EVEREST GROUP, LTD. - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED:
SEPTEMBER
30, 2009
|
Commission
file number:
1-15731
|
EVEREST RE GROUP,
LTD.
(Exact
name of registrant as specified in its charter)
Bermuda
|
98-0365432
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Wessex
House – 2nd
Floor
45
Reid Street
PO
Box HM 845
Hamilton
HM DX, Bermuda
441-295-0006
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive office)
Indicate
by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES
|
X
|
NO
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or shorter period that the registrant
was required to submit and post such files).
YES
|
NO
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
|
X
|
Accelerated
filer
|
||
Non-accelerated
filer
|
Smaller
reporting company
|
|||
(Do
not check if smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
|
NO
|
X
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Number
of Shares Outstanding
|
||||
Class
|
At November 1, 2009
|
|||
Common
Shares, $0.01 par value
|
60,382,170 |
EVEREST
RE GROUP, LTD
Form
10-Q
Page
PART
I
FINANCIAL
INFORMATION
Item
1.
|
Financial
Statements
|
|
1
|
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2
|
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3
|
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4
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5
|
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Item
2.
|
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27
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Item
3.
|
56
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Item
4.
|
57
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PART
II
OTHER
INFORMATION
Item
1.
|
57
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|
Item
1A.
|
57
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|
Item
2.
|
58
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|
Item
3.
|
58
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Item
4.
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58
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|
Item
5.
|
58
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Item
6.
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59
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PART
I
ITEM
1. FINANCIAL STATEMENTS
EVEREST
RE GROUP, LTD.
September
30,
|
December
31,
|
|||||||
(Dollars
in thousands, except par value per share)
|
2009
|
2008
|
||||||
(unaudited)
|
||||||||
ASSETS:
|
||||||||
Fixed
maturities - available for sale, at market value
|
$ | 12,637,625 | $ | 10,759,612 | ||||
(amortized
cost: 2009, $12,175,370; 2008, $10,932,076)
|
||||||||
Fixed
maturities - available for sale, at fair value
|
52,815 | 43,090 | ||||||
Equity
securities - available for sale, at market value (cost: 2009, $14,244;
2008, $14,915)
|
16,572 | 16,900 | ||||||
Equity
securities - available for sale, at fair value
|
158,456 | 119,829 | ||||||
Short-term
investments
|
1,340,481 | 1,889,799 | ||||||
Other
invested assets (cost: 2009, $644,320; 2008, $687,265)
|
642,025 | 679,356 | ||||||
Cash
|
265,075 | 205,694 | ||||||
Total
investments and cash
|
15,113,049 | 13,714,280 | ||||||
Accrued
investment income
|
149,193 | 149,215 | ||||||
Premiums
receivable
|
979,127 | 908,110 | ||||||
Reinsurance
receivables
|
625,138 | 657,169 | ||||||
Funds
held by reinsureds
|
382,062 | 331,817 | ||||||
Deferred
acquisition costs
|
367,663 | 354,992 | ||||||
Prepaid
reinsurance premiums
|
104,356 | 79,379 | ||||||
Deferred
tax asset
|
245,471 | 442,367 | ||||||
Federal
income taxes recoverable
|
44,810 | 32,295 | ||||||
Other
assets
|
118,022 | 176,966 | ||||||
TOTAL
ASSETS
|
$ | 18,128,891 | $ | 16,846,590 | ||||
LIABILITIES:
|
||||||||
Reserve
for losses and loss adjustment expenses
|
$ | 8,889,681 | $ | 8,840,660 | ||||
Future
policy benefit reserve
|
66,153 | 66,172 | ||||||
Unearned
premium reserve
|
1,467,392 | 1,335,511 | ||||||
Funds
held under reinsurance treaties
|
89,859 | 83,431 | ||||||
Losses
in the course of payment
|
47,219 | 45,654 | ||||||
Commission
reserves
|
41,877 | 52,460 | ||||||
Other
net payable to reinsurers
|
51,676 | 51,138 | ||||||
8.75%
Senior notes due 3/15/2010
|
199,931 | 199,821 | ||||||
5.4%
Senior notes due 10/15/2014
|
249,759 | 249,728 | ||||||
6.6%
Long term notes due 5/1/2067
|
238,347 | 399,643 | ||||||
Junior
subordinated debt securities payable
|
329,897 | 329,897 | ||||||
Accrued
interest on debt and borrowings
|
12,821 | 11,217 | ||||||
Equity
index put option liability
|
61,022 | 60,552 | ||||||
Unsettled
securities payable
|
157,305 | 1,476 | ||||||
Other
liabilities
|
141,000 | 158,875 | ||||||
Total
liabilities
|
12,043,939 | 11,886,235 | ||||||
Commitments
and contingencies (Note 8)
|
||||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Preferred
shares, par value: $0.01; 50 million shares authorized;
|
||||||||
no
shares issued and outstanding
|
- | - | ||||||
Common
shares, par value: $0.01; 200 million shares authorized; (2009) 65.8
million and
|
||||||||
(2008)
65.6 million issued
|
658 | 656 | ||||||
Additional
paid-in capital
|
1,836,342 | 1,824,552 | ||||||
Accumulated
other comprehensive income (loss), net of deferred income tax
expense
|
||||||||
of
$117.9 million at 2009 and tax benefit of $16.5 million at
2008
|
332,564 | (291,851 | ) | |||||
Treasury
shares, at cost; 5.4 million shares (2009) and 4.2 million shares
(2008)
|
(482,824 | ) | (392,329 | ) | ||||
Retained
earnings
|
4,398,212 | 3,819,327 | ||||||
Total
shareholders' equity
|
6,084,952 | 4,960,355 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 18,128,891 | $ | 16,846,590 | ||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
EVEREST
RE GROUP, LTD.
