| Investments |
2. INVESTMENTS Our investments are primarily composed of fixed income debt securities and common stock equity securities. We carry our equity securities at fair value and categorize all of our debt securities as available-for-sale, which are carried at fair value. Realized gains and losses on disposition of investments are based on the specific identification of the investments sold on the settlement date. The following is a summary of the disposition of fixed income and equity securities for the six-month periods ended June 30, 2025 and 2024: | | | | | | | | | | | | | Sales | | Proceeds | | Gross Realized | | Net Realized | (in thousands) | | From Sales | | Gains | | Losses | | Gain (Loss) | 2025 | | | | | | | | | | | | | Fixed income securities - available-for-sale | | $ | 29,579 | | $ | 188 | | $ | (1,000) | | $ | (812) | Equity securities | | | 55,251 | | | 30,034 | | | (562) | | | 29,472 | 2024 | | | | | | | | | | | | | Fixed income securities - available-for-sale | | $ | 41,543 | | $ | 357 | | $ | (1,139) | | $ | (782) | Equity securities | | | 31,473 | | | 13,344 | | | (340) | | | 13,004 | | | | | | | | | | | | | | Calls/Maturities | | | | | Gross Realized | | Net Realized | (in thousands) | | Proceeds | | Gains | | Losses | | Gain (Loss) | 2025 | | | | | | | | | | | | | Fixed income securities - available-for-sale | | $ | 241,380 | | $ | 62 | | $ | (72) | | $ | (10) | 2024 | | | | | | | | | | | | | Fixed income securities - available-for-sale | | $ | 158,472 | | $ | 79 | | $ | (856) | | $ | (777) |
FAIR VALUE MEASUREMENTS Assets measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 are summarized below: | | | | | | | | | | | | | | | As of June 30, 2025 | | | Quoted Prices in | | Significant Other | | Significant | | | | | | Active Markets for | | Observable | | Unobservable | | | | | | Identical Assets | | Inputs | | Inputs | | | | (in thousands) | | (Level 1) | | (Level 2) | | (Level 3) | | Total | Fixed income securities - available-for-sale | | | | | | | | | | | | | U.S. government | | $ | — | | $ | 702,072 | | $ | — | | $ | 702,072 | U.S. agency | | | — | | | 55,998 | | | — | | | 55,998 | Non-U.S. government & agency | | | — | | | 11,089 | | | 999 | | | 12,088 | Agency MBS | | | — | | | 398,548 | | | — | | | 398,548 | ABS/CMBS/MBS* | | | — | | | 418,389 | | | — | | | 418,389 | Corporate | | | — | | | 1,309,630 | | | 96,297 | | | 1,405,927 | Municipal | | | — | | | 427,739 | | | — | | | 427,739 | Total fixed income securities - available-for-sale | | $ | — | | $ | 3,323,465 | | $ | 97,296 | | $ | 3,420,761 | Equity securities | | | 806,721 | | | — | | | 4,238 | | | 810,959 | Total | | $ | 806,721 | | $ | 3,323,465 | | $ | 101,534 | | $ | 4,231,720 |
| | | | | | | | | | | | | | | As of December 31, 2024 | | | Quoted Prices in | | Significant Other | | Significant | | | | | | Active Markets for | | Observable | | Unobservable | | | | | | Identical Assets | | Inputs | | Inputs | | | | (in thousands) | | (Level 1) | | (Level 2) | | (Level 3) | | Total | Fixed income securities - available-for-sale | | | | | | | | | | | | | U.S. government | | $ | — | | $ | 515,635 | | $ | — | | $ | 515,635 | U.S. agency | | | — | | | 54,338 | | | — | | | 54,338 | Non-U.S. government & agency | | | — | | | 6,898 | | | 973 | | | 7,871 | Agency MBS | | | — | | | 396,223 | | | — | | | 396,223 | ABS/CMBS/MBS* | | | — | | | 410,248 | | | — | | | 410,248 | Corporate | | | — | | | 1,256,991 | | | 89,530 | | | 1,346,521 | Municipal | | | — | | | 444,960 | | | — | | | 444,960 | Total fixed income securities - available-for-sale | | $ | — | | $ | 3,085,293 | | $ | 90,503 | | $ | 3,175,796 | Equity securities | | | 731,569 | | | — | | | 4,622 | | | 736,191 | Total | | $ | 731,569 | | $ | 3,085,293 | | $ | 95,125 | | $ | 3,911,987 |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
