Debt and Equity Securities

3 Months Ended

Mar. 31, 2021

Investments Debt And Equity Securities [Abstract]

Note 4 – Debt and Equity Securities

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

(in thousands)	Amortized cost		Allowance for credit losses			Gross unrealized					Estimated fair value
(in thousands)	Amortized cost		Allowance for credit losses			Gains		Losses			Estimated fair value
March 31, 2021
U.S. Treasury bonds	$	158,348	$	—		$	519	$	(2,750	)	$	156,117
Municipal bonds		1,406,091		—			65,205		(17,678	)		1,453,618
Foreign government bonds		206,289		—			2,604		(3,601	)		205,292
Governmental agency bonds		299,347		—			6,189		(2,031	)		303,505
Governmental agency mortgage-backed securities		3,993,429		—			56,030		(33,609	)		4,015,850
U.S. corporate debt securities		638,875		(104	)		26,746		(5,183	)		660,334
Foreign corporate debt securities		407,099		(5	)		13,813		(4,125	)		416,782
	$	7,109,478	$	(109	)	$	171,106	$	(68,977	)	$	7,211,498
December 31, 2020
U.S. Treasury bonds	$	80,172	$	—		$	778	$	(104	)	$	80,846
Municipal bonds		1,168,425		—			80,953		(570	)		1,248,808
Foreign government bonds		194,042		—			6,004		(516	)		199,530
Governmental agency bonds		254,248		—			9,869		(195	)		263,922
Governmental agency mortgage-backed securities		3,401,737		—			74,549		(1,668	)		3,474,618
U.S. corporate debt securities		637,808		(119	)		43,505		(497	)		680,697
Foreign corporate debt securities		384,572		(13	)		22,078		(236	)		406,401
	$	6,121,004	$	(132	)	$	237,736	$	(3,786	)	$	6,354,822

Sales of debt securities resulted in realized gains of $5.1 million and $6.2 million, realized losses of $0.4 million and $1.3 million, and proceeds of $191.4 million and $209.4 million for the three months ended March 31, 2021 and 2020, respectively.

Investments in debt securities in an unrealized loss position, based on length of time, 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, 2021
U.S. Treasury bonds	$	109,133	$	(2,750	)	$	—	$	—		$	109,133	$	(2,750	)
Municipal bonds		466,304		(17,569	)		2,391		(109	)		468,695		(17,678	)
Foreign government bonds		91,324		(3,601	)		—		—			91,324		(3,601	)
Governmental agency bonds		69,387		(2,031	)		—		—			69,387		(2,031	)
Governmental agency mortgage-backed securities		1,896,533		(33,607	)		709		(2	)		1,897,242		(33,609	)
U.S. corporate debt securities		165,797		(5,009	)		6,198		(174	)		171,995		(5,183	)
Foreign corporate debt securities		113,406		(4,075	)		3,372		(50	)		116,778		(4,125	)
	$	2,911,884	$	(68,642	)	$	12,670	$	(335	)	$	2,924,554	$	(68,977	)
December 31, 2020
U.S. Treasury bonds	$	7,744	$	(104	)	$	—	$	—		$	7,744	$	(104	)
Municipal bonds		74,045		(570	)		—		—			74,045		(570	)
Foreign government bonds		67,094		(516	)		—		—			67,094		(516	)
Governmental agency bonds		15,353		(195	)		—		—			15,353		(195	)
Governmental agency mortgage-backed securities		287,947		(1,089	)		100,473		(579	)		388,420		(1,668	)
U.S. corporate debt securities		42,508		(484	)		1,357		(13	)		43,865		(497	)
Foreign corporate debt securities		19,042		(232	)		276		(4	)		19,318		(236	)
	$	513,733	$	(3,190	)	$	102,106	$	(596	)	$	615,839	$	(3,786	)

Based on the Company’s review of its debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, it determined that the losses were due to non-credit factors. As such, the Company does not consider these securities to be credit impaired at March 31, 2021.