AND
COMPREHENSIVE INCOME (LOSS)
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
REVENUES:
|
||||||||||||||||
Premiums
earned
|
$ | 975,380 | $ | 931,859 | $ | 2,864,578 | $ | 2,785,927 | ||||||||
Net
investment income
|
165,387 | 164,478 | 401,350 | 490,527 | ||||||||||||
Net
realized capital gains (losses):
|
||||||||||||||||
Other-than-temporary
impairments on fixed maturity securities
|
- | (153,435 | ) | (13,210 | ) | (159,935 | ) | |||||||||
Other-than-temporary
impairments on fixed maturity securities
|
||||||||||||||||
transferred
to other comprehensive income
|
- | - | - | - | ||||||||||||
Other
net realized capital gains (losses)
|
31,063 | (139,930 | ) | 2,598 | (301,379 | ) | ||||||||||
Total
net realized capital gains (losses)
|
31,063 | (293,365 | ) | (10,612 | ) | (461,314 | ) | |||||||||
Realized
gain on debt repurchase
|
- | - | 78,271 | - | ||||||||||||
Net
derivative (expense) income
|
(2,118 | ) | 14,943 | (470 | ) | 13,228 | ||||||||||
Other
expense
|
(13,204 | ) | (8,243 | ) | (15,995 | ) | (23,570 | ) | ||||||||
Total
revenues
|
1,156,508 | 809,672 | 3,317,122 | 2,804,798 | ||||||||||||
CLAIMS
AND EXPENSES:
|
||||||||||||||||
Incurred
losses and loss adjustment expenses
|
587,247 | 813,668 | 1,723,937 | 1,963,760 | ||||||||||||
Commission,
brokerage, taxes and fees
|
229,257 | 218,045 | 684,509 | 689,905 | ||||||||||||
Other
underwriting expenses
|
48,937 | 40,335 | 134,409 | 120,307 | ||||||||||||
Interest,
fees and bond issue cost amortization expense
|
17,376 | 19,795 | 54,634 | 59,376 | ||||||||||||
Total
claims and expenses
|
882,817 | 1,091,843 | 2,597,489 | 2,833,348 | ||||||||||||
INCOME
(LOSS) BEFORE TAXES
|
273,691 | (282,171 | ) | 719,633 | (28,550 | ) | ||||||||||
Income
tax expense (benefit)
|
45,073 | (49,044 | ) | 109,871 | (26,383 | ) | ||||||||||
NET
INCOME (LOSS)
|
$ | 228,618 | $ | (233,127 | ) | $ | 609,762 | $ | (2,167 | ) | ||||||
Other
comprehensive income (loss), net of tax
|
376,448 | (248,664 | ) | 681,727 | (421,714 | ) | ||||||||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | 605,066 | $ | (481,791 | ) | $ | 1,291,489 | $ | (423,881 | ) | ||||||
EARNINGS
PER COMMON SHARE:
|
||||||||||||||||
Basic
|
$ | 3.76 | $ | (3.79 | ) | $ | 9.97 | $ | (0.04 | ) | ||||||
Diluted
|
$ | 3.75 | $ | (3.79 | ) | $ | 9.94 | $ | (0.04 | ) | ||||||
Dividends
declared
|
$ | 0.48 | $ | 0.48 | $ | 1.44 | $ | 1.44 | ||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
EVEREST
RE GROUP, LTD.
CHANGES
IN SHAREHOLDERS’ EQUITY
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
COMMON
SHARES (shares outstanding):
|
||||||||||||||||
Balance,
beginning of period
|
60,852,944 | 61,643,803 | 61,414,027 | 62,863,845 | ||||||||||||
Issued
during the period, net
|
36,647 | 66,278 | 183,464 | 176,536 | ||||||||||||
Treasury
shares acquired
|
(491,731 | ) | (302,000 | ) | (1,199,631 | ) | (1,632,300 | ) | ||||||||
Balance,
end of period
|
60,397,860 | 61,408,081 | 60,397,860 | 61,408,081 | ||||||||||||
COMMON
SHARES (par value):
|
||||||||||||||||
Balance,
beginning of period
|
$ | 657 | $ | 655 | $ | 656 | $ | 654 | ||||||||
Issued
during the period, net
|
1 | 1 | 2 | 2 | ||||||||||||
Balance,
end of period
|
658 | 656 | 658 | 656 | ||||||||||||
ADDITIONAL
PAID-IN CAPITAL:
|
||||||||||||||||
Balance,
beginning of period
|
1,831,695 | 1,816,174 | 1,824,552 | 1,805,844 | ||||||||||||
Share-based
compensation plans
|
4,647 | 5,195 | 11,753 | 15,431 | ||||||||||||
Other
|
- | 37 | 37 | 131 | ||||||||||||
Balance,
end of period
|
1,836,342 | 1,821,406 | 1,836,342 | 1,821,406 | ||||||||||||
ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS),
|
||||||||||||||||
NET
OF DEFERRED INCOME TAXES:
|
||||||||||||||||
Balance,
beginning of period
|
(43,884 | ) | (9,895 | ) | (291,851 | ) | 163,155 | |||||||||
Cumulative
adjustment of initial adoption (1),
net of tax
|
- | - | (57,312 | ) | - | |||||||||||
Net
increase (decrease) during the period
|
376,448 | (248,664 | ) | 681,727 | (421,714 | ) | ||||||||||
Balance,
end of period
|
332,564 | (258,559 | ) | 332,564 | (258,559 | ) | ||||||||||
RETAINED
EARNINGS:
|
||||||||||||||||
Balance,
beginning of period
|
4,198,694 | 4,127,991 | 3,819,327 | 3,956,701 | ||||||||||||
Cumulative
adjustment of initial adoption (1),
net of tax
|
- | - | 57,312 | - | ||||||||||||
Net
income (loss)
|
228,618 | (233,127 | ) | 609,762 | (2,167 | ) | ||||||||||
Dividends
declared ($0.48 per quarter and $1.44 year-to-date
|
||||||||||||||||
per
share in 2009 and 2008)
|
(29,100 | ) | (29,463 | ) | (88,189 | ) | (89,133 | ) | ||||||||
Balance,
end of period
|
4,398,212 | 3,865,401 | 4,398,212 | 3,865,401 | ||||||||||||
TREASURY
SHARES AT COST:
|
||||||||||||||||
Balance,
beginning of period
|
(441,747 | ) | (367,322 | ) | (392,329 | ) | (241,584 | ) | ||||||||
Purchase
of treasury shares
|
