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Investments
 6 Months Ended
Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
Investments

3. Investments

A. Fixed maturities

The amortized cost and fair value of available-for-sale fixed maturities were as follows:

 

 

 

June 30, 2022

 

 

 

 

 

 

 

 

 

Amortized Cost,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance

 

 

Net of Allowance

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

for Credit

 

 

for Credit

 

 

Unrealized

 

 

Unrealized

 

 

 

 

(in millions)

 

Cost

 

 

Losses

 

 

Losses

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasury and government agencies

 

$

414.2

 

 

$

—

 

 

$

414.2

 

 

$

0.6

 

 

$

39.0

 

 

$

375.8

 

Foreign government

 

 

2.2

 

 

 

—

 

 

 

2.2

 

 

 

—

 

 

 

—

 

 

 

2.2

 

Municipal

 

 

1,208.8

 

 

 

—

 

 

 

1,208.8

 

 

 

3.6

 

 

 

111.6

 

 

 

1,100.8

 

Corporate

 

 

3,977.1

 

 

 

(2.2

)

 

 

3,974.9

 

 

 

5.1

 

 

 

281.7

 

 

 

3,698.3

 

Residential mortgage-backed

 

 

1,074.0

 

 

 

—

 

 

 

1,074.0

 

 

 

0.3

 

 

 

88.9

 

 

 

985.4

 

Commercial mortgage-backed

 

 

881.6

 

 

 

—

 

 

 

881.6

 

 

 

—

 

 

 

58.4

 

 

 

823.2

 

Asset-backed

 

 

276.0

 

 

 

—

 

 

 

276.0

 

 

 

0.1

 

 

 

17.1

 

 

 

259.0

 

Total fixed maturities

 

$

7,833.9

 

 

$

(2.2

)

 

$

7,831.7

 

 

$

9.7

 

 

$

596.7

 

 

$

7,244.7

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Amortized Cost,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance

 

 

Net of Allowance

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

for Credit

 

 

for Credit

 

 

Unrealized

 

 

Unrealized

 

 

 

 

(in millions)

 

Cost

 

 

Losses

 

 

Losses

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Treasury and government agencies

 

$

394.3

 

 

$

—

 

 

$

394.3

 

 

$

9.3

 

 

$

7.4

 

 

$

396.2

 

Foreign government

 

 

2.2

 

 

 

—

 

 

 

2.2

 

 

 

0.4

 

 

 

—

 

 

 

2.6

 

Municipal

 

 

1,176.2

 

 

 

—

 

 

 

1,176.2

 

 

 

32.6

 

 

 

8.0

 

 

 

1,200.8

 

Corporate

 

 

3,931.5

 

 

 

(0.3

)

 

 

3,931.2

 

 

 

174.5

 

 

 

15.6

 

 

 

4,090.1

 

Residential mortgage-backed

 

 

1,068.2

 

 

 

—

 

 

 

1,068.2

 

 

 

12.4

 

 

 

11.0

 

 

 

1,069.6

 

Commercial mortgage-backed

 

 

802.4

 

 

 

—

 

 

 

802.4

 

 

 

26.6

 

 

 

4.6

 

 

 

824.4

 

Asset-backed

 

 

140.3

 

 

 

—

 

 

 

140.3

 

 

 

1.3

 

 

 

1.4

 

 

 

140.2

 

Total fixed maturities

 

$

7,515.1

 

 

$

(0.3

)

 

$

7,514.8

 

 

$

257.1

 

 

$

48.0

 

 

$

7,723.9

 

 

The Company deposits funds with various state and governmental authorities. For a discussion of the Company’s deposits with state and governmental authorities, see also Note 2 – “Investments” in the Notes to Consolidated Financial Statements in the Company’s 2021 Annual Report on Form 10-K.

The amortized cost and fair value by maturity periods for fixed maturities are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

 

 

 

June 30, 2022

 

 

 

Amortized Cost, Net

 

 

 

 

 

 

of Allowance for

 

 

Fair

 

(in millions)

 

Credit Losses

 

 

Value

 

Due in one year or less

 

$

244.2

 

 

$

244.3

 

Due after one year through five years

 

 

2,131.0

 

 

 

2,083.5

 

Due after five years through ten years

 

 

2,740.0

 

 

 

2,431.4

 

Due after ten years

 

 

484.9

 

 

 

417.9

 

 

 

 

5,600.1

 

 

 

5,177.1

 

Mortgage-backed and asset-backed securities

 

 

2,231.6

 

 

 

2,067.6

 

Total fixed maturities

 

$

7,831.7

 

 

$

7,244.7

 

 

B. Fixed maturity securities in an unrealized loss position

The following tables provide information about the Company’s available-for-sale fixed maturity securities that were in an unrealized loss position at June 30, 2022 and December 31, 2021, including the length of time the securities have been in an unrealized loss position:

 

 

 

June 30, 2022

 

 

 

12 months or less

 

 

Greater than 12 months

 

 

Total

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

(in millions)

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

$

14.4

 

 

$

232.3

 

 

$

24.6

 

 

$

116.9

 

 

$

39.0

 

 

$

349.2

 

Foreign governments

 

 

—

 

 

 

2.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.0

 

Municipal

 

 

109.8

 

 

 

931.7

 

 

 

1.8

 

 

 

8.2

 

 

 

111.6

 

 

 

939.9

 

Corporate

 

 

210.2

 

 

 

2,786.1

 

 

 

27.6

 

 

 

110.9

 

 

 

237.8

 

 

 

2,897.0

 

Residential mortgage-backed

 

 

77.3

 

 

 

890.1

 

 

 

11.6

 

 

 

