236,341

 

 

 

40.6

 

 

 

94,264

 

 

 

16.2

 

 

 

582,604

 

 

 

100.0

 

Foreign corporate debt securities

 

 

104,526

 

 

 

37.5

 

 

 

151,605

 

 

 

54.4

 

 

 

22,569

 

 

 

8.1

 

 

 

278,700

 

 

 

100.0

 

Total debt securities

 

 

5,316,177

 

 

 

90.4

 

 

 

442,452

 

 

 

7.5

 

 

 

123,792

 

 

 

2.1

 

 

 

5,882,421

 

 

 

100.0

 

Preferred stocks

 

 

43

 

 

 

0.3

 

 

 

13,124

 

 

 

92.0

 

 

 

1,095

 

 

 

7.7

 

 

 

14,262

 

 

 

100.0

 

Total

 

$

5,316,220

 

 

 

90.2

 

 

$

455,576

 

 

 

7.7

 

 

$

124,887

 

 

 

2.1

 

 

$

5,896,683

 

 

 

100.0

 

Included in debt securities at September 30, 2019, were bank loans totaling $78.1 million, of which $68.1 million were non-investment grade; high yield corporate debt securities totaling $45.2 million, all of which were non-investment grade; and emerging market debt securities totaling $57.2 million, of which $9.1 million were non-investment grade.

 

The composition of the debt securities portfolio in an unrealized loss position at September 30, 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

 

$

47,701

 

 

 

100.0

 

 

$

—

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

47,701

 

 

 

100.0

 

Municipal bonds

 

 

43,010

 

 

 

94.6

 

 

 

2,471

 

 

 

5.4

 

 

 

—

 

 

 

—

 

 

 

45,481

 

 

 

100.0

 

Foreign government bonds

 

 

36,850

 

 

 

100.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

36,850

 

 

 

100.0

 

Governmental agency bonds

 

 

47,472

 

 

 

100.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

47,472

 

 

 

100.0

 

Governmental agency mortgage-backed securities

 

 

1,265,411

 

 

 

100.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,265,411

 

 

 

100.0

 

U.S. corporate debt securities

 

 

18,790

 

 

 

22.6

 

 

 

29,450

 

 

 

35.5

 

 

 

34,820

 

 

 

41.9

 

 

 

83,060

 

 

 

100.0

 

Foreign corporate debt securities

 

 

13,343

 

 

 

43.7

 

 

 

9,394

 

 

 

30.7

 

 

 

7,834

 

 

 

25.6

 

 

 

30,571

 

 

 

100.0

 

Total

 

$

1,472,577

 

 

 

94.6

 

 

$

41,315

 

 

 

2.7

 

 

$

42,654

 

 

 

2.7

 

 

$

1,556,546

 

 

 

100.0

 

Debt securities in an unrealized loss position at September 30, 2019, included bank loans totaling $29.7 million, of which $28.8 million were non-investment grade; high yield corporate debt securities totaling $13.7 million, all of which were non-investment grade; and emerging market debt securities totaling $0.5 million, of which $0.2 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.