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Investments

3 Months Ended

Mar. 31, 2022

3. INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:


	March 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	302,835	$	1,239	$	7,071	$	0	$	297,003
Obligations of U.S. states and their political subdivisions	604,286		17,194		12,308		0		609,172
Foreign government bonds	333,824		10,697		17,993		399		326,129
U.S. public corporate securities	4,973,499		115,899		316,620		0		4,772,778
U.S. private corporate securities	2,136,230		15,758		100,031		2,482		2,049,475
Foreign public corporate securities	994,201		8,921		68,260		1,177		933,685
Foreign private corporate securities	3,001,495		8,711		204,953		16,667		2,788,586
Asset-backed securities(1)	624,560		486		7,251		0		617,795
Commercial mortgage-backed securities	598,640		6,048		24,296		0		580,392
Residential mortgage-backed securities(2)	50,525		727		1,402		0		49,850
Total fixed maturities, available-for-sale	$	13,620,095	$	185,680	$	760,185	$	20,725	$	13,024,865

(1)Includes credit-tranched securities collateralized by loan obligations, education loans, auto loans and other asset types.

(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	303,040	$	31,011	$	111	$	0	$	333,940
Obligations of U.S. states and their political subdivisions	584,244		46,978		701		0		630,521
Foreign government bonds	324,454		29,299		3,271		11		350,471
U.S. public corporate securities	4,794,878		366,764		29,770		0		5,131,872
U.S. private corporate securities	1,964,767		59,037		16,880		2,049		2,004,875
Foreign public corporate securities	906,031		34,234		10,363		0		929,902
Foreign private corporate securities	2,741,449		62,932		48,381		2,089		2,753,911
Asset-backed securities(1)	547,549		860		1,099		0		547,310
Commercial mortgage-backed securities	552,653		25,928		3,397		0		575,184
Residential mortgage-backed securities(2)	18,684		1,501		5		0		20,180
Total fixed maturities, available-for-sale	$	12,737,749	$	658,544	$	113,978	$	4,149	$	13,278,166

(1)Includes credit-tranched securities collateralized by loan obligations, education loans, auto loans and other asset types.

(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:


	March 31, 2022
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	275,075	$	6,836	$	1,983	$	235	$	277,058	$	7,071
Obligations of U.S. states and their political subdivisions	141,153		12,308		0		0		141,153		12,308
Foreign government bonds	178,805		12,942		27,715		5,051		206,520		17,993
U.S. public corporate securities	2,921,652		278,141		201,571		38,479		3,123,223		316,620
U.S. private corporate securities	1,451,948		95,558		23,847		4,473		1,475,795		100,031
Foreign public corporate securities	697,013		56,679		79,629		10,775		776,642		67,454
Foreign private corporate securities	2,394,846		194,856		57,609		10,094		2,452,455		204,950
Asset-backed securities	575,329		7,199		6,750		52		582,079		7,251
Commercial mortgage-backed securities	305,947		18,064		49,414		6,232		355,361		24,296
Residential mortgage-backed securities	38,622		1,402		0		0		38,622		1,402
Total fixed maturities, available-for-sale	$	8,980,390	$	683,985	$	448,518	$	75,391	$	9,428,908	$	759,376


	December 31, 2021
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	0	$	2,119	$	111	$	2,119	$	111
Obligations of U.S. states and their political subdivisions	104,621		701		0		0		104,621		701
Foreign government bonds	59,550		2,826		6,473		371		66,023		3,197
U.S. public corporate securities	1,681,201		23,160		180,249		6,610		1,861,450		29,770
U.S. private corporate securities	972,796		14,036		16,409		2,844		989,205		16,880
Foreign public corporate securities	532,445		8,255		29,718		2,108		562,163		10,363
Foreign private corporate securities	1,253,739		42,392		57,637		5,616		1,311,376		48,008
Asset-backed securities	288,971		1,099		0		0		288,971		1,099
Commercial mortgage-backed securities	157,355		1,622		40,689		1,775		198,044		3,397
Residential mortgage-backed securities	1,393		5		0		0		1,393		5
Total fixed maturities, available-for-sale	$	5,052,071	$	94,096	$	333,294	$	19,435	$	5,385,365	$	113,531

