Company Quick10K Filing
WR Berkley
Price71.72 EPS4
Shares194 P/E20
MCap13,884 P/FCF17
Net Debt-813 EBIT981
TEV13,072 TEV/EBIT13
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-04
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-05
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-22
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-04
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-06
10-Q 2013-03-31 Filed 2013-05-06
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-07
10-Q 2011-09-30 Filed 2011-11-07
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-06-12
8-K 2020-05-27
8-K 2020-05-12
8-K 2020-05-05
8-K 2020-04-21
8-K 2020-01-28
8-K 2019-12-16
8-K 2019-12-09
8-K 2019-11-08
8-K 2019-10-22
8-K 2019-07-23
8-K 2019-06-06
8-K 2019-04-23
8-K 2019-02-21
8-K 2019-01-29
8-K 2018-10-23
8-K 2018-07-24
8-K 2018-05-31
8-K 2018-04-24
8-K 2018-04-03
8-K 2018-03-26
8-K 2018-03-19
8-K 2018-01-30

WRB 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 wrb331202010-qex311.htm
EX-31.2 wrb331202010-qex312.htm
EX-32.1 wrb331202010-qex321.htm

WR Berkley Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
30241812602012201420172020
Assets, Equity
2.11.71.30.80.40.02012201420172020
Rev, G Profit, Net Income
0.40.20.0-0.2-0.4-0.62012201420172020
Ops, Inv, Fin

Document
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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, 2020
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
1-15202

W. R. BERKLEY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
22-1867895
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
475 Steamboat Road
Greenwich
Connecticut
06830
(Address of principal executive offices)
 
 
(Zip Code)
(203)
629-3000
(Registrant’s telephone number, including area code)
 
None
 
Former name, former address and former fiscal year, if changed since last report.
Securities registered pursuant to Section 12(b) of the Act:
Title
Trading Symbol
Name
 
 
 
Common Stock, par value $.20 per share
WRB
New York Stock Exchange
5.625% Subordinated Debentures due 2053
WRB-PB
New York Stock Exchange
5.90% Subordinated Debentures due 2056
WRB-PC
New York Stock Exchange
5.75% Subordinated Debentures due 2056
WRB-PD
New York Stock Exchange
5.70% Subordinated Debentures due 2058
WRB-PE
New York Stock Exchange
5.10% Subordinated Debentures due 2059
WRB-PF
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

1



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
Number of shares of common stock, $.20 par value, outstanding as of April 30, 2020: 178,724,311
 

2



TABLE OF CONTENTS

3



Part I — FINANCIAL INFORMATION
Item 1.     Financial Statements

W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
March 31,
2020
 
December 31,
2019
 
(Unaudited)
 
(Audited)
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities (amortized cost of $13,818,447 and $13,976,647; allowance for expected credit losses of $67,463 at March 31, 2020)
$
13,666,067

 
$
14,180,961

Real estate
2,084,387

 
2,105,950

Investment funds
1,178,858

 
1,213,535

Arbitrage trading account
666,829

 
400,809

Equity securities
356,102

 
480,620

Loans receivable (net of allowance for expected credit losses of $3,928 at March 31, 2020)
87,058

 
91,799

Total investments
18,039,301

 
18,473,674

Cash and cash equivalents
965,012

 
1,023,710

Premiums and fees receivable (net of allowance for expected credit losses of $21,524 at March 31, 2020)
2,075,685

 
1,997,186

Due from reinsurers (net of allowance for expected credit losses of $6,800 at March 31, 2020)
2,178,092

 
2,133,683

Deferred policy acquisition costs
542,013

 
517,364

Prepaid reinsurance premiums
576,646

 
567,595

Trading account receivables from brokers and clearing organizations
132,928

 
423,543

Property, furniture and equipment
422,012

 
422,091

Goodwill
169,652

 
169,652

Accrued investment income
140,843

 
138,789

Federal and foreign income taxes
83,677

 

Other assets
764,068

 
762,743

Total assets
$
26,089,929

 
$
26,630,030

 
 
 
 
Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Reserves for losses and loss expenses
$
12,732,515

