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Investments
 12 Months Ended
Dec. 31, 2015
Investments [Abstract]  
Investments
Investments
A summary of current and long-term investments, available-for-sale, at December 31, 2015 and 2014 is as follows:
 
 
 
 
 
 
 
 
 
Non-Credit
Component of
Other-Than-
Temporary
Impairments
Recognized in
AOCI
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized Losses
 
Estimated
Fair Value
 
 
 
 
Less than
12 Months
 
12 Months
or Greater
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
$
349.5

 
$
2.0

 
$
(1.6
)
 
$
—

 
$
349.9

 
$
—

Government sponsored securities
75.6

 
0.5

 
(0.1
)
 
(0.1
)
 
75.9

 
—

States, municipalities and political subdivisions, tax-exempt
5,976.7

 
284.1

 
(4.0
)
 
(5.2
)
 
6,251.6

 
—

Corporate securities
8,209.7

 
61.1

 
(267.2
)
 
(110.5
)
 
7,893.1

 
(15.4
)
Residential mortgage-backed securities
1,724.5

 
41.2

 
(7.6
)
 
(7.2
)
 
1,750.9

 
—

Commercial mortgage-backed securities
407.6

 
1.4

 
(4.3
)
 
(0.4
)
 
404.3

 
—

Other debt securities
756.8

 
4.1

 
(5.8
)
 
(2.6
)
 
752.5

 
—

Total fixed maturity securities
17,500.4

 
394.4

 
(290.6
)
 
(126.0
)
 
17,478.2

 
$
(15.4
)
Equity securities
1,083.1

 
420.6

 
(30.9
)
 
—

 
1,472.8

 
 
Total investments, available-for-sale
$
18,583.5

 
$
815.0

 
$
(321.5
)
 
$
(126.0
)
 
$
18,951.0

 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
$
315.7

 
$
4.6

 
$
(0.3
)
 
$
—

 
$
320.0

 
$
—

Government sponsored securities
94.6

 
0.8

 
—

 
(0.4
)
 
95.0

 
—

States, municipalities and political subdivisions, tax-exempt
5,451.4

 
287.0

 
(1.8
)
 
(3.0
)
 
5,733.6

 
—

Corporate securities
8,335.9

 
162.9

 
(123.1
)
 
(43.2
)
 
8,332.5

 
(6.8
)
Options embedded in convertible securities
98.7

 
—

 
—

 
—

 
98.7

 
—

Residential mortgage-backed securities
2,099.7

 
68.9

 
(1.0
)
 
(8.6
)
 
2,159.0

 
—

Commercial mortgage-backed securities
504.8

 
6.1

 
(0.6
)
 
(0.4
)
 
509.9

 
—

Other debt securities
720.3

 
6.1

 
(1.7
)
 
(1.6
)
 
723.1

 
—

Total fixed maturity securities
17,621.1

 
536.4

 
(128.5
)
 
(57.2
)
 
17,971.8

 
$
(6.8
)
Equity securities
1,330.7

 
618.5

 
(11.1
)
 
—

 
1,938.1

 
 
Total investments, available-for-sale
$
18,951.8

 
$
1,154.9

 
$
(139.6
)
 
$
(57.2
)
 
$
19,909.9

 
 

At December 31, 2015, we owned $2,155.2 of mortgage-backed securities and $698.6 of asset-backed securities out of a total available-for-sale investment portfolio of $18,951.0. These securities included sub-prime and Alt-A securities with fair values of $30.9 and $58.2, respectively. These sub-prime and Alt-A securities had accumulated net unrealized gains of $1.0 and $3.3, respectively. The average credit rating of the sub-prime and Alt-A securities was “CCC” and “CC”, respectively.
At December 31, 2015, we owned $777.2 of energy sector fixed maturity securities out of a total available-for-sale investment portfolio of $18,951.0. These energy sector securities had accumulated net unrealized losses of $172.0.
For available-for-sale securities in an unrealized loss position at December 31, 2015 and 2014, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position.
 
Less than 12 Months
 
12 Months or Greater
 
Number of
Securities
 
Estimated
Fair Value
 
Gross
Unrealized
Loss
 
Number of
Securities
 
Estimated
Fair Value
 
Gross
Unrealized
Loss
(Securities are whole amounts)
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
48

 
$
248.4

 
$
(1.6
)
 
2

 
$
0.9

 
$
—

Government sponsored securities
13

 
18.3

 
(0.1
)
 
6

 
8.2

 
(0.1
)
States, municipalities and political subdivisions, tax-exempt
198

 
467.8

 
(4.0
)
 
43

 
83.0

 
(5.2
)
Corporate securities
2,492

 
4,912.3

 
(267.2
)
 
372

 
447.0

 
(110.5
)
Residential mortgage-backed securities
298

 
668.3

 
(7.6
)
 