(41,077 | ) | (25,006 | ) | (90,495 | ) | (150,744 | ) | ||||||||
Balance,
end of period
|
(482,824 | ) | (392,328 | ) | (482,824 | ) | (392,328 | ) | ||||||||
TOTAL
SHAREHOLDERS' EQUITY, END OF PERIOD
|
$ | 6,084,952 | $ | 5,036,576 | $ | 6,084,952 | $ | 5,036,576 | ||||||||
(1)
The cumulative adjustment to accumulated other comprehensive income
(loss), net of deferred income taxes and retained earnings represents the
effect of initially adopting ASC 320-10-65-1
|
||||||||||||||||
(FASB Staff Position No. FAS 115-2 and FAS 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments").
|
||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
EVEREST
RE GROUP, LTD.
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
Net
income (loss)
|
$ | 228,618 | $ | (233,127 | ) | $ | 609,762 | $ | (2,167 | ) | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
Decrease
(increase) in premiums receivable
|
10,974 | 9,685 | (48,369 | ) | 23,195 | |||||||||||
Increase
in funds held by reinsureds, net
|
7,458 | (7,133 | ) | (23,327 | ) | (33,500 | ) | |||||||||
Decrease
(increase) in reinsurance receivables
|
34,620 | (25,938 | ) | 78,435 | (12,877 | ) | ||||||||||
Decrease
(increase) in deferred tax asset
|
5,771 | 59,187 | 59,989 | (31,615 | ) | |||||||||||
Increase
(decrease) in reserve for losses and loss adjustment
expenses
|
26,614 | 291,530 | (152,544 | ) | 357,606 | |||||||||||
Decrease
in future policy benefit reserve
|
(1,168 | ) | (3,972 | ) | (20 | ) | (11,524 | ) | ||||||||
Increase
(decrease) in unearned premiums
|
103,568 | 17,019 | 114,033 | (137,396 | ) | |||||||||||
Change
in equity adjustments in limited partnerships
|
(23,512 | ) | 21,051 | 29,964 | 5,453 | |||||||||||
Change
in other assets and liabilities, net
|
(56,631 | ) | (54,159 | ) | (24,819 | ) | (33,827 | ) | ||||||||
Non-cash
compensation expense
|
3,534 | 2,941 | 10,290 | 13,511 | ||||||||||||
Amortization
of bond premium
|
5,912 | 4,905 | 12,793 | 9,381 | ||||||||||||
Amortization
of underwriting discount on senior notes
|
48 | 45 | 142 | 133 | ||||||||||||
Realized
gain on debt repurchase
|
- | - | (78,271 | ) | - | |||||||||||
Net
realized capital (gains) losses
|
(31,063 | ) | 293,365 | 10,612 | 461,314 | |||||||||||
Net
cash provided by operating activities
|
314,743 | 375,399 | 598,670 | 607,687 | ||||||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
Proceeds
from fixed maturities matured/called - available for sale, at market
value
|
364,585 | 154,577 | 924,998 | 701,138 | ||||||||||||
Proceeds
from fixed maturities matured/called - available for sale, at fair
value
|
- | - | 5,570 | - | ||||||||||||
Proceeds
from fixed maturities sold - available for sale, at market
value
|
109,963 | 95,500 | 239,621 | 225,447 | ||||||||||||
Proceeds
from fixed maturities sold - available for sale, at fair
value
|
4,010 | - | 12,012 | - | ||||||||||||
Proceeds
from equity securities sold - available for sale, at market
value
|
23,067 | - | 24,143 | - | ||||||||||||
Proceeds
from equity securities sold - available for sale, at fair
value
|
11,309 | 345,063 | 23,548 | 674,297 | ||||||||||||
Distributions
from other invested assets
|
27,280 | 52,045 | 50,591 | 65,926 | ||||||||||||
Cost
of fixed maturities acquired - available for sale, at market
value
|
(840,561 | ) | (582,558 | ) | (2,203,804 | ) | (2,435,862 | ) | ||||||||
Cost
of fixed maturities acquired - available for sale, at fair
value
|
(2,548 | ) | (11,444 | ) | (19,101 | ) | (11,444 | ) | ||||||||
Cost
of equity securities acquired - available for sale, at market
value
|
- | (16 | ) | - | (456 | ) | ||||||||||
Cost
of equity securities acquired - available for sale, at fair
value
|
(12,948 | ) | (181,408 | ) | (32,247 | ) | (330,789 | ) | ||||||||
Cost
of other invested assets acquired
|
(11,882 | ) | (176,333 | ) | (36,624 | ) | (224,432 | ) | ||||||||
Net
change in short-term securities
|
(229,898 | ) | 55,779 | 561,164 | 1,019,830 | |||||||||||
Net
change in unsettled securities transactions
|
104,102 | (52,820 | ) | 157,430 | (58,562 | ) | ||||||||||
Net
cash used in investing activities
|
(453,521 | ) | (301,615 | ) | (292,699 | ) | (374,907 | ) | ||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
Common
shares issued during the period, net
|
1,114 | 2,292 | 1,502 | 2,053 | ||||||||||||
Purchase
of treasury shares
|
(41,077 | ) | (25,006 | ) | (90,495 | ) | (150,744 | ) | ||||||||
Net
cost of debt repurchase
|
- | - | (83,026 | ) | - | |||||||||||
Dividends
paid to shareholders
|
(29,100 | ) | (29,463 | ) | (88,189 | ) | (89,133 | ) | ||||||||
Net
cash used in financing activities
|
(69,063 | ) | (52,177 | ) | (260,208 | ) | (237,824 | ) | ||||||||
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
616 | (23,855 | ) | 13,618 | (21,893 | ) | ||||||||||
Net
(decrease) increase in cash
|
(207,225 | ) | (2,248 | ) | 59,381 | (26,937 | ) | |||||||||
Cash,
beginning of period
