10-Q 1 rli-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2024

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to

Commission File Number:       001-09463

RLI Corp.

(Exact name of registrant as specified in its charter)

Delaware

37-0889946

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

9025 North Lindbergh Drive, Peoria, IL

61615

(Address of principal executive offices)

(Zip Code)

(309) 692-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock $0.01 par value

RLI

New York Stock Exchange

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     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 16, 2024, the number of shares outstanding of the registrant’s Common Stock was 45,709,881.

Table of Contents

Page

Part I - Financial Information

3

Item 1.

Financial Statements

3

Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three-Month Periods Ended March 31, 2024 and 2023 (unaudited)

3

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (unaudited)

4

Condensed Consolidated Statements of Shareholders’ Equity for the Three-Month Periods Ended March 31, 2024 and 2023 (unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2024 and 2023 (unaudited)

6

Notes to Unaudited Condensed Consolidated Interim Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4.

Controls and Procedures

31

Part II - Other Information

32

Item 1.

Legal Proceedings

32

Item 1a.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

33

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(Unaudited)

For the Three Months

Ended March 31,

(in thousands, except per share data)

 

2024

 

2023

Net premiums earned

$

360,676

$

307,723

Net investment income

32,847

27,084

Net realized gains

5,994

14,620

Net unrealized gains on equity securities

45,314

15,496

Consolidated revenue

$

444,831

$

364,923

Losses and settlement expenses

143,824

114,488

Policy acquisition costs

110,454

101,444

Insurance operating expenses

28,703

23,901

Interest expense on debt

1,618

2,008

General corporate expenses

5,010

4,214

Total expenses

$

289,609

$

246,055

Equity in earnings of unconsolidated investees

4,769

3,923

Earnings before income taxes

$

159,991

$

122,791

Income tax expense

32,091

23,980

Net earnings

$

127,900

$

98,811

Other comprehensive earnings (loss), net of tax

(12,671)

37,707

Comprehensive earnings

$

115,229

$

136,518

Basic net earnings per share

$

2.80

$

2.17

Diluted net earnings per share

$

2.77

$

2.15

Weighted average number of common shares outstanding:

Basic

45,684

45,530

Diluted

46,163

46,035

See accompanying notes to the unaudited condensed consolidated interim financial statements.

3

RLI Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

March 31,

December 31,

(in thousands, except share and per share data)

 

2024

 

2023

ASSETS

Investments and cash:

Fixed income:

Available-for-sale, at fair value

$

2,863,321

$

2,855,849

(amortized cost of $3,082,273 and allowance for credit losses of $237 at 3/31/24)

(amortized cost of $3,054,391 and allowance for credit losses of $306 at 12/31/23)

Equity securities, at fair value (cost - $362,527 at 3/31/24 and $354,022 at 12/31/23)

643,367

590,041

Short-term investments, at cost which approximates fair value

147,186

134,923

Other invested assets

59,273

59,081

Cash

44,557

36,424

Total investments and cash

$

3,757,704

$

3,676,318

Accrued investment income

25,353

24,062

Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $21,699 at 3/31/24 and $21,438 at 12/31/23

230,537

221,206

Ceded unearned premium

107,822

112,257

Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $11,085 at 3/31/24 and $10,608 at 12/31/23

814,676

757,349

Deferred policy acquisition costs

152,924

146,566

Property and equipment, at cost, net of accumulated depreciation of $75,558 at 3/31/24 and $74,279 at 12/31/23

46,536

46,715

Investment in unconsolidated investees

66,134

56,966

Goodwill and intangibles

53,562

53,562

Income taxes-deferred

10,700

15,872

Other assets

72,461

69,348

TOTAL ASSETS

$

5,338,409

$

5,180,221

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Unpaid losses and settlement expenses

$

2,532,190

$

2,446,025

Unearned premiums

904,848

892,326

Reinsurance balances payable

35,157

71,507

Funds held

106,430

101,446

Income taxes-current

25,455

3,757

Debt

100,000

100,000

Accrued expenses

68,216

108,880

Other liabilities

45,361

42,766

TOTAL LIABILITIES

$

3,817,657

$

3,766,707

Shareholders’ Equity

Common stock ($0.01 par value)

(Shares authorized - 200,000,000)

(68,640,095 shares issued, 45,709,881 shares outstanding at 3/31/24)

(68,570,261 shares issued, 45,640,047 shares outstanding at 12/31/23)

$

687

$

686

Paid-in capital

366,701

362,345

Accumulated other comprehensive earnings (loss)

(178,974)

(166,303)

Retained earnings

1,725,337

1,609,785

Deferred compensation

12,749

13,539

Less: Treasury shares, at cost (22,930,214 shares at 3/31/24 and 12/31/23)

(405,748)

(406,538)

TOTAL SHAREHOLDERS’ EQUITY

$

1,520,752

$

1,413,514

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

5,338,409

$

5,180,221

See accompanying notes to the unaudited condensed consolidated interim financial statements.