51.3

 

 

 

88.9

 

 

 

941.4

 

Commercial mortgage-backed

 

 

50.9

 

 

 

777.4

 

 

 

7.5

 

 

 

38.9

 

 

 

58.4

 

 

 

816.3

 

Asset-backed

 

 

17.1

 

 

 

228.3

 

 

 

—

 

 

 

—

 

 

 

17.1

 

 

 

228.3

 

Total investment grade

 

 

479.7

 

 

 

5,847.9

 

 

 

73.1

 

 

 

326.2

 

 

 

552.8

 

 

 

6,174.1

 

Below investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

41.3

 

 

 

323.1

 

 

 

2.6

 

 

 

8.5

 

 

 

43.9

 

 

 

331.6

 

Total fixed maturities

 

$

521.0

 

 

$

6,171.0

 

 

$

75.7

 

 

$

334.7

 

 

$

596.7

 

 

$

6,505.7

 

 

 

 

 

December 31, 2021

 

 

 

12 months or less

 

 

Greater than 12 months

 

 

Total

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

Gross

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

(in millions)

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

$

2.3

 

 

$

98.0

 

 

$

5.1

 

 

$

101.3

 

 

$

7.4

 

 

$

199.3

 

Municipal

 

 

7.9

 

 

 

480.8

 

 

 

0.1

 

 

 

2.5

 

 

 

8.0

 

 

 

483.3

 

Corporate

 

 

13.6

 

 

 

599.6

 

 

 

0.4

 

 

 

7.5

 

 

 

14.0

 

 

 

607.1

 

Residential mortgage-backed

 

 

11.0

 

 

 

653.5

 

 

 

—

 

 

 

—

 

 

 

11.0

 

 

 

653.5

 

Commercial mortgage-backed

 

 

4.6

 

 

 

204.0

 

 

 

—

 

 

 

—

 

 

 

4.6

 

 

 

204.0

 

Asset-backed

 

 

1.4

 

 

 

91.5

 

 

 

—

 

 

 

—

 

 

 

1.4

 

 

 

91.5

 

Total investment grade

 

 

40.8

 

 

 

2,127.4

 

 

 

5.6

 

 

 

111.3

 

 

 

46.4

 

 

 

2,238.7

 

Below investment grade:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

1.6

 

 

 

95.8

 

 

 

—

 

 

 

—

 

 

 

1.6

 

 

 

95.8

 

Total fixed maturities

 

$

42.4

 

 

$

2,223.2

 

 

$

5.6

 

 

$

111.3

 

 

$

48.0

 

 

$

2,334.5

 

 

The Company views gross unrealized losses on fixed maturities as non-credit related and through its assessment of unrealized losses has determined that these securities will recover, allowing the Company to realize the anticipated long-term economic value. The Company currently does not intend to sell, nor does it expect to be required to sell these securities before recovery of their amortized cost. The Company employs a systematic methodology to evaluate declines in fair value below amortized cost for fixed maturity securities. In determining impairments, the Company evaluates several factors and circumstances, including the issuer’s overall financial condition; the issuer’s credit and financial strength ratings; the issuer’s financial performance, including earnings trends and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the degree to which the fair value of an issuer’s securities is below the Company’s amortized cost. The Company also considers any factors that might raise doubt about the issuer’s ability to make contractual payments as they come due and whether the Company expects to recover the entire amortized cost basis of the security.

C. Proceeds from sales

The proceeds from sales of available-for-sale fixed maturities and gross realized gains and gross realized losses on those sales were as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

205.1

 

 

$

34.7

 

 

$

273.7

 

 

$

252.1

 

Gross gains

 

 

0.2

 

 

 

1.0

 

 

 

1.8

 

 

 

3.9

 

Gross losses

 

 

20.3

 

 

 

0.2

 

 

 

20.8

 

 

 

7.4

 

 

D. Impairments

For the three months ended June 30, 2022, the Company recognized a net recovery of $0.3 million, consisting of recoveries on mortgage loans of $1.8 million, partially offset by impairments on fixed maturities of $1.5 million. For the six months ended June 30, 2022, the Company recognized net impairments of $0.6 million, consisting of impairments on fixed maturities of $2.4 million, partially offset by recoveries on mortgage loans of $1.8 million. For the three and six months ended June 30, 2021, the Company recognized impairments on fixed maturities of $0.2 million.

At June 30, 2022 and December 31, 2021, the allowance for credit losses on mortgage loans was $5.2 and $7.1 million respectively, and the allowance for credit losses on available-for-sale debt securities was $2.2 million and $0.3 million, respectively.

The methodology and significant inputs used to measure the amount of credit losses were as follows:

Fixed maturities, Corporate bonds – the Company utilized a financial model that derives expected cash flows based on probability-of-default factors by credit rating and asset duration, and loss-given-default factors based on security type. These factors are based on historical data provided by an independent third-party rating agency. In addition, other qualitative market data relevant to the realizability of contractual cash flows may be considered, including current conditions and reasonable and supportable forecasts.

 

E. Equity securities

The following table provides pre-tax net realized and unrealized gains (losses) on equity securities:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in millions)

2022

 

 

2021

 

 

2022

 

 

2021

 

Net gains (losses) recognized during the period

$

(59.0

)

 

$

26.5

 

 

$

(77.0

)

 

$

65.6

 

Less: net gains (losses) recognized on equity securities sold during
     the period

 

(9.2

)

 

 

(0.1

)

 

 

(8.7

)

 

 

0.5

 

Net unrealized gains (losses) recognized during the period on equity
     securities still held

$

(49.8

)

 

$

26.6

 

 

$

(68.3

)

 

$

65.1