|
472,300 | 225,878 | 205,694 | 250,567 | ||||||||||||
Cash,
end of period
|
$ | 265,075 | $ | 223,630 | $ | 265,075 | $ | 223,630 | ||||||||
SUPPLEMENTAL
CASH FLOW INFORMATION
|
||||||||||||||||
Cash
transactions:
|
||||||||||||||||
Income
taxes paid (recovered)
|
$ | 2,983 | $ | (97,418 | ) | $ | 70,762 | $ | 3,286 | |||||||
Interest
paid
|
$ | 14,194 | $ | 13,937 | $ | 52,318 | $ | 53,004 | ||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
For
the Three and Nine Months Ended September 30, 2009 and 2008
1. General
Everest
Re Group, Ltd. (“Group”), a Bermuda company, through its subsidiaries,
principally provides reinsurance and insurance in the U.S., Bermuda and
international markets. As used in this document, “Company” means
Group and its subsidiaries. On December 30, 2008, Group contributed
Everest Reinsurance Holdings, Inc. and its subsidiaries (“Holdings”) to its
recently established Irish holding company, Everest Underwriting Group
(Ireland), Limited.
2. Basis
of Presentation
The
unaudited consolidated financial statements of the Company for the three and
nine months ended September 30, 2009 and 2008 include all adjustments,
consisting of normal recurring accruals, which, in the opinion of management,
are necessary for a fair statement of the results on an interim
basis. Certain financial information, which is normally included in
annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”), has been omitted
since it is not required for interim reporting purposes. The December 31, 2008
consolidated balance sheet data was derived from audited financial statements,
but does not include all disclosures required by GAAP. The results
for the three and nine months ended September 30, 2009 and 2008 are not
necessarily indicative of the results for a full year. These
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the years ended December 31, 2008,
2007 and 2006 included in the Company’s most recent Form 10-K
filing.
Financial Accounting
Standards Board Launched Accounting Codification
The
Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 168,
“The FASB Accounting Standards
CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles”. This guidance
establishes the FASB Accounting Standards CodificationTM
(“Codification” or “ASC”) as the single source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The Codification supersedes all existing non-SEC accounting and
reporting standards. All other non-grandfathered, non-SEC accounting literature
not included in the Codification will become non-authoritative.
Following
the Codification, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, the FASB will issue Accounting Standards Updates, which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.
GAAP is
not intended to be changed as a result of the FASB’s Codification, but it will
change the way the guidance is organized and presented. As a result, these
changes will have a significant impact on how companies reference GAAP in their
financial statements and in the accounting policies for financial statements
issued for interim and annual periods ending after September 15,
2009.
Application of Recently
Issued Accounting Standard Changes
Additional Disclosures for
Derivative Instruments. On January 1, 2009, the Company adopted the
additional disclosure requirements of ASC 815-10-65-1 (FASB No. 161 “Disclosures
about Derivative Instruments and Hedging Activities - an amendment of FASB
Statement No. 133”). The standard requires enhanced
disclosures
on derivative instruments and hedged items. No comparative information for
periods prior to the effective date is required. ASC 815-10-65-1 had no impact
on how the Company accounts for these items.
Revisions to Earnings per Share
Calculation. ASC 260-10-45 to 66 (FASB Staff Position (“FSP”) Emerging
Issues Task Force 03-6-1 “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities”) requires unvested
share-based payment awards that contain non-forfeitable rights to dividends be
considered as a separate class of common stock and included in the earnings per
share calculation using the two-class method. The Company’s restricted share
awards meet this definition and are therefore included in the basic earnings per
share calculation. All prior period earnings per share data presented have been
adjusted retrospectively.
Measurement of Fair Value in
Inactive Markets. ASC 820-10-65-4 (FSP No. FAS 157-4 “Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP
FAS 157-4”) reaffirms that fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date under current market conditions. It
also reaffirms the need to use judgment in determining if a formerly active
market has become inactive and in determining fair values when the market has
become inactive. There was no impact to the Company’s financial statements upon
adoption.