4

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

 

 

 

 

Accumulated

 

 

 

Other

Total

Comprehensive

Treasury

Common

Shareholders’

Common

Paid-in

Earnings

Retained

Deferred

Shares

(in thousands, except share and per share data)

 

Shares

 

Equity

 

Stock

 

Capital

 

(Loss)

 

Earnings

 

Compensation

 

at Cost

Balance, January 1, 2023

 

45,469,752

$

1,177,341

$

684

$

352,391

$

(229,076)

$

1,446,341

$

12,015

$

(405,014)

Cumulative-effect adjustment from ASU 2023-02

(951)

(951)

Net earnings

 

98,811

98,811

Other comprehensive earnings (loss), net of tax

 

37,707

37,707

Deferred compensation

 

249

(249)

Share-based compensation

 

84,944

2,864

1

2,863

Dividends and dividend equivalents ($0.26 per share)

 

(11,851)

(11,851)

Balance, March 31, 2023

 

45,554,696

$

1,303,921

$

685

$

355,254

$

(191,369)

$

1,532,350

$

12,264

$

(405,263)

Accumulated

Other

Total

Comprehensive

Treasury

Common

Shareholders’

Common

Paid-in

Earnings

Retained

Deferred

Shares

(in thousands, except share and per share data)

Shares

Equity

Stock

Capital

(Loss)

Earnings

Compensation

at Cost

Balance, January 1, 2024

 

45,640,047

$

1,413,514

$

686

$

362,345

$

(166,303)

$

1,609,785

$

13,539

$

(406,538)

Net earnings

 

127,900

127,900

Other comprehensive earnings (loss), net of tax

 

(12,671)

(12,671)

Deferred compensation

 

(790)

790

Share-based compensation

 

69,834

4,357

1

4,356

Dividends and dividend equivalents ($0.27 per share)

 

(12,348)

(12,348)

Balance, March 31, 2024

 

45,709,881

$

1,520,752

$

687

$

366,701

$

(178,974)

$

1,725,337

$

12,749

$

(405,748)

See accompanying notes to the unaudited condensed consolidated interim financial statements.

5

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months

Ended March 31,

(in thousands)

 

2024

 

2023

Net cash provided by operating activities

$

70,946

$

69,219

Cash Flows from Investing Activities

Purchase of:

Fixed income securities, available-for-sale

$

(120,109)

$

(180,040)

Equity securities

(17,302)

(6,395)

Property and equipment

(1,089)

(1,277)

Other

(2,664)

(1,392)

Proceeds from sale of:

Fixed income securities, available-for-sale

11,819

3,064

Equity securities

15,910

3,501

Equity method investments

14,134

Other

1,350

271

Proceeds from call or maturity of:

Fixed income securities, available-for-sale

71,284

190,303

Net proceeds from sale (purchase) of short-term investments

(12,263)

(79,973)

Net cash used in investing activities

$

(53,064)

$

(57,804)

Cash Flows from Financing Activities

Cash dividends paid

$

(12,337)

$

(11,839)

Proceeds from stock option exercises

2,588

375

Net cash used in financing activities

$

(9,749)

$

(11,464)

Net increase (decrease) in cash

$

8,133

$

(49)

Cash at the beginning of the period

36,424

22,818

Cash at March 31,

$

44,557

$

22,769

See accompanying notes to the unaudited condensed consolidated interim financial statements.

6

NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2023 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at March 31, 2024 and the results of operations of RLI Corp. (the Company) and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year.

The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates.

B. ADOPTED ACCOUNTING STANDARDS

No new accounting standards applicable in 2024 materially impact our financial statements.

C. PROSPECTIVE ACCOUNTING STANDARDS

2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

The guidance in ASU 2023-07 was designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on our financial statements.

2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures

The guidance in ASU 2023-09 was designed to increase transparency about income tax information through improvements to the rate reconciliation and disclosure of income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on our financial statements.

