Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Private Equity Partnerships

The following tables present additional information about our private equity partnerships, including commitments for additional investments which may or may not be funded:

		September 30, 2019
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	172.0	Not redeemable	$	205.7
		32.3		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	6.2
Total Private Credit		204.3			211.9
Private Equity	(b)	151.5		Not redeemable	166.5
Real Assets	(c)	171.2		Not redeemable	134.1
		30.4		Quarterly / 90 days notice	25.0
Total Real Assets		201.6			159.1
Total Partnerships		$	557.4		$	537.5

		December 31, 2018
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	168.6	Not redeemable	$	99.5
		25.7		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	10.3
Total Private Credit		194.3			109.8
Private Equity	(b)	128.3		Not redeemable	169.5
Real Assets	(c)	131.0		Not redeemable	106.0
		30.2		Quarterly / 90 days notice	—
Total Real Assets		161.2			106.0
Total Partnerships		$	483.8		$	385.3

(a) Private Credit - The limited partnerships described in this category employ various investment strategies, generally providing direct lending or other forms of debt financing including first-lien, second-lien, mezzanine, and subordinated loans. The limited partnerships have credit exposure to corporates, physical assets, and/or financial assets within a variety of industries (including manufacturing, healthcare, energy, business services, technology, materials, and retail) in North America and, to a lesser extent, outside of North America.  Unless specifically disclosed in the table above, these limited partnerships do not allow for redemptions. As of September 30, 2019, the estimated remaining life of the investments that do not allow for redemptions is approximately 58 percent in the next 3 years, 31 percent during the period from 3 to 5 years, 8 percent during the period from 5 to 10 years, and 3 percent during the period from 10 to 15 years.

(b) Private Equity - The limited partnerships described in this category employ various strategies generally investing in controlling or minority control equity positions directly in companies and/or assets across various industries (including manufacturing, healthcare, energy, business services, technology, materials, and retail), primarily in private markets within North America and, to a lesser extent, outside of North America.  Unless specifically disclosed in the table above, these limited partnerships do not allow for redemptions. As of September 30, 2019, the estimated remaining life of the investments that do not allow for redemptions is approximately 36 percent in the next 3 years, 7 percent during the period from 3 to 5 years, 55 percent during the period from 5 to 10 years, and 2 percent during the period from 10 to 15 years.

(c) Real Assets - The limited partnerships described in this category employ various strategies, which include investing in the equity and/or debt financing of physical assets, including infrastructure (energy, power, water/wastewater, communications), transportation (including airports, ports, toll roads, aircraft, railcars) and real estate in North America, Europe, South America, and Asia.  Unless specifically disclosed in the table above, these limited partnerships do not allow for redemptions. As of September 30, 2019, the estimated remaining life of the investments that do not allow for redemptions is approximately 1 percent in the next 3 years, 20 percent during period from 3 to 5 years, 71 percent during the period from 5 to 10 years, and 8 percent during the period from 10 to 15 years.

Fair Values by Fair Value Heirarchy Input Level

The following tables present information about assets and liabilities measured at fair value on a recurring basis by fair value level, based on the observability of the inputs used:

	September 30, 2019
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	210.8	$	1,636.7	$	—	$	—	$	1,847.5
States, Municipalities, and Political Subdivisions	—		2,935.6		13.1		—		2,948.7
Foreign Governments	—		1,019.9		31.9		—		1,051.8
Public Utilities	453.9		7,265.6		96.2		—		7,815.7
Mortgage/Asset-Backed Securities	—		1,452.0		61.2		—		1,513.2
All Other Corporate Bonds	8,689.2		23,107.2		421.7		—		32,218.1
Redeemable Preferred Stocks	—		40.0		—		—		40.0
Total Fixed Maturity Securities	9,353.9		37,457.0		624.1		—		47,435.0
Other Long-term Investments
Derivatives
Foreign Exchange Contracts	—		34.7		—		—		34.7
Credit Default Swaps	—		0.2		—		—		0.2
Total Derivatives	—		34.9		—		—		34.9
Equity Securities	—		27.8		4.6		—		32.4
Private Equity Partnerships	—		—		—		557.4		557.4
Total Other Long-term Investments	—		62.7		4.6		557.4		624.7
Total Financial Instrument Assets Carried at Fair Value	$	9,353.9	$	37,519.7	$	628.7	$	557.4	$	48,059.7
Liabilities
Other Liabilities
Derivatives
Interest Rate Swaps and Forwards	$	—	$	1.1	$	—	$	—	$	1.1
Foreign Exchange Contracts	—		32.8		—		—		32.8
Embedded Derivative in Modified Coinsurance Arrangement	—		—		37.5		—		37.5
Total Derivatives	—		33.9		37.5		—		71.4
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	33.9	$	37.5	$	—	$	71.4