Other-Than-Temporary Impairments on
Investment Securities. ASC 320-10-65-1 (FSP No. FAS 115-2 and FAS 124-2
“Recognition and Presentation of Other-Than-Temporary Impairments”) amends the
recognition guidance for other-than-temporary impairments of debt securities and
expands the financial statement disclosures for other-than-temporary impairments
on debt and equity securities. For available for sale debt securities that the
Company has no intent to sell and more likely than not will not be required to
sell prior to recovery, only the credit loss component of the impairment would
be recognized in earnings, while the rest of the fair value loss would be
recognized in accumulated other comprehensive income. The Company
adopted ASC 320-10-65-1 guidance effective April 1, 2009. Upon
adoption the Company recognized a $57.3 million cumulative-effect adjustment
from retained earnings, net of $8.3 million of tax.
Interim Disclosures about Fair Value
of Financial Instruments. ASC 825-10-65-1 (FSP FAS 107-1 and FSP APB 28-1
“Interim Disclosures about Fair Value of Financial Instruments”) requires
quarterly disclosures on the qualitative and quantitative information about the
fair value of all financial instruments including methods and significant
assumptions used to estimate fair value during the period. These disclosures
were previously only done annually. The Company included these disclosures in
the second quarter 2009 Notes to Consolidated Interim Financial
Statements.
Subsequent Events
Disclosures. ASC 855-10-50 (FAS 165 “Subsequent Events”) requires a
disclosure as to the date through which subsequent events have been evaluated as
well as whether that date is the date the financial statements were issued. The
Company included this disclosure in its second quarter 2009 Notes to
Consolidated Interim Financial Statements.
Future Accounting Standard
Changes
Fair Value Disclosures about Pension
Plan Assets. ASC 715-20-65-2 (FSP FAS 132(R)-1 “Employers’ Disclosures
about Postretirement Benefit Plan Assets”) requires that information about plan
assets be disclosed, on an annual basis, based on the fair value disclosure
requirements of ASC 820-10. The Company will be required to separate plan assets
into the three fair value hierarchy levels and provide a roll forward of the
changes in fair value of plan assets classified as Level 3 in the 2009 annual
consolidated financial statements. These disclosures have no effect on the
Company’s accounting for plan benefits and obligations.
3. Investments
The
amortized cost, market value and gross unrealized appreciation and depreciation
of available for sale, fixed maturity and equity security investments, carried
at market value, are as follows for the periods indicated:
At
September 30, 2009
|
||||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
(Dollars
in thousands)
|
Cost
|
Appreciation
|
Depreciation
|
Value
|
||||||||||||
Fixed
maturity securities - available for sale
|
||||||||||||||||
U.S.
Treasury securities and obligations of
|
||||||||||||||||
U.S.
government agencies and corporations
|
$ | 337,184 | $ | 20,109 | $ | (1,677 | ) | $ | 355,616 | |||||||
Obligations
of U.S. states and political subdivisions
|
3,747,780 | 231,278 | (12,632 | ) | 3,966,426 | |||||||||||
Corporate
securities
|
2,331,007 | 111,093 | (46,339 | ) | 2,395,761 | |||||||||||
Asset-backed
securities
|
309,288 | 9,176 | (6,327 | ) | 312,137 | |||||||||||
Mortgage-backed
securities
|
||||||||||||||||
Commercial
|
475,911 | 5,359 | (49,610 | ) | 431,660 | |||||||||||
Agency
residential
|
2,015,323 | 68,626 | (457 | ) | 2,083,492 | |||||||||||
Non-agency
residential
|
188,646 | 284 | (28,204 | ) | 160,726 | |||||||||||
Foreign
government securities
|
1,500,230 | 112,474 | (7,933 | ) | 1,604,771 | |||||||||||
Foreign
corporate securities
|
1,270,001 | 73,431 | (16,396 | ) | 1,327,036 | |||||||||||
Total
fixed maturity securities
|
$ | 12,175,370 | $ | 631,830 | $ | (169,575 | ) | $ | 12,637,625 | |||||||
Equity
securities
|
$ | 14,244 | $ | 2,330 | $ | (2 | ) | $ | 16,572 |
At
December 31, 2008
|
||||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
(Dollars
in thousands)
|
Cost
|
Appreciation
|
Depreciation
|
Value
|
||||||||||||
Fixed
maturity securities - available for sale
|
||||||||||||||||
U.S.
Treasury securities and obligations of
|
||||||||||||||||
U.S.
government agencies and corporations
|
$ | 354,195 | $ | 55,186 | $ | (663 | ) | $ | 408,718 | |||||||
Obligations
of U.S. states and political subdivisions
|
3,846,754 | 113,885 | (164,921 | ) | 3,795,718 | |||||||||||
Corporate
securities
|
2,408,978 | 60,898 | (198,479 | ) | 2,271,397 | |||||||||||
Asset-backed
securities
|
281,808 | 654 | (29,213 | ) | 253,249 | |||||||||||
Mortgage-backed
securities
|
||||||||||||||||
Commercial
|
440,833 | - | (90,108 | ) | 350,725 | |||||||||||
Agency
residential
|
1,334,042 | 26,331 | (502 | ) | 1,359,871 | |||||||||||
Non-agency
residential
|
213,484 | - | (45,688 | ) | 167,796 | |||||||||||
Foreign
government securities
|
1,087,731 | 117,973 | (23,598 | ) | 1,182,106 | |||||||||||
Foreign
corporate securities
|
964,251 | 56,813 | (51,032 | ) | 970,032 | |||||||||||
Total
fixed maturity securities
|
$ | 10,932,076 | $ | 431,740 | $ | (604,204 | ) | $ | 10,759,612 | |||||||
Equity
securities
|
$ | 14,915 | $ | 1,985 | $ | - | $ | 16,900 |
In
accordance with ASC 320-10-65-1, the Company reclassified previously
other-than-temporary impairments from retained earnings into accumulated other
comprehensive income. The pre-tax amount of the reclassification was
$65.7 million with $65.4 million related to corporate securities and $0.3
million related to foreign corporate securities. At September 30,
2009, the cumulative unrealized depreciation on these securities had improved
and the remaining unrealized depreciation for the corporate securities was $13.0
million and the foreign corporate securities were in an unrealized appreciation
position at September 30, 2009.