119

 
186.3

 
(7.2
)
Commercial mortgage-backed securities
66

 
263.0

 
(4.3
)
 
17

 
38.5

 
(0.4
)
Other debt securities
153

 
488.2

 
(5.8
)
 
28

 
77.0

 
(2.6
)
Total fixed maturity securities
3,268

 
7,066.3

 
(290.6
)
 
587

 
840.9

 
(126.0
)
Equity securities
792

 
261.1

 
(30.9
)
 
—

 
—

 
—

Total fixed maturity and equity securities
4,060

 
$
7,327.4

 
$
(321.5
)
 
587

 
$
840.9

 
$
(126.0
)
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
United States Government securities
17

 
$
145.3

 
$
(0.3
)
 
2

 
$
0.9

 
$
—

Government sponsored securities
2

 
0.3

 
—

 
16

 
29.3

 
(0.4
)
States, municipalities and political subdivisions, tax-exempt
136

 
315.6

 
(1.8
)
 
80

 
174.3

 
(3.0
)
Corporate securities
1,802

 
3,213.3

 
(123.1
)
 
314

 
514.6

 
(43.2
)
Residential mortgage-backed securities
78

 
155.0

 
(1.0
)
 
186

 
398.3

 
(8.6
)
Commercial mortgage-backed securities
43

 
156.2

 
(0.6
)
 
10

 
33.2

 
(0.4
)
Other debt securities
79

 
270.6

 
(1.7
)
 
21

 
65.0

 
(1.6
)
Total fixed maturity securities
2,157

 
4,256.3

 
(128.5
)
 
629

 
1,215.6

 
(57.2
)
Equity securities
407

 
125.4

 
(11.1
)
 
—

 
—

 
—

Total fixed maturity and equity securities
2,564

 
$
4,381.7

 
$
(139.6
)
 
629

 
$
1,215.6

 
$
(57.2
)

The amortized cost and fair value of available-for-sale fixed maturity securities at December 31, 2015, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations.
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
276.6

 
$
278.6

Due after one year through five years
4,872.9

 
4,792.3

Due after five years through ten years
5,392.0

 
5,390.1

Due after ten years
4,826.8

 
4,862.0

Mortgage-backed securities
2,132.1

 
2,155.2

Total available-for-sale fixed maturity securities
$
17,500.4

 
$
17,478.2


The major categories of net investment income (loss) for the years ended December 31 are as follows:

2015

2014

2013
Fixed maturity securities
$
679.0


$
644.1


$
638.9

Equity securities
61.7


57.7


45.9

Cash equivalents
0.7


0.8


1.0

Other
(22.6
)

66.3


19.8

Investment income
718.8


768.9


705.6

Investment expense
(41.2
)

(44.5
)

(46.5
)
Net investment income
$
677.6


$
724.4


$
659.1


Net realized investment gains/losses and net change in unrealized appreciation/depreciation in investments for the years ended December 31are as follows:
 
2015
 
2014
 
2013
Net realized gains (losses) on investments:
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
Gross realized gains from sales
$
135.9

 
$
198.2

 
$
225.9

Gross realized losses from sales
(182.1
)
 
(50.6
)
 
(125.7
)
Net realized (losses) gains from sales of fixed maturity securities
(46.2
)
 
147.6

 
100.2

Equity securities:
 
 
 
 
 
Gross realized gains from sales
233.4

 
93.5

 
189.6

Gross realized losses from sales
(45.1
)
 
(13.9
)
 
(13.4
)
Net realized gains from sales of equity securities
188.3

 
79.6

 
176.2

Other investments:
 
 
 
 
 
Gross realized gains from sales
139.8

 
14.4

 
107.2

Gross realized losses from sales
(124.4
)
 
(64.6
)
 
(111.7
)
Net realized gains (losses) from sales of other investments
15.4

 
(50.2
)
 
(4.5
)
Net realized gains on investments
157.5

 
177.0

 
271.9

 
 
 
 
 
 
Other-than-temporary impairment losses recognized in income:
 
 
 
 
 
Fixed maturity securities
(31.2
)
 
(22.3
)
 
(42.5
)
Equity securities
(35.6
)
 
(13.5
)
 
(13.9
)
Other invested assets, long-term
(16.6
)
 
(13.2
)
 
(42.5
)
Other-than-temporary impairment losses recognized in income
(83.4
)
 
(49.0
)
 
(98.9
)
 
 
 
 
 
 
Change in net unrealized (losses) gains on investments:
 
 
 
 
 
Fixed maturity securities
(372.9
)
 
145.2

 
(679.8
)
Equity securities
(217.7
)
 
36.5

 
225.4

Other invested assets, long-term
(4.1
)
 
—

 
—

Total change in net unrealized (losses) gains on investments
(594.7
)
 