 
$
12,583,249

Unearned premiums
3,800,642

 
3,656,507

Due to reinsurers
368,724

 
360,314

Trading account securities sold but not yet purchased
14,003

 
36,143

Federal and foreign income taxes

 
4,308

Other liabilities
1,005,433

 
1,244,888

Senior notes and other debt
1,432,117

 
1,427,575

Subordinated debentures
1,198,951

 
1,198,704

Total liabilities
20,552,385

 
20,511,688

Equity:
 
 
 
Preferred stock, par value $.10 per share:
 
 
 
Authorized 5,000,000 shares; issued and outstanding - none

 

Common stock, par value $.20 per share:
 
 
 
Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 179,836,714 and 183,411,907 shares, respectively
70,535

 
70,535

Additional paid-in capital
1,063,084

 
1,056,042

Retained earnings
7,877,371

 
7,932,372

Accumulated other comprehensive loss
(589,521
)
 
(257,299
)
Treasury stock, at cost, 172,840,050 and 169,264,857 shares, respectively
(2,927,994
)
 
(2,726,711
)
Total stockholders’ equity
5,493,475

 
6,074,939

Noncontrolling interests
44,069

 
43,403

Total equity
5,537,544

 
6,118,342

Total liabilities and equity
$
26,089,929

 
$
26,630,030

See accompanying notes to interim consolidated financial statements.

1




W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)
(In thousands, except per share data)
 
For the Three Months
Ended March 31,
 
 
2020
 
2019
REVENUES:
 
 
 
Net premiums written
$
1,845,846

 
$
1,709,601

Change in net unearned premiums
(154,428
)
 
(116,745
)
Net premiums earned
1,691,418

 
1,592,856

Net investment income
174,763

 
158,254

Net investment (losses) gains:
 
 
 
Net realized and unrealized (losses) gains on investments
(143,285
)
 
68,653

Change in allowance for expected credit losses on investments
(33,889
)
 

Net investment (losses) gains
(177,174
)
 
68,653

Revenues from non-insurance businesses
93,729

 
91,827

Insurance service fees
25,751

 
25,312

Other income
2,123

 
120

Total revenues
1,810,610

 
1,937,022

OPERATING COSTS AND EXPENSES:
 
 
 
Losses and loss expenses
1,107,253

 
988,650

Other operating costs and expenses
578,334

 
588,087

Expenses from non-insurance businesses
94,757

 
90,125

Interest expense
36,734

 
40,721

Total operating costs and expenses
1,817,078

 
1,707,583

(Loss) income before income taxes
(6,468
)
 
229,439

Income tax benefit (expense)
2,942

 
(47,825
)
Net (loss) income before noncontrolling interests
(3,526
)
 
181,614

Noncontrolling interests
(892
)
 
(892
)
Net (loss) income to common stockholders
$
(4,418
)
 
$
180,722

 
 
 
 
NET (LOSS) INCOME PER SHARE:
 
 
 
Basic
$
(0.02
)
 
$
0.95

Diluted
$
(0.02
)
 
$
0.94


See accompanying notes to interim consolidated financial statements.






2



W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(In thousands)
 
For the Three Months
Ended March 31,
 
 
2020
 
2019
Net (loss) income before noncontrolling interests
$
(3,526
)
 
$
181,614

Other comprehensive (loss) income:
 
 
 
Change in unrealized currency translation adjustments
(98,194
)
 
19,760

Change in unrealized investment (losses) gains, net of taxes
(258,981
)
 
125,774

Other comprehensive (loss) income
(357,175
)
 
145,534

Comprehensive (loss) income
(360,701
)
 
327,148

Noncontrolling interests
(893
)
 
(845
)
Comprehensive (loss) income to common stockholders
$
(361,594
)
 
$
326,303


See accompanying notes to interim consolidated financial statements.