	December 31, 2018
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	513.4	$	1,301.0	$	—	$	—	$	1,814.4
States, Municipalities, and Political Subdivisions	—		2,424.2		—		—		2,424.2
Foreign Governments	—		952.3		31.4		—		983.7
Public Utilities	286.4		7,041.7		84.7		—		7,412.8
Mortgage/Asset-Backed Securities	—		1,582.7		—		—		1,582.7
All Other Corporate Bonds	4,232.1		23,026.1		1,495.8		—		28,754.0
Redeemable Preferred Stocks	—		18.8		21.1		—		39.9
Total Fixed Maturity Securities	5,031.9		36,346.8		1,633.0		—		43,011.7
Other Long-term Investments
Derivatives
Foreign Exchange Contracts	—		30.4		—		—		30.4
Credit Default Swaps	—		0.5		—		—		0.5
Total Derivatives	—		30.9		—		—		30.9
Equity Securities	—		24.6		4.6		—		29.2
Private Equity Partnerships	—		—		—		483.8		483.8
Total Other Long-term Investments	—		55.5		4.6		483.8		543.9
Total Financial Instrument Assets Carried at Fair Value	$	5,031.9	$	36,402.3	$	1,637.6	$	483.8	$	43,555.6
Liabilities
Other Liabilities
Derivatives
Interest Rate Swaps	$	—	$	5.2	$	—	$	—	$	5.2
Foreign Exchange Contracts	—		32.8		—		—		32.8
Embedded Derivative in Modified Coinsurance Arrangement	—		—		31.1		—		31.1
Total Derivatives	—		38.0		31.1		—		69.1
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	38.0	$	31.1	$	—	$	69.1

Changes in Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs

Changes in assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows:

	Three Months Ended September 30, 2019
				Total Realized and Unrealized Investment Gains (Losses) Included in											Level 3 Transfers
	Fair Value Beginning of Period			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Into		Out of			Fair Value End of Period
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	—		$	—		$	—		$	13.1	$	—		$	—	$	—		$	13.1
Foreign Governments	31.9			—			—			—		—			—		—			31.9
Public Utilities	189.1			—			3.6			—		—			84.2		(180.7		)	96.2
Mortgage/Asset-Backed Securities	—			—			(0.8		)	—		—			62.0		—			61.2
All Other Corporate Bonds	1,014.1			—			2.7			19.8		(1.4		)	76.5		(690.0		)	421.7
Redeemable Preferred Stocks	—			—			—			—		—			—		—			—
Total Fixed Maturity Securities	1,235.1			—			5.5			32.9		(1.4		)	222.7		(870.7		)	624.1
Equity Securities	4.6			—			—			—		—			—		—			4.6
Embedded Derivative in Modified Coinsurance Arrangement	(26.4		)	(11.1		)	—			—		—			—		—			(37.5		)

