XML 36 R25.htm IDEA: XBRL DOCUMENT

Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value, Investments, Entities that Calculate Net Asset Value Per Share

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, 2020
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	221.0	Not redeemable	$	193.3

		40.1		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	—
Total Private Credit		261.1			193.3

Private Equity	(b)	198.5		Not redeemable	204.6
		2.1		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	37.8
Total Private Equity		200.6			242.4


Real Assets	(c)	171.8		Not redeemable	186.6
		55.1		Quarterly / 90 days notice	—
Total Real Assets		226.9			186.6

Total Partnerships		$	688.6		$	622.3


		December 31, 2019
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	223.6	Not redeemable	$	152.6

		39.6		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	0.1
Total Private Credit		263.2			152.7

Private Equity	(b)	149.3		Not redeemable	166.8

Real Assets	(c)	173.8		Not redeemable	130.6
		30.4		Quarterly / 90 days notice	25.0
Total Real Assets		204.2			155.6

Total Partnerships		$	616.7		$	475.1

Fair Values by Fair Value Hierarchy Input level

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


	September 30, 2020
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	—	$	1,249.9	$	—	$	—	$	1,249.9
States, Municipalities, and Political Subdivisions	18.5		3,897.1		14.4		—		3,930.0
Foreign Governments	—		1,093.4		21.7		—		1,115.1
Public Utilities	550.0		7,104.2		361.8		—		8,016.0
Mortgage/Asset-Backed Securities	—		1,344.3		87.8		—		1,432.1
All Other Corporate Bonds	8,556.3		24,260.9		700.4		—		33,517.6
Redeemable Preferred Stocks	—		9.5		—		—		9.5
Total Fixed Maturity Securities	9,124.8		38,959.3		1,186.1		—		49,270.2

Other Long-term Investments
Derivatives

Forwards	—		0.1		—		—		0.1
Foreign Exchange Contracts	—		38.0		—		—		38.0
Credit Default Swaps	—		0.2		—		—		0.2
Total Derivatives	—		38.3		—		—		38.3
Perpetual Preferred and Equity Securities	19.3		0.2		4.6		—		24.1
Private Equity Partnerships	—		—		—		688.6		688.6
Total Other Long-term Investments	19.3		38.5		4.6		688.6		751.0
Total Financial Instrument Assets Carried at Fair Value	$	9,144.1	$	38,997.8	$	1,190.7	$	688.6	$	50,021.2

Liabilities
Other Liabilities
Derivatives

Foreign Exchange Contracts	$	—	$	34.0	$	—	$	—	$	34.0

Embedded Derivative in Modified Coinsurance Arrangement	—		—		53.7		—		53.7
Total Derivatives	—		34.0		53.7		—		87.7
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	34.0	$	53.7	$	—	$	87.7


	December 31, 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	$	412.8	$	988.9	$	—	$	—	$	1,401.7
States, Municipalities, and Political Subdivisions	—		3,321.6		41.8		—		3,363.4
Foreign Governments	—		995.9		21.8		—		1,017.7
Public Utilities	171.1		7,546.5		14.6		—		7,732.2
Mortgage/Asset-Backed Securities	—		1,444.6		34.1		—		1,478.7
All Other Corporate Bonds	4,114.4		27,695.5		600.5		—		32,410.4
Redeemable Preferred Stocks	—		39.6		—		—		39.6
Total Fixed Maturity Securities	4,698.3		42,032.6		712.8		—		47,443.7

Other Long-term Investments
Derivatives

Foreign Exchange Contracts	—		27.0		—		—		27.0
Credit Default Swaps	—		0.5		—		—		0.5
Total Derivatives	—		27.5		—		—		27.5
Perpetual Preferred and Equity Securities	—		28.0		4.6		—		32.6
Private Equity Partnerships	—		—		—		616.7		616.7
Total Other Long-term Investments	—		55.5		4.6		616.7		676.8
Total Financial Instrument Assets Carried at Fair Value	$	4,698.3	$	42,088.1	$	717.4	$	616.7	$	48,120.5

Liabilities
Other Liabilities
Derivatives
Interest Rate Swaps	$	—	$	0.6	$	—	$	—	$	0.6
Foreign Exchange Contracts	—		34.0		—		—		34.0

Embedded Derivative in Modified Coinsurance Arrangement	—		—		22.8		—		22.8
Total Derivatives	—		34.6		22.8		—		57.4
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	34.6	$	22.8	$	—	$	57.4

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, 2020
	Fair Value Beginning of Period		Total Realized and Unrealized Investment Gains (Losses) in															Level 3 Transfers										Fair Value End of Period		Change in Unrealized Gain (Loss) on Securities Held at the End of Period included in
					Earnings			OCI¹			Purchases			Sales			Into			Out of					OCI¹				Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	13.8	$	—		$	0.6		$	—		$	—		$	—		$	—		$	14.4	$	0.1		$	—
Foreign Governments	22.0		—			(0.3)			—			—			—			—			21.7		(0.2)			—
Public Utilities	309.2		—			2.8			—			—			128.1			(78.3)			361.8		2.9			—
Mortgage/Asset-Backed Securities	174.3		—			(1.0)			—			—			—			(85.5)			87.8		(0.9)			—
All Other Corporate Bonds	546.5		—			11.4			60.0			(1.0)			208.3			(124.8)			700.4		10.2			—