3



W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
 
For the Three Months
Ended March 31,
 
 
2020
 
2019
COMMON STOCK:
 
 
 
Beginning and end of period
$
70,535

 
$
70,535

ADDITIONAL PAID-IN CAPITAL:
 
 
 
Beginning of period
$
1,056,042

 
$
1,039,633

Restricted stock units issued
(4,590
)
 
(455
)
Restricted stock units expensed
11,632

 
14,194

End of period
$
1,063,084

 
$
1,053,372

RETAINED EARNINGS:
 
 
 
Beginning of period
$
7,932,372

 
$
7,558,619

Cumulative effect adjustment resulting from changes in accounting principles
(30,514
)
 

Net (loss) income to common stockholders
(4,418
)
 
180,722

Dividends ($0.11 and $0.10 per share, respectively)
(20,069
)
 
(18,302
)
End of period
$
7,877,371

 
$
7,721,039

ACCUMULATED OTHER COMPREHENSIVE LOSS:
 
 
 
Unrealized investment (losses) gains:
 
 
 
Beginning of period
$
124,514

 
$
(91,491
)
Cumulative effect adjustment resulting from changes in accounting principles
24,952

 

Change in unrealized (losses) gains on securities without an allowance for expected credit losses
(260,521
)
 
125,796

Change in unrealized gains (losses) on securities with an allowance for expected credit losses
1,541

 
(69
)
End of period
(109,514
)
 
34,236

Currency translation adjustments:
 
 
 
Beginning of period
(381,813
)
 
(418,979
)
Net change in period
(98,194
)
 
19,760

End of period
(480,007
)
 
(399,219
)
Total accumulated other comprehensive loss
$
(589,521
)
 
$
(364,983
)
TREASURY STOCK:
 
 
 
Beginning of period
$
(2,726,711
)
 
$
(2,720,466
)
Stock exercised/vested
1,338

 
455

Stock repurchased
(202,621
)
 

End of period
$
(2,927,994
)
 
$
(2,720,011
)
NONCONTROLLING INTERESTS:
 
 
 
Beginning of period
$
43,403

 
$
41,947

(Distributions) contributions
(227
)
 
52

Net income
892

 
892

Other comprehensive income (loss), net of tax
1

 
(47
)
End of period
$
44,069

 
$
42,844

See accompanying notes to interim consolidated financial statements.

4



W. R. BERKLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
For the Three Months
Ended March 31,
 
 
2020
 
2019
CASH FROM OPERATING ACTIVITIES:
 
 
 
Net (loss) income to common stockholders
$
(4,418
)
 
$
180,722

Adjustments to reconcile net (loss) income to net cash from (used in) operating activities:
 
 
 
Net investment losses (gains)
177,174

 
(68,653
)
Depreciation and amortization
25,063

 
27,424

Noncontrolling interests
892

 
892

Investment funds
(40,576
)
 
(11,411
)
Stock incentive plans
11,683

 
14,828

Change in:
 
 
 
Arbitrage trading account
2,455

 
(7,753
)
Premiums and fees receivable
(97,169
)
 
(156,450
)
Reinsurance accounts
(43,104
)
 
(20,272
)
Deferred policy acquisition costs
(26,139
)
 
(17,732
)
Income taxes
(12,500
)
 
36,180

Reserves for losses and loss expenses
200,294

 
119,780

Unearned premiums
163,793

 
135,184

Other
(204,878
)
 
(154,409
)
Net cash from operating activities
152,570

 
78,330

CASH FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from sale of fixed maturity securities
1,574,232

 
973,626

Proceeds from sale of equity securities
5,311

 
37,762

Distributions from (contributions to) investment funds
99,194

 
(13,874
)
Proceeds from maturities and prepayments of fixed maturity securities
1,055,722

 
686,795

Purchase of fixed maturity securities
(2,598,076
)
 
(1,528,267
)
Purchase of equity securities
(35,260
)
 
(35,314
)
Real estate purchased
(24,249
)
 
(52,901
)
Change in loans receivable
2,877

 
(726
)
Net purchases of property, furniture and equipment
(14,637
)
 
(3,299
)
Change in balances due to security brokers
(34,378
)
 
(22,011
)
Other
86

 

Net cash from investing activities
30,822

 
41,791

CASH USED IN FINANCING ACTIVITIES:
 
 
 
Net payments for stock options exercised
(3,321
)
 

Net proceeds from issuance of debt
4,259

 

Cash dividends to common stockholders
(20,069
)
 

Purchase of common treasury shares
(202,621
)
 

Other, net
(204
)
 
(976
)
Net cash used in financing activities
(221,956
)
 
(976
)
Net impact on cash due to change in foreign exchange rates
(20,134
)
 
681

Net change in cash and cash equivalents
(58,698
)
 
119,826

Cash and cash equivalents at beginning of year
1,023,710

 
817,602

Cash and cash equivalents at end of period
$
965,012

 
$
937,428

See accompanying notes to interim consolidated financial statements.