	Three Months Ended September 30, 2018
				Total Realized and Unrealized Investment Gains (Losses) Included in										Level 3 Transfers
	Fair Value Beginning of Period			Earnings		Other Comprehensive Income or Loss			Purchases		Sales			Into		Out of			Fair Value End of Period
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	36.5		$	—	$	(1.5	)	$	—	$	—		$	28.9	$	—		$	63.9
Foreign Governments	31.5			—		0.1			—		—			—		—			31.6
Public Utilities	169.2			—		(1.2		)	—		—			66.9		(112.5		)	122.4
Mortgage/Asset-Backed Securities	0.5			—		—			—		—			—		—			0.5
All Other Corporate Bonds	816.3			—		(6.9		)	—		(21.0		)	358.8		(255.4		)	891.8
Redeemable Preferred Stocks	21.6			—		(0.1		)	—		—			—		—			21.5
Total Fixed Maturity Securities	1,075.6			—		(9.6		)	—		(21.0		)	454.6		(367.9		)	1,131.7
Equity Securities	1.1			—		—			—		—			—		—			1.1
Embedded Derivative in Modified Coinsurance Arrangement	(19.9		)	6.1		—			—		—			—		—			(13.8		)

	Nine Months Ended September 30, 2019
				Total Realized and Unrealized Investment Gains (Losses) Included in											Level 3 Transfers
	Fair Value Beginning of Year			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Into		Out of			Fair Value End of Period
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	—		$	—		$	—		$	13.1	$	—		$	—	$	—		$	13.1
Foreign Governments	31.4			—			0.5			—		—			—		—			31.9
Public Utilities	84.7			—			0.8			—		—			87.5		(76.8		)	96.2
Mortgage/Asset-Backed Securities	—			—			(1.2		)	—		—			62.4		—			61.2
All Other Corporate Bonds	1,495.8			—			15.5			35.2		(48.6		)	146.5		(1,222.7		)	421.7
Redeemable Preferred Stocks	21.1			—			—			—		—			—		(21.1		)	—
Total Fixed Maturity Securities	1,633.0			—			15.6			48.3		(48.6		)	296.4		(1,320.6		)	624.1
Equity Securities	4.6			—			—			—		—			—		—			4.6
Embedded Derivative in Modified Coinsurance Arrangement	(31.1		)	(6.4		)	—			—		—			—		—			(37.5		)

	Nine Months Ended September 30, 2018
				Total Realized and Unrealized Investment Gains (Losses) Included in										Level 3 Transfers
	Fair Value Beginning of Year			Earnings		Other Comprehensive Income or Loss			Purchases		Sales			Into		Out of			Fair Value End of Period
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	—		$	—	$	(1.6	)	$	—	$	(0.4	)	$	65.9	$	—		$	63.9
Foreign Governments	—			—		(1.2		)	—		—			32.8		—			31.6
Public Utilities	207.7			—		(6.7		)	—		—			120.7		(199.3		)	122.4
Mortgage/Asset-Backed Securities	—			—		—			—		—			0.5		—			0.5
All Other Corporate Bonds	1,150.1			5.8		(49.5		)	47.0		(117.7		)	471.0		(614.9		)	891.8
Redeemable Preferred Stocks	22.8			—		(1.3		)	—		—			—		—			21.5
Total Fixed Maturity Securities	1,380.6			5.8		(60.3		)	47.0		(118.1		)	690.9		(814.2		)	1,131.7
Equity Securities	1.1			—		—			—		—			—		—			1.1
Embedded Derivative in Modified Coinsurance Arrangement	(15.9		)	2.1		—			—		—			—		—			(13.8		)

Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses only for the time during which the applicable financial instruments were classified as Level 3. The transfers between levels resulted primarily from a change in observability of three inputs used to determine fair values of the securities transferred: (1) transactional data for new issuance and secondary trades, (2) broker/dealer quotes and pricing, primarily related to changes in the level of activity in the market and whether the market was considered orderly, and (3) comparable bond metrics from which to perform an analysis. For fair value measurements of financial instruments that were transferred either into or out of Level 3, we reflect the transfers using the fair value at the beginning of the period. We believe this allows for greater transparency, as all changes in fair value that arise during the reporting period of the transfer are disclosed as a component of our Level 3 reconciliation. Gains (losses) which are included in earnings and are attributable to the change in fair value of assets or liabilities valued using significant unobservable inputs and still held at period end were $(11.1) million and $(6.4) million for the three and nine months ended September 30, 2019, respectively, and $6.1 million and $2.1 million for the three and nine months ended September 30, 2018, respectively. These amounts relate entirely to the change in fair value of an embedded derivative in a modified coinsurance arrangement and are reported as a component of realized investment gains and losses.