The
amortized cost and market value of fixed maturities are shown in the following
table by contractual maturity. Mortgage-backed securities generally
are more likely to be prepaid than other fixed maturities. As the stated
maturity of such securities may not be indicative of actual maturities, the
totals for mortgage-backed and asset-backed securities are shown
separately.
At
September 30, 2009
|
||||||||
Amortized
|
Market
|
|||||||
(Dollars
in thousands)
|
Cost
|
Value
|
||||||
Fixed
maturity securities – available for sale
|
||||||||
Due
in one year or less
|
$ | 573,183 | $ | 594,689 | ||||
Due
after one year through five years
|
2,894,035 | 3,032,711 | ||||||
Due
after five years through ten years
|
2,474,668 | 2,610,605 | ||||||
Due
after ten years
|
3,244,316 | 3,411,605 | ||||||
Asset-backed
securities
|
309,288 | 312,137 | ||||||
Mortgage-backed
securities
|
||||||||
Commercial
|
475,911 | 431,660 | ||||||
Agency
residential
|
2,015,323 | 2,083,492 | ||||||
Non-agency
residential
|
188,646 | 160,726 | ||||||
Total
fixed maturity securities
|
$ | 12,175,370 | $ | 12,637,625 |
The
changes in net unrealized appreciation (depreciation) for the Company’s
investments are derived from the following sources for the periods
indicated:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Increase
(decrease) during the period between the market value and
cost
|
||||||||||||||||
of
investments carried at market value, and deferred taxes
thereon:
|
||||||||||||||||
Fixed
maturity securities
|
$ | 428,617 | $ | (254,242 | ) | $ | 700,376 | $ | (468,894 | ) | ||||||
Fixed
maturity securities ASC 320-10-65-1 adjustment
|
- | - | (65,658 | ) | - | |||||||||||
Equity
securities
|
448 | 612 | 343 | 494 | ||||||||||||
Other
invested assets
|
3,387 | (2,231 | ) | 5,614 | (3,122 | ) | ||||||||||
Change
in unrealized appreciation (depreciation), pre-tax
|
432,452 | (255,861 | ) | 640,675 | (471,522 | ) | ||||||||||
Deferred
tax (expense) benefit
|
(88,942 | ) | 65,403 | (130,628 | ) | 116,078 | ||||||||||
Deferred
tax benefit ASC 320-10-65-1 adjustment
|
- | - | 8,346 | - | ||||||||||||
Change
in unrealized appreciation (depreciation),
|
||||||||||||||||
net
of deferred taxes, included in shareholders’ equity
|
$ | 343,510 | $ | (190,458 | ) | $ | 518,393 | $ | (355,444 | ) |
The Company frequently reviews its investment portfolio for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized value at the time of review. The Company then assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute an other-than-temporary impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income. If the Company determines that the decline is other-than-temporary and the Company does not have the intent to sell the security; and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, the carrying value of the investment is written down to fair value. The fair value adjustment that is credit related is recorded in net realized capital gains (losses) in the Company’s consolidated statements of operations and comprehensive income. The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income, net of tax, and is included in accumulated other comprehensive income in the Company’s consolidated balance sheets. The Company’s assessments are based on the issuers current and expected future financial position,
timeliness
with respect to interest and/or principal payments, speed of repayments and any
applicable credit enhancements or breakeven constant default rates on
mortgage-backed and asset-backed securities, as well as relevant information
provided by rating agencies, investment advisors and analysts.
Retrospective
adjustments are employed to recalculate the values of asset-backed securities.
All of the Company’s asset-backed and mortgage-backed securities have a
pass-through structure. Each acquisition lot is reviewed to recalculate the
effective yield. The recalculated effective yield is used to derive a book value
as if the new yield were applied at the time of acquisition. Outstanding
principal factors from the time of acquisition to the adjustment date are used
to calculate the prepayment history for all applicable securities. Conditional
prepayment rates, computed with life to date factor histories and weighted
average maturities, are used in the calculation of projected and prepayments for
pass-through security types.
The
tables below display the aggregate market value and gross unrealized
depreciation of fixed maturity securities, by security type and maturity type,
in each case subdivided according to length of time that individual securities
had been in a continuous unrealized loss position for the periods
indicated:
Duration
by security type of unrealized loss at September 30, 2009
|
||||||||||||||||||||||||
Less
than 12 months
|
Greater
than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
(Dollars
in thousands)
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
||||||||||||||||||
Fixed
maturity securities - available for sale
|
||||||||||||||||||||||||
U.S.