The following table summarizes changes in the balance of securities whose fair value was measured using significant unobservable inputs (Level 3). | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | | 2025 | | 2024 | | 2025 | | 2024 | Beginning balance | | $ | 98,945 | | $ | 64,169 | | $ | 95,125 | | $ | 62,096 | Net realized and unrealized gains (losses) | | | | | | | | | | | | | Included in other comprehensive earnings (loss) | | | 899 | | | (44) | | | 1,792 | | | (315) | Purchases | | | 3,028 | | | 9,575 | | | 8,098 | | | 12,310 | Sales / Calls / Maturities | | | (1,338) | | | (1,020) | | | (3,481) | | | (1,411) | Transfers into Level 3 | | | — | | | — | | | — | | | — | Transfers out of Level 3 | | | — | | | — | | | — | | | — | Balance as of June 30, | | $ | 101,534 | | $ | 72,680 | | $ | 101,534 | | $ | 72,680 | Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings (loss) | | $ | 899 | | $ | (44) | | $ | 1,792 | | $ | (315) |
The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of June 30, 2025 were as follows: | | | | | | | | | June 30, 2025 | (in thousands) | | Amortized Cost | | Fair Value | Due in one year or less | | $ | 246,543 | | $ | 244,682 | Due after one year through five years | | | 819,878 | | | 812,427 | Due after five years through 10 years | | | 1,085,099 | | | 1,078,613 | Due after 10 years | | | 556,171 | | | 468,102 | ABS/CMBS/MBS* | | | 865,988 | | | 816,937 | Total available-for-sale | | $ | 3,573,679 | | $ | 3,420,761 |
* | Asset-backed, commercial mortgage-backed and mortgage-backed securities |
The amortized cost and fair value of available-for-sale securities at June 30, 2025 and December 31, 2024 are presented in the tables below. Amortized cost does not include accrued interest receivable of $30 million as of June 30, 2025 and $27 million as of December 31, 2024. | | | | | | | | | | | | | | | | | | June 30, 2025 | | | Cost or | | Allowance | | Gross | | Gross | | | | | | Amortized | | for Credit | | Unrealized | | Unrealized | | Fair | (in thousands) | | Cost | | Losses | | Gains | | Losses | | Value | U.S. government | | $ | 698,528 | | $ | — | | $ | 6,173 | | $ | (2,629) | | $ | 702,072 | U.S. agency | | | 56,151 | | | — | | | 780 | | | (933) | | | 55,998 | Non-U.S. government & agency | | | 12,729 | | | — | | | 135 | | | (776) | | | 12,088 | Agency MBS | | | 431,849 | | | — | | | 2,268 | | | (35,569) | | | 398,548 | ABS/CMBS/MBS* | | | 434,139 | | | (77) | | | 3,008 | | | (18,681) | | | 418,389 | Corporate | | | 1,430,965 | | | (168) | | | 11,450 | | | (36,320) | | | 1,405,927 | Municipal | | | 509,318 | | | — | | | 328 | | | (81,907) | | | 427,739 | Total Fixed Income | | $ | 3,573,679 | | $ | (245) | | $ | 24,142 | | $ | (176,815) | | $ | 3,420,761 | | | | | | | | | | | | | | | | | | | December 31, 2024 | | | Cost or | | Allowance | | Gross | | Gross | | | | | | Amortized | | for Credit | | Unrealized | | Unrealized | | Fair | (in thousands) | | Cost | | Losses | | Gains | | Losses | | Value | U.S. government | | $ | 525,608 | | $ | — | | $ | 309 | | $ | (10,282) | | $ | 515,635 | U.S. agency | | | 55,921 | | | — | | | 261 | | | (1,844) | | | 54,338 | Non-U.S. government & agency | | | 8,959 | | | — | | | — | | | (1,088) | | | 7,871 | Agency MBS | | | 438,545 | | | — | | | 927 | | | (43,249) | | | 396,223 | ABS/CMBS/MBS* | | | 430,973 | | | (8) | | | 2,208 | | | (22,925) | | | 410,248 | Corporate | | | 1,397,676 | | | (189) | | | 4,737 | | | (55,703) | | | 1,346,521 | Municipal | | | 533,477 | | | — | | | 1,003 | | | (89,520) | | | 444,960 | Total Fixed Income | | $ | 3,391,159 | | $ | (197) | | $ | 9,445 | | $ | (224,611) | | $ | 3,175,796 |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