Activity in the allowance for credit losses on debt securities for the three months ended March 31, 2021 and 2020, is summarized as follows:

	Three Months Ended March 31,
(in thousands)		2021			2020
Balance at beginning of period	$	(132	)	$	—
Credit losses recognized during the period		—			(7,493	)
Net decreases to credit losses previously recognized		7			—
Reductions for securities sold/matured		16			—
Balance at end of period	$	(109	)	$	(7,493	)

Investments in debt securities at March 31, 2021, 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	$	44,026	$	73,336	$	24,774	$	16,212	$	158,348
Estimated fair value	$	44,451	$	73,186	$	23,789	$	14,691	$	156,117
Municipal bonds
Amortized cost		37,990		105,276		540,808		722,017		1,406,091
Estimated fair value		38,272		110,007		562,538		742,801		1,453,618
Foreign government bonds
Amortized cost		39,784		74,345		77,959		14,201		206,289
Estimated fair value		39,813		75,496		75,807		14,176		205,292
Governmental agency bonds
Amortized cost		23,877		143,684		52,930		78,856		299,347
Estimated fair value		24,068		146,765		53,574		79,098		303,505
U.S. corporate debt securities
Amortized cost		11,474		329,634		230,522		67,245		638,875
Estimated fair value		11,547		347,060		233,607		68,120		660,334
Foreign corporate debt securities
Amortized cost		12,807		223,422		124,604		46,266		407,099
Estimated fair value		12,927		232,283		125,873		45,699		416,782
Total debt securities excluding mortgage-backed securities
Amortized cost	$	169,958	$	949,697	$	1,051,597	$	944,797	$	3,116,049
Estimated fair value	$	171,078	$	984,797	$	1,075,188	$	964,585	$	3,195,648
Total mortgage-backed securities
Amortized cost										3,993,429
Estimated fair value										4,015,850
Total debt securities
Amortized cost									$	7,109,478
Estimated fair value									$	7,211,498

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, 2021
Preferred stocks	$	21,803	$	20,920
Common stocks		308,752		398,686
	$	330,555	$	419,606
December 31, 2020
Preferred stocks	$	22,163	$	19,479
Common stocks		354,157		444,647
	$	376,320	$	464,126

Net gains (realized and unrealized) of $19.1 million and net losses (realized and unrealized) of $82.5 million were recognized for the three months ended March 31, 2021 and 2020, respectively, as a result of changes in the fair values of equity securities. Included in net gains during the three months ended March 31, 2021 were net unrealized gains of $17.9 million related to equity securities still held at March 31, 2021, and included in net losses during the three months ended March 31, 2020 were net unrealized losses of $82.4 million related to equity securities still held at March 31, 2020.

The composition of the investment portfolio at March 31, 2021, 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	$	156,117		100.0	$	—		—	$	—		—	$	156,117		100.0
Municipal bonds		1,406,205		96.7		44,833		3.1		2,580		0.2		1,453,618		100.0
Foreign government bonds		190,399		92.7		12,069		5.9		2,824		1.4		205,292		100.0
Governmental agency bonds		303,505		100.0		—		—		—		—		303,505		100.0
Governmental agency mortgage-backed securities		4,015,850		100.0		—		—		—		—		4,015,850		100.0
U.S. corporate debt securities		246,251		37.3		336,566		51.0		77,517		11.7		660,334		100.0
Foreign corporate debt securities		147,967		35.5		236,995		56.9		31,820		7.6		416,782		100.0
Total debt securities		6,466,294		89.7		630,463		8.7		114,741		1.6		7,211,498		100.0
Preferred stocks		59		0.3		19,368		92.6		1,493		7.1		20,920		100.0
Total	$	6,466,353		89.4	$	649,831		9.0	$	116,234		1.6	$	7,232,418		100.0

Included in debt securities at March 31, 2021, were bank loans totaling $62.0 million, of which $58.2 million were non-investment grade; high yield corporate debt securities totaling $47.0 million, all of which were non-investment grade; and emerging market debt securities totaling $70.2 million, of which $7.0 million were non-investment grade.

The composition of the debt securities portfolio in an unrealized loss position at March 31, 2021, 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	$	109,133		100.0	$	—		—	$	—		—	$	109,133		100.0
Municipal bonds		462,004		98.6		6,691		1.4		—		—		468,695		100.0
Foreign government bonds		89,161		97.6		612		0.7		1,551		1.7		91,324		100.0
Governmental agency bonds		69,387		100.0		—		—		—		—		69,387		100.0
Governmental agency mortgage-backed securities		1,897,242		100.0		—		—		—		—		1,897,242		100.0
U.S. corporate debt securities		48,707		28.3		80,898		47.1		42,390		24.6		171,995		100.0
Foreign corporate debt securities		52,118		44.6		53,618		45.9		11,042		9.5		116,778		100.0
Total	$	2,727,752		93.3	$	141,819		4.8	$	54,983		1.9	$	2,924,554		100.0

Debt securities in an unrealized loss position at March 31, 2021, included bank loans totaling $32.9 million, of which $31.2 million were non-investment grade; high yield corporate debt securities totaling $21.5 million, all of which were non-investment grade; and emerging market debt securities totaling $15.4 million, of which $2.3 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.