As of March 31, 2022 and December 31, 2021, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $686.1 million and $95.1 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $73.3 million and $18.4 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of March 31, 2022, the $75.4 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the finance, utility and consumer non-cyclical sectors. As of December 31, 2021, the $19.4 million of gross unrealized losses of twelve months or more were concentrated in the Company's corporate securities within the utility, finance and consumer non-cyclical sectors.

In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at March 31, 2022. This conclusion was based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of March 31, 2022, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:


	March 31, 2022
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	387,461	$	370,463
Due after one year through five years	2,790,499		2,674,504
Due after five years through ten years	3,360,474		3,117,495
Due after ten years	5,807,936		5,614,366
Asset-backed securities	624,560		617,795
Commercial mortgage-backed securities	598,640		580,392
Residential mortgage-backed securities	50,525		49,850
Total fixed maturities, available-for-sale	$	13,620,095	$	13,024,865

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	274,429	$	33,749
Proceeds from maturities/prepayments	120,361		74,085
Gross investment gains from sales and maturities	(706)		352
Gross investment losses from sales and maturities	(19,442)		(2,569)

Write-downs recognized in earnings(2)	3		(2)
(Addition to) release of allowance for credit losses	(16,576)		(519)

(1)Excludes activities from non-cash related proceeds due to the timing of trade settlements of $2.3 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

(2)Amounts represent write-downs of credit adverse securities and securities actively marketed for sale.

The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the dates indicated:


	Three Months Ended March 31, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in thousands)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	11	$	4,138	$	0	$	0	$	0	$	4,149
Additions to allowance for credit losses not previously recorded	0		329		9,258		0		0		0		9,587

Reductions for securities sold during the period	0		(3)		0		0		0		0		(3)

Addition (reductions) on securities with previous allowance	0		62		6,930		0		0		0		6,992


Balance, end of period	$	0	$	399	$	20,326	$	0	$	0	$	0	$	20,725


	Three Months Ended March 31, 2021
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in thousands)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	0	$	2,339	$	0	$	0	$	0	$	2,339


Reductions for securities sold during the period	0		0		(11)		0		0		0		(11)

Addition (reductions) on securities with previous allowance	0		0		530		0		0		0		530


Balance, end of period	$	0	$	0	$	2,858	$	0	$	0	$	0	$	2,858

See Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company’s methodology for developing our allowance for credit losses.

For the three months ended March 31, 2022, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to adverse projected cash flows in the communication and foreign agency sectors within corporate securities. For the three months ended March 31, 2021, the net increase in the allowance for credit losses on available-for-sale securities was primarily related to adverse projected cash flows on securities in the utility and communication sectors within private corporate securities.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of both March 31, 2022 and December 31, 2021.

Fixed Maturities, Trading

The net change in unrealized gains (losses) from fixed maturities, trading still held at period end, recorded within “Other income (loss),” was $(336.4) million and $(2.7) million during the three months ended March 31, 2022 and 2021, respectively.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was $(4.1) million and $(0.5) million during the three months ended March 31, 2022 and 2021, respectively.

Commercial Mortgage and Other Loans

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:


	March 31, 2022				December 31, 2021
	Amount (in thousands)		% of Total		Amount (in thousands)		% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	806,466	27.0	%	$	748,414	26.4	%
Hospitality	47,529		1.7		48,141		1.7
Industrial	994,566		33.3		916,398		32.2
Office	454,299		15.2		445,055		15.7
Other	257,859		8.6		252,590		8.9
Retail	229,353		7.7		255,577		9.0
Total commercial mortgage loans	2,790,072		93.5		2,666,175		93.9
Agricultural property loans	193,512		6.5		172,336		6.1
Total commercial mortgage and agricultural property loans	2,983,584		100.0	%	2,838,511		100.0	%
Allowance for credit losses	(6,446)				(5,951)
Total net commercial mortgage and agricultural property loans	$	2,977,138			$	2,832,560

As of March 31, 2022, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (24%), Texas (11%) and New York (6%)) and included loans secured by properties in Europe (14%), Australia (3%) and Mexico (3%).