Allowance for Credit Losses and Unrealized Losses on Fixed Income Securities A reversible allowance for credit losses is recognized on available-for-sale fixed income securities, if applicable. Several criteria are reviewed to determine if securities in the fixed income portfolio should be included in the allowance for expected credit loss evaluation, including: | ● | Changes in technology that may impair the earnings potential of the investment, |
| ● | The discontinuance of a segment of business that may affect future earnings potential, |
| ● | Reduction of or non-payment of interest and/or principal, |
| ● | Specific concerns related to the issuer’s industry or geographic area of operation, |
| ● | Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and |
| ● | Downgrades in credit quality by a major rating agency. |
If changes in interest rates and credit spreads do not reasonably explain the unrealized loss for an available-for-sale security, or if any of the criteria above indicate a potential credit loss, the security is subjected to a discounted cash flow analysis. Inputs into the discounted cash flow analysis include prepayment assumptions for structured securities, default rates and recoverability rates based on credit rating. The allowance for any security is limited to the amount that the security’s fair value is below amortized cost. As of June 30, 2025, the discounted cash flow analysis resulted in an allowance for credit losses on 9 securities. The following table presents changes in the allowance for expected credit losses on available-for-sale securities: | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | | 2025 | | 2024 | | 2025 | | 2024 | Beginning balance | | $ | 157 | | $ | 237 | | $ | 197 | | $ | 306 | Increase to allowance from securities for which credit losses were not previously recorded | | | 16 | | | — | | | 16 | | | — | Reduction from securities sold during the period | | | (2) | | | (27) | | | — | | | (89) | Reductions from intent to sell securities | | | (15) | | | — | | | — | | | — | Net increase (decrease) from securities that had an allowance at the beginning of the period | | | 89 | | | 18 | | | 32 | | | 11 | Balance as of June 30, | | $ | 245 | | $ | 228 | | $ | 245 | | $ | 228 |
We recognized less than $1 million of losses on securities for which we no longer had the intent to hold until recovery during the first six months of 2025. No such losses were recognized during the first six months of 2024. As of June 30, 2025, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 1,133 securities with an unrealized loss position for which an allowance for credit losses had not been recorded. The $177 million in associated unrealized losses represents 5 percent of the fixed income portfolio’s cost basis and 4 percent of total invested assets. Isolated to these securities, unrealized losses decreased through the first six months of 2025, as bonds rallied on falling interest rates. Of the total 1,133 securities, 932 have been in an unrealized loss position for 12 consecutive months or longer. The following table illustrates the total value of fixed income securities that were in an unrealized loss position as of June 30, 2025 and December 31, 2024 after factoring in the allowance for credit losses. All fixed income securities continue to pay the expected coupon payments and we believe we will recover the amortized cost basis of available-for-sale securities that remain in an unrealized loss position. | | | | | | | | | | | | | | | | | | | | | June 30, 2025 | | December 31, 2024 | (in thousands) | | < 12 Mos. | | 12 Mos. &