Treasury securities and obligations of
|
||||||||||||||||||||||||
U.S.
government agencies and corporations
|
$ | 83,202 | $ | (1,677 | ) | $ | - | $ | - | $ | 83,202 | $ | (1,677 | ) | ||||||||||
Obligations
of U.S. states and political subdivisions
|
15,698 | (736 | ) | 254,791 | (11,896 | ) | 270,489 | (12,632 | ) | |||||||||||||||
Corporate
securities
|
116,139 | (13,318 | ) | 423,993 | (33,021 | ) | 540,132 | (46,339 | ) | |||||||||||||||
Asset-backed
securities
|
2,618 | (203 | ) | 58,303 | (6,124 | ) | 60,921 | (6,327 | ) | |||||||||||||||
Mortgage-backed
securities
|
||||||||||||||||||||||||
Commercial
|
- | - | 319,335 | (49,610 | ) | 319,335 | (49,610 | ) | ||||||||||||||||
Agency
residential
|
60,630 | (435 | ) | 4,274 | (22 | ) | 64,904 | (457 | ) | |||||||||||||||
Non-agency
residential
|
1 | (1 | ) | 159,349 | (28,203 | ) | 159,350 | (28,204 | ) | |||||||||||||||
Foreign
government securities
|
131,053 | (6,553 | ) | 46,898 | (1,380 | ) | 177,951 | (7,933 | ) | |||||||||||||||
Foreign
corporate securities
|
177,058 | (11,038 | ) | 116,586 | (5,358 | ) | 293,644 | (16,396 | ) | |||||||||||||||
Total
fixed maturity securities
|
$ | 586,399 | $ | (33,961 | ) | $ | 1,383,529 | $ | (135,614 | ) | $ | 1,969,928 | $ | (169,575 | ) |
Duration
by maturity of unrealized loss at September 30, 2009
|
||||||||||||||||||||||||
Less
than 12 months
|
Greater
than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
(Dollars
in thousands)
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
||||||||||||||||||
Fixed
maturity securities
|
||||||||||||||||||||||||
Due
in one year or less
|
$ | 83,509 | $ | (7,867 | ) | $ | 54,485 | $ | (846 | ) | $ | 137,994 | $ | (8,713 | ) | |||||||||
Due
in one year through five years
|
254,768 | (12,863 | ) | 180,862 | (11,485 | ) | 435,630 | (24,348 | ) | |||||||||||||||
Due
in five years through ten years
|
145,700 | (10,210 | ) | 142,075 | (5,031 | ) | 287,775 | (15,241 | ) | |||||||||||||||
Due
after ten years
|
39,173 | (2,382 | ) | 464,846 | (34,293 | ) | 504,019 | (36,675 | ) | |||||||||||||||
Asset-backed
securities
|
2,618 | (203 | ) | 58,303 | (6,124 | ) | 60,921 | (6,327 | ) | |||||||||||||||
Mortgage-backed
securities
|
60,631 | (436 | ) | 482,958 | (77,835 | ) | 543,589 | (78,271 | ) | |||||||||||||||
Total
fixed maturity securities
|
$ | 586,399 | $ | (33,961 | ) | $ | 1,383,529 | $ | (135,614 | ) | $ | 1,969,928 | $ | (169,575 | ) |
The aggregate market value and gross unrealized losses related to investments in an unrealized loss position as of September 30, 2009 were $1,969.9 million and $169.6 million, respectively. There were no unrealized losses on a single security that exceeded 0.11% of the market value of the fixed maturities at September 30, 2009. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $34.0 million of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were generally comprised of highly rated government, municipal, corporate and mortgage-backed securities. Of these unrealized losses,
$23.9
million were related to securities that were rated investment grade or better by
at least one nationally recognized statistical rating
organization. The $135.6 million of unrealized losses related to
fixed maturity securities in an unrealized loss position for more than one year
also related primarily to highly rated government, municipal, corporate and
mortgage-backed securities. Of these unrealized losses, $102.5
million related to securities that were rated investment grade or better by at
least one nationally recognized statistical rating organization. The
non-investment grade securities with unrealized losses are mainly comprised of
non-credit other-than-temporary impaired securities and non-agency residential
mortgage-backed securities. In all instances, there were no projected
cash flow shortfalls to recover the full book value of the investments and the
related interest obligations. The mortgage-backed securities still
have excess credit coverage and are current on interest and principal
payments. Unrealized losses have decreased since year end as a result
of improved conditions in the overall financial market resulting from increased
liquidity and lower interest rates.
The
Company, given the size of its investment portfolio and capital position, does
not have the intent to sell these securities; and it is more likely than not the
Company will not have to sell the security before recovery of its cost
basis. In addition, all securities currently in an unrealized loss
position are current with respect to principal and interest
payments.
The
tables below display the aggregate market value and gross unrealized
depreciation of fixed maturity securities, by security type and maturity type,
in each case subdivided according to the length of time that individual
securities had been in a continuous unrealized loss position for the period
indicated:
Duration
by security type of unrealized loss at December 31, 2008
|
||||||||||||||||||||||||
Less
than 12 months
|
Greater
than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
(Dollars
in thousands)
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
||||||||||||||||||
Fixed
maturity securities - available for sale
|
||||||||||||||||||||||||
U.S.
Treasury securities and obligations of
|
||||||||||||||||||||||||
U.S.