Quantitative Information Regarding Significant Unobservable Inputs

The table below provides quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements derived from internal models. Certain securities classified as Level 3 are excluded from the table below due to limitations in our ability to obtain the underlying inputs used by external pricing sources.

	September 30, 2019
	Fair Value			Valuation Method	Unobservable Input		Range/Weighted Average
	(in millions of dollars)
Fixed Maturity Securities
All Other Corporate Bonds - Private	$	120.5		Market Approach	Lack of Marketability Volatility of Credit Market Convention	(a) (b) (c)	8.64% - 8.64% / 8.64% 0.35% - 0.50% / 0.42% Priced at Par
Equity Securities - Private	4.6			Market Approach	Market Convention	(c)	Priced at Cost or Owner's Equity
Embedded Derivative in Modified Coinsurance Arrangement	(37.5		)	Discounted Cash Flows	Projected Liability Cash Flows	(d)	Actuarial Assumptions

	December 31, 2018
	Fair Value			Valuation Method	Unobservable Input		Range/Weighted Average
	(in millions of dollars)
Fixed Maturity Securities
All Other Corporate Bonds - Private	$	148.5		Market Approach	Lack of Marketability Volatility of Credit Market Convention	(a) (b) (c)	0.25% - 0.25% / 0.25% 0.25% - 10.99% / 1.00% Priced at Par
Equity Securities - Private	4.6			Market Approach	Market Convention	(c)	Priced at Cost or Owner's Equity
Embedded Derivative in Modified Coinsurance Arrangement	(31.1		)	Discounted Cash Flows	Projected Liability Cash Flows	(d)	Actuarial Assumptions

(a) Represents basis point adjustments to apply a discount due to the illiquidity of an investment

(b) Represents basis point adjustments for credit-specific factors

(c) Represents a decision to price based on par value, cost, or owner's equity when limited data is available

(d)

Represents various actuarial assumptions required to derive the liability cash flows including incidence, termination, and lapse rates

Fair Value, by Balance Sheet Grouping

The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	September 30, 2019
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,491.6	$	—	$	2,491.6	$	2,321.7
Policy Loans	—		—		3,899.3		3,899.3		3,763.6
Other Long-term Investments
Miscellaneous Long-term Investments	—		18.5		66.5		85.0		85.0
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,510.1	$	3,965.8	$	6,475.9	$	6,170.3
Liabilities
Long-term Debt	$	2,588.0	$	763.6	$	—	$	3,351.6	$	3,037.6
Other Liabilities
Unfunded Commitments	—		2.0		—		2.0		2.0
Total Financial Instrument Liabilities Not Carried at Fair Value	$	2,588.0	$	765.6	$	—	$	3,353.6	$	3,039.6
	December 31, 2018
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,317.4	$	—	$	2,317.4	$	2,295.0
Policy Loans	—		—		3,831.1		3,831.1		3,729.9
Other Long-term Investments
Miscellaneous Long-term Investments	—		24.1		91.5		115.6		115.6
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,341.5	$	3,922.6	$	6,264.1	$	6,140.5
Liabilities
Long-term Debt	$	1,429.8	$	1,639.4	$	—	$	3,069.2	$	2,971.3
Payables for Collateral on Investments
FHLB Funding Agreements	—		104.0		—		104.0		104.0
Other Liabilities
Unfunded Commitments	—		2.3		—		2.3		2.3
Total Financial Instrument Liabilities Not Carried at Fair Value	$	1,429.8	$	1,745.7	$	—	$	3,175.5	$	3,077.6