The following table sets forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:



	Three Months Ended March 31,
	2022				2021
	Commercial Mortgage Loans		Agricultural Property Loans		Total		Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)





Allowance, beginning of period	$	5,847	$	104	$	5,951	$	4,546	$	6	$	4,552


Addition to (release of) allowance for expected losses	477		18		495		(237)		(1)		(238)




Allowance, end of period	$	6,324	$	122	$	6,446	$	4,309	$	5	$	4,314

See Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company's methodology for developing our allowance and expected losses.

For the three months ended March 31, 2022, the net increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to loan originations. For the three months ended March 31, 2021, the decrease in the allowance for credit losses on commercial mortgage and other loans was reflecting the improving credit environment.

The following tables set forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:


	March 31, 2022
	Amortized Cost by Origination Year
	2022		2021		2020		2019		2018		Prior		Total
	(in thousands)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	0	$	47,159	$	0	$	177,478	$	75,987	$	643,413	$	944,037
60%-69.99%	40,360		307,625		235,943		290,954		170,351		261,320		1,306,553
70%-79.99%	132,705		163,009		75,332		72,412		13,728		81,343		538,529
80% or greater	0		0		0		0		0		953		953
Total	$	173,065	$	517,793	$	311,275	$	540,844	$	260,066	$	987,029	$	2,790,072
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	173,065	$	500,852	$	195,538	$	478,368	$	253,238	$	884,585	$	2,485,646
1.0 - 1.2x	0		16,941		109,430		39,338		6,828		45,716		218,253
Less than 1.0x	0		0		6,307		23,138		0		56,728		86,173
Total	$	173,065	$	517,793	$	311,275	$	540,844	$	260,066	$	987,029	$	2,790,072
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	25,000	$	98,527	$	26,363	$	16,181	$	6,452	$	20,989	$	193,512
60%-69.99%	0		0		0		0		0		0		0
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	25,000	$	98,527	$	26,363	$	16,181	$	6,452	$	20,989	$	193,512
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	25,000	$	98,527	$	26,363	$	16,181	$	6,452	$	20,174	$	192,697
1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	0		0		0		0		0		815		815
Total	$	25,000	$	98,527	$	26,363	$	16,181	$	6,452	$	20,989	$	193,512


	December 31, 2021
	Amortized Cost by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
	(in thousands)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	47,161	$	0	$	179,682	$	76,656	$	126,934	$	553,022	$	983,455
60%-69.99%	307,999		225,330		289,322		170,444		126,159		116,654		1,235,908
70%-79.99%	163,451		86,083		75,185		13,728		55,032		51,203		444,682
80% or greater	0		0		0		0		958		1,172		2,130
Total	$	518,611	$	311,413	$	544,189	$	260,828	$	309,083	$	722,051	$	2,666,175
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	501,456	$	195,164	$	481,289	$	253,938	$	289,443	$	638,092	$	2,359,382
1.0 - 1.2x	17,155		109,862		39,577		6,890		7,100		39,213		219,797
Less than 1.0x	0		6,387		23,323		0		12,540		44,746		86,996
Total	$	518,611	$	311,413	$	544,189	$	260,828	$	309,083	$	722,051	$	2,666,175
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	98,579	$	26,581	$	16,226	$	6,463	$	8,372	$	16,115	$	172,336
60%-69.99%	0		0		0		0		0		0		0
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	98,579	$	26,581	$	16,226	$	6,463	$	8,372	$	16,115	$	172,336
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	98,579	$	26,581	$	16,226	$	6,463	$	8,372	$	15,300	$	171,521
1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	0		0		0		0		0		815		815
Total	$	98,579	$	26,581	$	16,226	$	6,463	$	8,372	$	16,115	$	172,336

See Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company’s commercial mortgage and other loans credit quality monitoring process.