5




W. R. Berkley Corporation and Subsidiaries
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) General
The unaudited consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”) have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for annual financial statements. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly the Company’s financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. For further information related to areas of judgment and estimates and other information necessary to understand the Company’s financial position and results of operations, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The income tax provision has been computed based on the Company’s estimated annual effective tax rate. The effective tax rate for the quarter differs from the U.S. federal income tax rate of 21% principally because of tax-exempt investment income, tax benefits related to equity-based compensation, and tax on income from foreign jurisdictions with different tax rates.

(2) Per Share Data
The Company presents both basic and diluted net (loss) income per share (“EPS”) amounts. Basic EPS is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period (including 7,575,168 and 7,389,781 common shares held in a grantor trust as of March 31, 2020 and 2019, respectively). The common shares held in the grantor trust are for delivery upon settlement of vested but mandatorily deferred restricted stock units ("RSUs"). Shares held by the grantor trust do not affect diluted shares outstanding since the shares deliverable under vested RSUs were already included in diluted shares outstanding. Diluted EPS is based upon the weighted average number of basic and common equivalent shares outstanding during the period and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. For the period ended March 31, 2020, diluted shares have been reduced by 2.0 million to reflect the anti-dilutive effect of common equivalent shares.
The weighted average number of common shares used in the computation of basic and diluted (losses) earnings per share was as follows:
 
For the Three Months
Ended March 31,
 
(In thousands)
2020
 
2019
Basic
190,287

 
190,400

Diluted
190,287

 
192,669



(3) Recent Accounting Pronouncements and Accounting Policies
Recently adopted accounting pronouncements:
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, which amended the accounting guidance for credit losses on financial instruments. The updated guidance amended the current other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. This guidance also applies a new current expected credit loss model for determining credit-related impairments for financial instruments measured at amortized cost, such as reinsurance recoverables. The updated guidance was effective for reporting periods beginning after December 15, 2019.
The adoption of this guidance on January 1, 2020 resulted in the recognition of an allowance for expected credit loss in connection with operating assets (premiums and fees receivable and due from reinsurers) of $5.7 million (net of tax) and a

6



corresponding cumulative effect adjustment that decreased common stockholders' equity. Certain investments (primarily fixed maturity securities available for sale) established an allowance for expected credit loss of $24.8 million (net of tax), with a cumulative effect adjustment decreasing retained earnings by $24.8 million (net of tax) and increasing accumulated other comprehensive (loss) income ("AOCI") by $25.0 million (net of tax), resulting in $0.2 million net impact to total common stockholders' equity.
All other accounting and reporting standards that have become effective in 2020 were either not applicable to the Company or their adoption did not have a material impact on the Company. 
Accounting and reporting standards that are not yet effective:
All recently issued but not yet effective accounting and reporting standards are either not applicable to the Company or are not expected to have a material impact on the Company.
Accounting policies:
The following accounting policies have been updated to reflect the Company's adoption of Financial Instruments - Credit Losses as described above.
Revenue recognition (related to premiums and fees receivable)
Insurance premiums are recognized as written at the inception of the policy. Reinsurance premiums are estimated based upon information received from ceding companies, and subsequent differences from such estimates are recorded in the period they are determined. Insurance and reinsurance premiums are primarily earned on a pro rata basis over the policy term. Fees for services are earned over the period that the services are provided. Premiums and fees receivable are reported net of an allowance for expected credit losses with the allowance being estimated based on current and future expected conditions, historical loss data and specific identification of collectability concerns where applicable. Changes in the allowance are reported within other operating costs and expenses.
Reinsurance ceded (related to due from reinsurers)
The unearned portion of premiums ceded to reinsurers is reported as prepaid reinsurance premiums and earned ratably over the policy term. The estimated amounts of reinsurance recoverable on unpaid losses are reported as due from reinsurers. To the extent any reinsurer does not meet its obligations under reinsurance agreements, the Company must discharge its liability. Amounts due from reinsurers are reflected net of funds held where the right of offset is present. The Company has provided an allowance for expected credit losses for estimated uncollectible reinsurance. The allowance is estimated based on the composition of the recoverable balance, considering reinsurer credit ratings, collateral received from financial institutions and funds withheld arrangements, length of collection periods, probability of default methodology, and specific identification of collectability concerns. Changes in the allowance are reported within losses and loss expenses.
Investments
For available for sale securities in an unrealized loss position where the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery in value, the amortized cost basis is written down to fair value through net investment (losses) gains. For available for sale securities in an unrealized loss position where the Company does not intend to sell, or it is more likely than not that it will not be required to sell the security before recovery in value, the Company evaluates whether the decline in fair value has resulted from credit losses or all other factors (non-credit factors). In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for expected credit losses is recorded for the credit loss through net investment (losses) gains, limited by the amount that the fair value is less than the amortized cost basis. The allowance is adjusted for any change in expected credit losses and subsequent recoveries through net investment (losses) gains. The impairment related to non-credit factors is recognized in other comprehensive income.
For financial assets carried at amortized cost, which includes held to maturity securities and loans receivable, the Company estimates an allowance for expected credit losses based on relevant information about past events, including historical loss experience, current conditions and forecasts that affect the expected collectability of the amortized cost of the financial asset. The allowance for expected credit losses is presented as a reduction to amortized cost of the financial asset in the consolidated balance sheet and changes to the estimate for expected credit losses are recognized through net investment (losses) gains.