government agencies and corporations
|
$ | 5,686 | $ | (663 | ) | $ | - | $ | - | $ | 5,686 | $ | (663 | ) | ||||||||||
Obligations
of U.S. states and political subdivisions
|
1,471,807 | (146,293 | ) | 176,555 | (18,628 | ) | 1,648,362 | (164,921 | ) | |||||||||||||||
Corporate
securities
|
746,163 | (98,335 | ) | 781,367 | (100,144 | ) | 1,527,530 | (198,479 | ) | |||||||||||||||
Asset-backed
securities
|
114,873 | (9,251 | ) | 92,593 | (19,962 | ) | 207,466 | (29,213 | ) | |||||||||||||||
Mortgage-backed
securities
|
||||||||||||||||||||||||
Commercial
|
171,692 | (36,451 | ) | 179,033 | (53,657 | ) | 350,725 | (90,108 | ) | |||||||||||||||
Agency
residential
|
32,407 | (394 | ) | 22,182 | (108 | ) | 54,589 | (502 | ) | |||||||||||||||
Non-agency
residential
|
65,523 | (16,565 | ) | 101,879 | (29,123 | ) | 167,402 | (45,688 | ) | |||||||||||||||
Foreign
government securities
|
139,077 | (18,613 | ) | 27,164 | (4,985 | ) | 166,241 | (23,598 | ) | |||||||||||||||
Foreign
corporate securities
|
246,915 | (26,174 | ) | 186,916 | (24,858 | ) | 433,831 | (51,032 | ) | |||||||||||||||
Total
fixed maturity securities
|
$ | 2,994,143 | $ | (352,739 | ) | $ | 1,567,689 | $ | (251,465 | ) | $ | 4,561,832 | $ | (604,204 | ) |
Duration
by maturity of unrealized loss at December 31, 2008
|
||||||||||||||||||||||||
Less
than 12 months
|
Greater
than 12 months
|
Total
|
||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
(Dollars
in thousands)
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
Market
Value
|
Depreciation
|
||||||||||||||||||
Fixed
maturity securities
|
||||||||||||||||||||||||
Due
in one year or less
|
$ | 116,392 | $ | (9,948 | ) | $ | 137,344 | $ | (6,636 | ) | $ | 253,736 | $ | (16,584 | ) | |||||||||
Due
in one year through five years
|
531,986 | (38,797 | ) | 385,620 | (36,183 | ) | 917,606 | (74,980 | ) | |||||||||||||||
Due
in five years through ten years
|
428,670 | (46,694 | ) | 348,062 | (49,378 | ) | 776,732 | (96,072 | ) | |||||||||||||||
Due
after ten years
|
1,532,600 | (194,639 | ) | 300,976 | (56,418 | ) | 1,833,576 | (251,057 | ) | |||||||||||||||
Asset-backed
securities
|
114,873 | (9,251 | ) | 92,593 | (19,962 | ) | 207,466 | (29,213 | ) | |||||||||||||||
Mortgage-backed
securities
|
269,622 | (53,410 | ) | 303,094 | (82,888 | ) | 572,716 | (136,298 | ) | |||||||||||||||
Total
fixed maturity securities
|
$ | 2,994,143 | $ | (352,739 | ) | $ | 1,567,689 | $ | (251,465 | ) | $ | 4,561,832 | $ | (604,204 | ) |
The
aggregate market value and gross unrealized losses related to investments in an
unrealized loss position as of December 31, 2008 were $4,561.8 million and
$604.2 million, respectively. There were no unrealized losses on a
single security that exceeded 0.25% of the market value of the fixed maturities
at December 31, 2008. In addition, there was no significant
concentration of unrealized losses in any one market sector. The
$352.7 million of unrealized losses related to fixed maturity securities that
have been in an unrealized loss position for less than one year were generally
comprised of highly rated government, municipal, corporate and mortgage-backed
securities with the losses primarily the result of widening credit spreads from
the financial markets crisis during the latter part of the year. Of
these unrealized losses, $346.6 million were related to securities that were
rated investment grade or better by at least one nationally recognized
statistical rating organization. The $251.5 million of unrealized
losses related to fixed maturity securities in an unrealized loss position for
more than one year also related primarily to highly rated government, municipal,
corporate and mortgage-backed securities and were also the result of widening
credit spreads during the latter part of the year. Of these
unrealized losses, $224.5 million related to securities that were rated
investment grade or better by at least one nationally recognized statistical
rating organization. The gross unrealized depreciation greater than
12 months for mortgage-backed securities includes only $4.7 million related to
sub-prime and alt-A loans.
The
components of net investment income are presented in the table below for the
periods indicated:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Fixed
maturity securities
|
$ | 145,408 | $ | 140,009 | $ | 434,363 | $ | 401,603 | ||||||||
Equity
securities
|
757 | 4,947 | 2,183 | 17,177 | ||||||||||||
Short-term
investments and cash
|
629 | 8,896 | 5,872 | 43,622 | ||||||||||||
Other
invested assets
|
||||||||||||||||
Limited
partnerships
|
23,452 | 11,076 | (29,227 | ) | 31,076 | |||||||||||
Other
|
(1,332 | ) | 275 | (297 | ) | 2,027 | ||||||||||
Total
gross investment income
|
168,914 | 165,203 | 412,894 | 495,505 | ||||||||||||
Interest
credited and other expense
|
(3,527 | ) | (725 | ) | (11,544 | ) | (4,978 | ) | ||||||||
Total
net investment income
|
$ | 165,387 | $ | 164,478 | $ | 401,350 | $ | 490,527 |
The
Company reports results from limited partnership investments on the equity basis
of accounting with changes in value reported through net investment
income. Due to the timing of receiving financial information from
these partnerships, the results are generally reported on a one month or quarter
lag. If the Company determines there has been a significant decline
in value of a limited partnership during this lag period, a loss will be
recorded in the period in which the Company indentifies the
decline.
The
Company had contractual commitments to invest up to an additional $256.8 million
in limited partnerships at September 30, 2009. These commitments will
be funded when called in accordance with the partnership agreements, which have
investment periods that expire, unless extended, through 2014.
The
components of net realized capital gains (losses) are presented in the table
below for the periods indicated:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Fixed
maturity securities, market value:
|
||||||||||||||||
Other-than-temporary
impairments
|
$ | - | $ | (153,435 | ) | $ | (13,210 | ) | $ |