D. REINSURANCE

Ceded unearned premiums and reinsurance balances recoverable on unpaid losses and settlement expenses are reported separately as an asset, rather than being netted with the related liability, since reinsurance does not relieve the Company of our liability to policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continually monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review reinsurers’ annual financial statements and Securities and Exchange Commission filings for those that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. In addition, we subject our reinsurance balances recoverable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, which assists the Company in assessing the sufficiency of its allowance. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements.

7

Our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable balances for the reinsurer are specifically identified and written off through use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. We then re-evaluate the overall allowance and determine whether the balance is sufficient and, if needed, an additional allowance is recognized.

The allowances for uncollectible amounts on paid and unpaid reinsurance balances recoverable were $16 million and $11 million, respectively, at March 31, 2024 and December 31, 2023. Changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs were applied to the allowances in the first three months of 2024 and less than $1 million was recovered.

E. INTANGIBLE ASSETS

The composition of goodwill and intangible assets at March 31, 2024 and December 31, 2023 is detailed in the following table:

March 31,

December 31,

(in thousands)

 

2024

 

2023

Goodwill

Surety

$

40,816

$

40,816

Casualty

5,246

5,246

Total goodwill

$

46,062

$

46,062

Indefinite-lived intangibles

7,500

7,500

Total goodwill and intangibles

$

53,562

$

53,562

Annual impairment assessments were performed on our goodwill and state insurance license indefinite-lived intangible assets during the second quarter of 2023. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of March 31, 2024 that would suggest an updated impairment test would be needed for our goodwill and intangible assets.

F. EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of these items increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding these items. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements:

For the Three Months

For the Three Months

Ended March 31, 2024

Ended March 31, 2023

Income

Shares

Per Share

Income

Shares

Per Share

(in thousands, except per share data)

 

(Numerator)

 

(Denominator)

 

Amount

 

(Numerator)

 

(Denominator)

 

Amount

Basic EPS

Earnings available to common shareholders

$

127,900

 

45,684

$

2.80

$

98,811

 

45,530

$

2.17

Effect of Dilutive Securities

Stock options and restricted stock units

 

479

 

505

Diluted EPS

Earnings available to common shareholders

$

127,900

 

46,163

$

2.77

$

98,811

 

46,035

$

2.15

Anti-dilutive securities excluded from diluted EPS

8

G. COMPREHENSIVE EARNINGS

Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our available-for-sale fixed income portfolio. In reporting the components of comprehensive earnings, we used the federal statutory tax rate of 21 percent. Other comprehensive earnings (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax benefit of $3 million for the first quarter of 2024, compared to $10 million of tax expense for the same period in 2023.

Unrealized losses, net of tax, recognized in other comprehensive earnings (loss) were $13 million for the first three months of 2024, compared to $38 million of unrealized gains, net of tax, during the same period last year. The unrealized losses in the first quarter of 2024 were attributable to an increase in interest rates, which decreased the fair value of securities held in the fixed income portfolio, compared to declining interest rates during the first quarter of 2023, which increased the fair value of fixed income securities.

The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings (loss) for each period presented in the unaudited condensed consolidated interim financial statements:

(in thousands)

For the Three Months

Ended March 31,

Unrealized Gains/Losses on Available-for-Sale Securities

 

2024

 

2023

 

Beginning balance

$

(166,303)

$

(229,076)

Other comprehensive earnings (loss) before reclassifications

(13,275)

36,254

Amounts reclassified from accumulated other comprehensive earnings

604

1,453

Net current-period other comprehensive earnings (loss)

$

(12,671)

$

37,707

Ending balance

$

(178,974)

$

(191,369)

Balance of securities for which an allowance for credit losses has been recognized in net earnings

$

904

$

1,841

Credit losses on or the sale of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings (loss) to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings (loss) by the respective line items of net earnings are presented in the following table:

Amount Reclassified from Accumulated Other

(in thousands)

Comprehensive Earnings (Loss)

For the Three Months

Component of Accumulated 

Ended March 31,

Affected line item in the

Other Comprehensive Earnings (Loss)

 

2024

 

2023

 

Statement of Earnings

Unrealized gains and losses on available-for-sale securities

$

(834)

$

(1,713)

Net realized gains (losses)

70

(126)

Credit gains (losses) presented within net realized gains

$

(764)

$

(1,839)

Earnings (loss) before income taxes

160

386

Income tax (expense) benefit

$

(604)

$

(1,453)

Net earnings (loss)

H. FAIR VALUE MEASUREMENTS

Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value.

Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets.

9

Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.

Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable.

As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy.

Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in approximate order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All corporate, agency, government and municipal securities are deemed Level 2.

Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology primarily includes interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, pre-payment assumptions and to incorporate collateral performance. To evaluate MBS and CMBS volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMBS and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMBS and ABS are deemed Level 2.

Regulation D Private Placement Securities: All Regulation D privately-placed bonds are classified as corporate securities and deemed Level 3. The pricing vendor evaluation methodology for these securities includes a combination of observable and unobservable inputs. Observable inputs include public corporate spread matrices classified by sector, rating and average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value.

For all of our fixed income securities classified as Level 2, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. If discrepancies are found in our comparisons, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 fixed income securities provided by our pricing services are reasonable.

Equity Securities: As of March 31, 2024, nearly all of our equity holdings were traded on an exchange. Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). Pricing for the equity securities not traded on an exchange is provided by a third-party pricing source using observable inputs and are classified as Level 2. Pricing for equity securities not traded on an exchange rely on one or more unobservable inputs and are classified as Level 3.

Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy.

10

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 three-month periods ended March 31, 2024 and 2023:

Sales

Proceeds

Gross Realized

Net Realized

(in thousands)

 

From Sales

 

Gains

 

Losses

 

Gain (Loss)

2024

Fixed income securities - available-for-sale

$

11,819

$

289

$

(793)

$

(504)

Equity securities

15,910

7,234

(121)

7,113

2023

Fixed income securities - available-for-sale

$

3,790

$

35

$

(82)

$

(47)

Equity securities

3,501

2,417

(101)

2,316

Calls/Maturities

Gross Realized

Net Realized

(in thousands)

 

Proceeds

 

Gains

 

Losses

 

Gain (Loss)

2024

Fixed income securities - available-for-sale

$

72,423

$

33

$

(157)

$

(124)

2023

Fixed income securities - available-for-sale

$

190,305

$

35

$

(40)

$

(5)

FAIR VALUE MEASUREMENTS

Assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are summarized below:

As of March 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

$

$

329,559

$

$

329,559

U.S. agency

58,455

58,455

Non-U.S. government & agency

3,844

3,844

Agency MBS

414,428

414,428

ABS/CMBS/MBS*

289,476

289,476

Corporate

1,158,487

62,560

1,221,047

Municipal

546,512

546,512

Total fixed income securities - available-for-sale

$

$

2,800,761

$

62,560

$

2,863,321

Equity securities

641,758

1,609

643,367

Total

$

641,758

$

2,800,761

$

64,169

$

3,506,688

*

Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities

11

As of December 31, 2023

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

$

$

308,031

$

$

308,031

U.S. agency

59,826

59,826

Non-U.S. government & agency

3,882

3,882

Agency MBS

425,285

425,285

ABS/CMBS/MBS*

281,182

281,182

Corporate

1,164,548

60,471

1,225,019

Municipal

552,624

552,624

Total fixed income securities - available-for-sale

$

$

2,795,378

$

60,471

$

2,855,849

Equity securities

588,416

1,625

590,041

Total

$

588,416

$

2,795,378

$

62,096

$

3,445,890

*

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).

(in thousands)

 

Level 3 Securities

Balance as of January 1, 2024

$

62,096

Net realized and unrealized gains (losses)

Included in other comprehensive earnings (loss)

(271)

Purchases

2,735

Sales / Calls / Maturities

(391)

Balance as of March 31, 2024

$

64,169

Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings (loss)

$

(271)

The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of March 31, 2024 were as follows:

March 31, 2024

(in thousands)

 

Amortized Cost

 

Fair Value

Due in one year or less

$

188,801

$

186,550

Due after one year through five years

875,943

843,536

Due after five years through 10 years

696,813

669,310

Due after 10 years

548,944

460,021

ABS/CMBS/MBS*

771,772

703,904

Total available-for-sale

$

3,082,273

$

2,863,321

*

Asset-backed, commercial mortgage-backed and mortgage-backed securities

12

The amortized cost and fair value of available-for-sale securities at March 31, 2024 and December 31, 2023 are presented in the tables below. Amortized cost does not include the $24 million and $23 million of accrued interest receivable as of March 31, 2024 and December 31, 2023, respectively.