7



The Company’s credit assessment of allowance for expected credit losses uses a third party model for available for sale and held to maturity securities, as well as loans receivable. The allowance for expected credit losses is generally based on the performance of the underlying collateral under various economic and default scenarios that involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. A discounted cash flow analysis is used to ascertain the amount of the allowance for expected credit losses, if any.  In general, the model reverts to the rating-level long-term average marginal default rates based on 10 years of historical data, beyond the forecast period. For other inputs, the model in most cases reverts to the baseline long-term assumptions linearly over 5 years beyond the forecast period. The long-term assumptions are based on the historical averages.
The Company reports accrued investment income separately from fixed maturity securities, and has elected not to measure an allowance for expected credit losses for accrued investment income. Accrued investment income is written off through net investment income at the time the issuer of the bond defaults or is expected to default on payments.




8



(4) Consolidated Statements of Comprehensive (Loss) Income

The following table presents the components of the changes in accumulated other comprehensive (loss) income ("AOCI"):
(In thousands)
Unrealized Investment (Losses) Gains
 
Currency Translation Adjustments
 
Accumulated Other Comprehensive
(Loss) Income
As of and for the three months ended March 31, 2020
 
 
 
 
Changes in AOCI
 
 
 
 
Beginning of period
$
124,514

 
$
(381,813
)
 
$
(257,299
)
Cumulative effect adjustment resulting from changes in accounting principles
24,952

 

 
24,952

Restated beginning of period
149,466

 
(381,813
)
 
(232,347
)
Other comprehensive loss before reclassifications
(298,531
)
 
(98,194
)
 
(396,725
)
Amounts reclassified from AOCI
39,550

 

 
39,550

Other comprehensive loss
(258,981
)
 
(98,194
)
 
(357,175
)
Unrealized investment losses related to noncontrolling interest
1

 

 
1

Ending balance
$
(109,514
)
 
$
(480,007
)
 
$
(589,521
)
Amounts reclassified from AOCI
 
 
 
 
 
Pre-tax
$
50,063

(1)
$

 
$
50,063

Tax effect
(10,513
)
(2)

 
(10,513
)
After-tax amounts reclassified
$
39,550

 
$

 
$
39,550

Other comprehensive loss
 
 
 
 
 
Pre-tax
$
(332,850
)
 
$
(98,194
)
 
$
(431,044
)
Tax effect
73,869

 

 
73,869

Other comprehensive loss
$
(258,981
)
 
$
(98,194
)
 
$
(357,175
)

As of and for the three months ended March 31, 2019
 
 
 
 
Changes in AOCI
 
 
 


Beginning of period
$
(91,491
)
 
$
(418,979
)
 
$
(510,470
)
Other comprehensive income before reclassifications
127,139

 
19,760

 
146,899

Amounts reclassified from AOCI
(1,365
)
 