Greater | | Total | | < 12 Mos. | | 12 Mos. &
Greater | | Total | U.S. government | | | | | | | | | | | | | | | | | | | Fair value | | $ | 60,991 | | $ | 120,340 | | $ | 181,331 | | $ | 303,226 | | $ | 157,418 | | $ | 460,644 | Amortized cost | | | 61,484 | | | 122,476 | | | 183,960 | | | 309,836 | | | 161,090 | | | 470,926 | Unrealized loss | | $ | (493) | | $ | (2,136) | | $ | (2,629) | | $ | (6,610) | | $ | (3,672) | | $ | (10,282) | U.S. agency | | | | | | | | | | | | | | | | | | | Fair value | | $ | 14,696 | | $ | 18,686 | | $ | 33,382 | | $ | 24,024 | | $ | 18,330 | | $ | 42,354 | Amortized cost | | | 15,031 | | | 19,284 | | | 34,315 | | | 24,910 | | | 19,288 | | | 44,198 | Unrealized loss | | $ | (335) | | $ | (598) | | $ | (933) | | $ | (886) | | $ | (958) | | $ | (1,844) | Non-U.S. government | | | | | | | | | | | | | | | | | | | Fair value | | $ | 2,392 | | $ | 4,028 | | $ | 6,420 | | $ | 4,075 | | $ | 3,796 | | $ | 7,871 | Amortized cost | | | 2,395 | | | 4,801 | | | 7,196 | | | 4,158 | | | 4,801 | | | 8,959 | Unrealized Loss | | $ | (3) | | $ | (773) | | $ | (776) | | $ | (83) | | $ | (1,005) | | $ | (1,088) | Agency MBS | | | | | | | | | | | | | | | | | | | Fair value | | $ | 68,809 | | $ | 227,415 | | $ | 296,224 | | $ | 108,772 | | $ | 233,625 | | $ | 342,397 | Amortized cost | | | 70,136 | | | 261,657 | | | 331,793 | | | 111,674 | | | 273,972 | | | 385,646 | Unrealized loss | | $ | (1,327) | | $ | (34,242) | | $ | (35,569) | | $ | (2,902) | | $ | (40,347) | | $ | (43,249) | ABS/CMBS/MBS* | | | | | | | | | | | | | | | | | | | Fair value | | $ | 17,352 | | $ | 157,095 | | $ | 174,447 | | $ | 43,027 | | $ | 164,433 | | $ | 207,460 | Amortized cost | | | 17,402 | | | 175,726 | | | 193,128 | | | 43,395 | | | 186,990 | | | 230,385 | Unrealized loss | | $ | (50) | | $ | (18,631) | | $ | (18,681) | | $ | (368) | | $ | (22,557) | | $ | (22,925) | Corporate | | | | | | | | | | | | | | | | | | | Fair value | | $ | 215,519 | | $ | 593,018 | | $ | 808,537 | | $ | 378,305 | | $ | 700,574 | | $ | 1,078,879 | Amortized cost | | | 221,224 | | | 623,633 | | | 844,857 | | | 389,299 | | | 745,283 | | | 1,134,582 | Unrealized loss | | $ | (5,705) | | $ | (30,615) | | $ | (36,320) | | $ | (10,994) | | $ | (44,709) | | $ | (55,703) | Municipal | | | | | | | | | | | | | | | | | | | Fair value | | $ | 26,009 | | $ | 360,306 | | $ | 386,315 | | $ | 48,514 | | $ | 355,475 | | $ | 403,989 | Amortized cost | | | 26,703 | | | 441,519 | | | 468,222 | | | 49,491 | | | 444,018 | | | 493,509 | Unrealized loss | | $ | (694) | | $ | (81,213) | | $ | (81,907) | | $ | (977) | | $ | (88,543) | | $ | (89,520) | Total fixed income | | | | | | | | | | | | | | | | | | | Fair value | | $ | 405,768 | | $ | 1,480,888 | | $ | 1,886,656 | | $ | 909,943 | | $ | 1,633,651 | | $ | 2,543,594 | Amortized cost | | | 414,375 | | | 1,649,096 | | | 2,063,471 | | | 932,763 | | | 1,835,442 | | | 2,768,205 | Unrealized loss | | $ | (8,607) | | $ | (168,208) | | $ | (176,815) | | $ | (22,820) | | $ | (201,791) | | $ | (224,611) |
* | Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities |
The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at June 30, 2025 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s. | | | | | | | | | | | | | | | | | | | Equivalent | | Equivalent | | (dollars in thousands) | | | | NAIC | | S&P | | Moody’s | | Amortized | | | | | Unrealized | | Percent | | Rating | | Rating | | Rating | | Cost | | Fair Value | | Loss | | to Total | | 1 | | AAA/AA/A | | Aaa/Aa/A | | $ | 1,693,968 | | $ | 1,534,547 | | $ | (159,421) | | 90.2 | % | 2 | | BBB | | Baa | | | 321,576 | | | 306,145 | | | (15,431) | | 8.7 | % | 3 | | BB | | Ba | | | 18,928 | | | 18,533 | | | (395) | | 0.2 | % | 4 | | B | | B | | | 24,173 | | | 23,343 | | | (830) | | 0.5 | % | 5 | | CCC | | Caa | | | 4,006 | | | 3,601 | | | (405) | | 0.2 | % | 6 | | CC or lower | | Ca or lower | | | 820 | | | 487 | | | (333) | | 0.2 | % | | | | | Total | | $ | 2,063,471 | | $ | 1,886,656 | | $ | (176,815) | | 100.0 | % |
Other Invested Assets We had $57 million of other invested assets at June 30, 2025, compared to $58 million at December 31, 2024. Other invested assets include investments in low-income housing tax credit partnerships (LIHTC) and historic tax credit partnerships (HTC), membership in the Federal Home Loan Bank of Chicago (FHLBC), and investments in private funds. Our LIHTC and HTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC, HTC and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investment’s net asset value. Our LIHTC interests increased to $11 million at June 30, 2025, compared to $7 million at December 31, 2024, as additional investments were made. Our LIHTC interests recognized amortization of $1 million as a component of income tax expense and a total tax benefit of $1 million during the second quarter of 2025 and 2024. For the six-months ended June 30, 2025 and 2024, our LIHTC interests recognized amortization of $1 million and a total tax benefit of $1 million. Our unfunded commitment for our LIHTC investments was $5 million at June 30, 2025 and will be paid out in installments through 2039. Our HTC investment had a balance of $13 million at June 30, 2025, compared to $15 million at December 31, 2024. Our HTC investment recognized $1 million of amortization as a component of income tax expense and a total tax benefit of $1 million during the second quarter of 2025 and 2024. For the six-months ended June 30, 2025, our HTC investment recognized amortization of $2 million and a total tax benefit of $2 million, compared to $2 million of amortization and a total tax benefit of $3 million for the same period in 2024. Our unfunded commitment for our HTC investments was $4 million at June 30, 2025 and will be paid out in installments through 2027. At June 30, 2025, $55 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides. At June 30, 2025, $50 million of borrowings were outstanding with the FHLBC. Our investments in private funds totaled $18 million at June 30, 2025, down from $24 million at December 31, 2024, and had $3 million of associated unfunded commitments at June 30, 2025. Our interest in private funds is generally restricted from being transferred or otherwise redeemed without prior consent by the respective entities, and the timed dissolution of the partnerships would trigger redemption. Investments in Unconsolidated Investees We had $61 million of investments in unconsolidated investees at June 30, 2025, compared to $56 million at December 31, 2024. At June 30, 2025, our investment in Prime Holdings Insurance Services, Inc. (Prime) was $61 million and other investments in unconsolidated investees totaled less than $1 million. Cash and Short-Term Investments Cash consists of uninvested balances in bank accounts. Short-term investments consist of investments with original maturities of 90 days or less, primarily AAA-rated government money market funds. Short-term investments are carried at cost. We had a cash and short-term investment balance of $21 million and $116 million, respectively, at June 30, 2025, compared to $40 million and $75 million, respectively, at December 31, 2024.
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