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:


	March 31, 2022
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	2,790,072	$	0	$	0	$	0	$	2,790,072	$	0
Agricultural property loans	193,512		0		0		0		193,512		0

Total	$	2,983,584	$	0	$	0	$	0	$	2,983,584	$	0

(1)As of March 31, 2022, there were no loans in this category accruing interest.

(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.


	December 31, 2021
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	2,666,175	$	0	$	0	$	0	$	2,666,175	$	0
Agricultural property loans	172,336		0		0		0		172,336		0

Total	$	2,838,511	$	0	$	0	$	0	$	2,838,511	$	0

(1)As of December 31, 2021, there were no loans in this category accruing interest.

For both the three months ended March 31, 2022 and 2021, there were no commercial mortgage and other loans acquired, other than those through direct origination and there were no commercial mortgage and other loans sold.

The Company did not have any commercial mortgage and other loans purchased with credit deterioration, as of both March 31, 2022 and December 31, 2021.

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in thousands)
Company’s investment in separate accounts	$	793	$	53,694
LPs/LLCs:
Equity method:
Private equity	298,562		286,141
Hedge funds	440,490		432,749
Real estate-related	96,504		89,337
Subtotal equity method	835,556		808,227
Fair value:
Private equity	67,984		69,137
Hedge funds	481		481
Real estate-related	10,230		9,861
Subtotal fair value	78,695		79,479
Total LPs/LLCs	914,251		887,706
Derivative instruments	202,416		268,525
Total other invested assets	$	1,117,460	$	1,209,925

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in thousands)
Fixed maturities	$	115,731	$	117,216
Equity securities	163		2
Commercial mortgage and other loans	7,954		7,025
Policy loans	14,456		35,153
Other invested assets	262		254
Short-term investments and cash equivalents	215		377

Total accrued investment income	$	138,781	$	160,027

There were no significant write-downs on accrued investment income for both the three months ended March 31, 2022 and 2021.

Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
Fixed maturities, available-for-sale	$	109,191	$	59,958
Fixed maturities, trading	15,565		531
Equity securities	162		103
Commercial mortgage and other loans	22,248		13,426
Policy loans	16,944		17,034
Other invested assets	24,912		13,073
Short-term investments and cash equivalents	648		127
Gross investment income	189,670		104,252
Less: investment expenses	(10,370)		(5,385)
Net investment income	$	179,300	$	98,867

Realized Investment Gains (Losses), Net

The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	(in thousands)
Fixed maturities(1)	$	(36,721)	$	(2,738)

Commercial mortgage and other loans	(603)		238
Other invested assets	1,642		22
Derivatives	820,053		79,091

Short-term investments and cash equivalents	(264)		(5)
Realized investment gains (losses), net	$	784,107	$	76,608

(1)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:


	March 31, 2022		December 31, 2021
	(in thousands)


Fixed maturity securities, available-for-sale with an allowance	$	2,063	$	3,685
Fixed maturity securities, available-for-sale without an allowance	(576,568)		540,881
Derivatives designated as cash flow hedges(1)	52,720		39,896
Affiliated notes	(5,992)		73
Other investments(2)	1,513		1,854
Net unrealized gains (losses) on investments	$	(526,264)	$	586,389

(1)For more information on cash flow hedges, see Note 4.

(2)Includes net unrealized gains (losses) on certain joint ventures that are strategic in nature and are included in "other assets".

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. As of both March 31, 2022 and December 31, 2021, the Company had no repurchase agreements.

The following table sets forth the composition of “Cash collateral for loaned securities,” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:


	March 31, 2022						December 31, 2021
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in thousands)



U.S. public corporate securities	$	2,696	$	0	$	2,696	$	3,004	$	0	$	3,004







Total cash collateral for loaned securities(1)	$	2,696	$	0	$	2,696	$	3,004	$	0	$	3,004

(1)The Company did not have any agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.