 
(1,365
)
Other comprehensive income
125,774

 
19,760

 
145,534

Unrealized investment gain related to noncontrolling interest
(47
)
 

 
(47
)
Ending balance
$
34,236

 
$
(399,219
)
 
$
(364,983
)
Amounts reclassified from AOCI
 
 
 
 

Pre-tax
$
(1,728
)
(1)
$

 
$
(1,728
)
Tax effect
363

(2)

 
363

After-tax amounts reclassified
$
(1,365
)
 
$

 
$
(1,365
)
Other comprehensive income
 
 
 
 

Pre-tax
$
169,260

 
$
19,760

 
$
189,020

Tax effect
(43,486
)
 

 
(43,486
)
Other comprehensive income
$
125,774

 
$
19,760

 
$
145,534

_________________________
(1) Net investment (losses) gains in the consolidated statements of income.
(2) Income tax benefit (expense) in the consolidated statements of income.



9



(5) Statements of Cash Flows
Interest payments were $54,582,000 and $62,981,000 for the three months ended March 31, 2020 and 2019, respectively. No income taxes were paid during such periods.

(6) Investments in Fixed Maturity Securities
At March 31, 2020 and December 31, 2019, investments in fixed maturity securities were as follows:
 
(In thousands)
Amortized
Cost
 
Allowance for Expected Credit Losses (1)
 
Gross Unrealized
 
Fair
Value
 
Carrying
Value
Gains
 
Losses
 
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Held to maturity:
 
 
 
 
 
 
 
 
 
 
 
State and municipal
$
70,971

 
$
(107
)
 
$
11,516

 
$

 
$
82,380

 
$
70,864

Residential mortgage-backed
7,888

 

 
808

 

 
8,696

 
7,888

Total held to maturity
78,859

 
(107
)
 
12,324

 

 
91,076

 
78,752

Available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. government and government agency
715,890

 

 
23,830

 
(58
)
 
739,662

 
739,662

State and municipal:
 
 
 
 
 
 
 
 
 
 
 
Special revenue
2,283,655

 

 
53,529

 
(9,043
)
 
2,328,141

 
2,328,141

State general obligation
365,109

 

 
22,440

 
(1,592
)
 
385,957

 
385,957

Pre-refunded
311,077

 

 
18,281

 
(128
)
 
329,230

 
329,230

Corporate backed
254,887

 

 
4,880

 
(1,705
)
 
258,062

 
258,062

Local general obligation
412,291

 

 
34,985

 
(511
)
 
446,765

 
446,765

Total state and municipal
3,627,019

 

 
134,115

 
(12,979
)
 
3,748,155

 
3,748,155

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
1,169,144

 

 
26,039

 
(15,480
)
 
1,179,703

 
1,179,703

Commercial
284,584

 

 
841

 
(9,688
)
 
275,737

 
275,737

Total mortgage-backed securities
1,453,728

 

 
26,880

 
(25,168
)
 
1,455,440

 
1,455,440

Asset-backed
3,123,627

 

 
2,415

 
(187,990
)
 
2,938,052

 
2,938,052

Corporate:
 
 
 
 
 
 
 
 
 
 
 
Industrial
2,175,423

 
(3,513
)
 
42,215

 
(62,365
)
 
2,151,760

 
2,151,760

Financial
1,482,371

 
(2,923
)
 
16,083

 
(28,128
)
 
1,467,403

 
1,467,403

Utilities
327,101

 

 
9,315

 
(1,838
)
 
334,578

 
334,578

Other
24,560

 

 
230

 
(14
)
 
24,776

 
24,776

Total corporate
4,009,455

 
(6,436
)
 
67,843

 
(92,345
)
 
3,978,517

 
3,978,517

Foreign government
809,869

 
(60,920
)
 
21,377

 
(42,837
)
 
727,489

 
727,489

Total available for sale
13,739,588

 
(67,356
)
 
276,460

 
(361,377
)
 
13,587,315

 
13,587,315

Total investments in fixed maturity securities
$
13,818,447

 
$
(67,463
)
 
$
288,784

 
$
(361,377
)
 
$
13,678,391

 
$
13,666,067

____________
(1) Represents the amount of impairment that has resulted from credit-relat