181.7

 
(454.4
)
Deferred income tax benefit (expense)
210.4

 
(63.1
)
 
159.7

Net change in net unrealized (losses) gains on investments
(384.3
)
 
118.6

 
(294.7
)
 
 
 
 
 
 
Net realized gains on investments, other-than-temporary impairment losses recognized in income and net change in net unrealized (losses) gains on investments
$
(310.2
)
 
$
246.6

 
$
(121.7
)

A primary objective in the management of our fixed maturity and equity portfolios is to maximize total return relative to underlying liabilities and respective liquidity needs. In achieving this goal, assets may be sold to take advantage of market conditions or other investment opportunities as well as tax considerations. Sales will generally produce realized gains and losses. In the ordinary course of business, we may sell securities at a loss for a number of reasons, including, but not limited to: (i) changes in the investment environment; (ii) expectations that the fair value could deteriorate further; (iii) desire to reduce exposure to an issuer or an industry; (iv) changes in credit quality; or (v) changes in expected cash flow.
Proceeds from fixed maturity securities, equity securities and other invested assets and the related gross realized gains and gross realized losses for the years ended December 31 are as follows:
 
2015
 
2014
 
2013
Proceeds
$
11,779.8

 
$
10,255.9

 
$
13,662.8

Gross realized gains
509.1

 
306.1

 
522.7

Gross realized losses
(351.6
)
 
(129.1
)
 
(250.8
)

A significant judgment in the valuation of investments is the determination of when an other-than-temporary decline in value has occurred. We follow a consistent and systematic process for recognizing impairments on securities that sustain other-than-temporary declines in value. We have established a committee responsible for the impairment review process. The decision to impair a security incorporates both quantitative criteria and qualitative information. The impairment review process considers a number of factors including, but not limited to: (i) the length of time and the extent to which the fair value has been less than book value, (ii) the financial condition and near term prospects of the issuer, (iii) our intent and ability to retain impaired investments for a period of time sufficient to allow for any anticipated recovery in fair value, (iv) our intent to sell or the likelihood that we will need to sell a fixed maturity security before recovery of its amortized cost basis, (v) whether the debtor is current on interest and principal payments, (vi) the reasons for the decline in value (i.e., credit event compared to liquidity, general credit spread widening, currency exchange rate or interest rate factors) and (vii) general market conditions and industry or sector specific factors. For securities that are deemed to be other-than-temporarily impaired, the security is adjusted to fair value and the resulting losses are recognized in the consolidated statements of income. The new cost basis of the impaired securities is not increased for future recoveries in fair value.
Other-than-temporary impairments recorded in 2015, 2014 and 2013 were primarily the result of the continued credit deterioration on specific issuers in the bond markets and the fair values of certain equity securities remaining below cost for an extended period of time. There were no individually significant OTTI losses on investments by issuer during 2015, 2014 or 2013.
Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is possible that changes in these risk factors in the near term could have an adverse material impact on our results of operations or shareholders’ equity.
The changes in the amount of the credit component of OTTI losses on fixed maturity securities recognized in income, for which a portion of the OTTI losses was recognized in other comprehensive income, was not material for the years ended December 31, 2015, 2014 or 2013.
At December 31, 2015 and 2014, no investments exceeded 10% of shareholders’ equity.
At December 31, 2015 and 2014, the carrying value of fixed maturity investments that did not produce income during the years then ended were $0.2 and $9.2, respectively.
As of December 31, 2015 we had committed approximately $662.3 to future capital calls from various third-party investments in exchange for an ownership interest in the related entities.
At December 31, 2015 and 2014, securities with carrying values of approximately $558.2 and $504.4, respectively, were deposited by our insurance subsidiaries under requirements of regulatory authorities.
In the tables above, certain amounts for the years ended December 31, 2014 and 2013 have been reclassified to conform to the current year presentation. The reclassifications do not impact amounts presented in the financial statements.
Securities Lending Programs
The fair value of the collateral received at the time of the securities lending transactions amounted to $1,300.9 and $1,515.3 at December 31, 2015 and 2014, respectively. The value of the collateral represented 103% of the market value of the securities on loan at December 31, 2015 and 2014.
The remaining contractual maturity of our securities lending agreements at December 31, 2015 is as follows:
 
Overnight and Continuous
 
Less than 30 days
 
30-90 days
 
Greater Than 90 days
 
Total
Securities lending transactions
 
 
 
 
 
 
 
 
 
United States Government securities
$
102.3

 
$
9.7

 
$
1.0

 
$
32.1

 
$
145.1

Corporate securities
813.3

 
—

 
—

 
—

 
813.3

Equity securities
300.2

 
6.3

 
—

 
—

 
306.5

Other debt securities
36.0

 
—

 
—

 
—

 
36.0

Total
$
1,251.8

 
$
16.0

 
$
1.0

 
$
32.1

 
$
1,300.9