Total Fixed Maturity Securities	1,065.8		—			13.5			60.0			(1.0)			336.4			(288.6)			1,186.1		12.1			—

Equity Securities	4.5		0.1			—			—			—			—			—			4.6		—			0.1
Embedded Derivative in Modified Coinsurance Arrangement	(67.8)		14.1			—			—			—			—			—			(53.7)		—			14.1

¹Other Comprehensive Income (Loss)


	Three Months Ended September 30, 2019
	Fair Value Beginning of Period		Total Realized and Unrealized Investment Gains (Losses) in															Level 3 Transfers					Fair Value End of Period
					Earnings			OCI			Purchases			Sales			Into			Out of
	(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)


	Nine Months Ended September 30, 2020
	Fair Value Beginning of Year		Total Realized and Unrealized Investment Gains (Losses) in															Level 3 Transfers										Fair Value End of Period		Change in Unrealized Gain (Loss) on Securities Held at the End of Period included in
					Earnings			OCI			Purchases			Sales			Into			Out of					OCI				Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	41.8	$	—		$	1.1		$	—		$	—		$	—		$	(28.5)		$	14.4	$	1.4		$	—
Foreign Governments	21.8		—			(0.1)			—			—			—			—			21.7		(0.1)			—
Public Utilities	14.6		—			7.0			—			—			340.2			—			361.8		7.1			—
Mortgage/Asset-Backed Securities	34.1		—			(1.8)			—			(7.0)			62.7			(0.2)			87.8		(1.8)			—
All Other Corporate Bonds	600.5		—			7.3			105.0			(29.1)			183.0			(166.3)			700.4		11.3			—

Total Fixed Maturity Securities	712.8		—			13.5			105.0			(36.1)			585.9			(195.0)			1,186.1		17.9			—

Equity Securities	4.6		—			—			—			—			—			—			4.6		—			—
Embedded Derivative in Modified Coinsurance Arrangement	(22.8)		(30.9)			—			—			—			—			—			(53.7)		—			(30.9)


	Nine Months Ended September 30, 2019
	Fair Value Beginning of Year		Total Realized and Unrealized Investment Gains (Losses) in															Level 3 Transfers					Fair Value End of Period
					Earnings			OCI			Purchases			Sales			Into			Out of
	(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)

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.

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. Unobservable inputs for fixed maturity securities are weighted by the fair value of the securities. 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, 2020

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

Public Utilities

111.6

Market Approach

Lack of Marketability

(a)

0.12% - 1.27% / 0.76%

All Other Corporate Bonds - Private

45.9

Market Approach

Volatility of Credit

(b)

0.50% - 15.42% / 2.43%

Equity Securities - Private

4.6

Market Approach

Market Convention

(c)

Priced at Cost or Owner's Equity

Embedded Derivative in Modified Coinsurance Arrangement

(53.7)

Discounted Cash Flows

Projected Liability Cash Flows

Weighted Spread of Swap Curve

(d)

Actuarial Assumptions

1.3%

December 31, 2019

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

119.2

Market Approach

Lack of Marketability

Volatility of Credit

Market Convention

(a)

(b)

(c)

4.56% - 4.56% / 4.56%

0.35% - 17.68% / 2.2%

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

(22.8)

Discounted Cash Flows

Projected Liability Cash Flows

Weighted Spread of Swap Curve

(d)

Actuarial Assumptions

0.8%

(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. Fair value of embedded derivative is most often driven by the change in the weighted average credit spread to the swap curve for the assets backing the hypothetical loan.

Carrying Amount and Fair Value of Financial Instruments

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, 2020
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,623.3	$	—	$	2,623.3	$	2,406.5
Policy Loans	—		—		3,819.2		3,819.2		3,669.1
Other Long-term Investments
Miscellaneous Long-term Investments	—		21.7		36.6		58.3		58.3
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,645.0	$	3,855.8	$	6,500.8	$	6,133.9

Liabilities
Long-term Debt	$	2,561.0	$	1,203.5	$	—	$	3,764.5	$	3,378.6


Payable for Collateral on Federal Home Loan Bank (FHLB) Funding Agreements	—		30.2		—		30.2		30.2
Other Liabilities
Unfunded Commitments	—		1.8		—		1.8		1.8

Total Financial Instrument Liabilities Not Carried at Fair Value	$	2,561.0	$	1,235.5	$	—	$	3,796.5	$	3,410.6


	December 31, 2019
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,556.3	$	—	$	2,556.3	$	2,397.0
Policy Loans	—		—		3,911.4		3,911.4		3,779.5
Other Long-term Investments
Miscellaneous Long-term Investments	—		18.5		58.4		76.9		76.9

Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,574.8	$	3,969.8	$	6,544.6	$	6,253.4

Liabilities
Long-term Debt	$	1,712.8	$	1,526.2	$	—	$	3,239.0	$	2,926.9


Other Liabilities
Unfunded Commitments	—		1.9		—		1.9		1.9
Total Financial Instrument Liabilities Not Carried at Fair Value	$	1,712.8	$	1,528.1	$	—	$	3,240.9	$	2,928.8