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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 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:


		December 31, 2020
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	233.3	Not redeemable	$	178.9

		40.4		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	1.3
Total Private Credit		273.7			180.2

Private Equity	(b)	232.6		Not redeemable	191.0
		9.2		Initial 5.5 year lock on each new investment / Quarterly after 5.5 year lock with 90 days notice	34.3
Total Private Equity		241.8			225.3

Real Assets	(c)	176.3		Not redeemable	185.2
		55.7		Quarterly / 90 days notice	—
Total Real Assets		232.0			185.2

Total Partnerships		$	747.5		$	590.7


		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

(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. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 37 percent in the next 3 years, 38 percent during the period from 3 to 5 years, 22 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. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 20 percent in the next 3 years, 35 percent during the period from 3 to 5 years, 44 percent during the period from 5 to 10 years, and 1 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. As of December 31, 2020, the estimated remaining life of the investments that do not allow for redemptions is approximately 12 percent in the next 3 years, 23 percent during period from 3 to 5 years, 64 percent during the period from 5 to 10 years, and 1 percent during the period from 10 to 15 years.

We record changes in our share of net asset value of the partnerships in net investment income. We receive financial information related to our investments in partnerships and generally record investment income on a one-quarter lag in accordance with our accounting policy.

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:


	December 31, 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	$	—	$	709.8	$	—	$	—	$	709.8
States, Municipalities, and Political Subdivisions	—		4,245.7		15.5		—		4,261.2
Foreign Governments	—		1,146.4		21.8		—		1,168.2
Public Utilities	131.9		6,644.7		185.7		—		6,962.3
Mortgage/Asset-Backed Securities	—		1,026.4		81.3		—		1,107.7
All Other Corporate Bonds	4,089.4		24,886.1		943.1		—		29,918.6
Redeemable Preferred Stocks	—		9.5		—		—		9.5
Total Fixed Maturity Securities	4,221.3		38,668.6		1,247.4		—		44,137.3

Other Long-term Investments
Derivatives

Foreign Exchange Contracts	—		19.7		—		—		19.7
Credit Default Swaps	—		0.1		—		—		0.1
Total Derivatives	—		19.8		—		—		19.8
Perpetual Preferred Equity Securities	8.4		15.2		4.7		—		28.3
Private Equity Partnerships	—		—		—		747.5		747.5
Total Other Long-term Investments	8.4		35.0		4.7		747.5		795.6
Total Financial Instrument Assets Carried at Fair Value	$	4,229.7	$	38,703.6	$	1,252.1	$	747.5	$	44,932.9

Liabilities
Other Liabilities
Derivatives
Forwards	$	—	$	0.5	$	—	$	—	$	0.5
Foreign Exchange Contracts	—		59.2		—		—		59.2

Embedded Derivative in Modified Coinsurance Arrangement	—		—		39.8		—		39.8
Total Derivatives	—		59.7		39.8		—		99.5
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	59.7	$	39.8	$	—	$	99.5


	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 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:


	Year Ended December 31, 2020

	Fair Value Beginning of Year			Total Realized and Unrealized Investment Gains (Losses) Included in					Purchases			Sales			Level 3 Transfers				Fair Value End of Year			Change in Unrealized Gain (Loss) on Securities Held at the End of Period included in
			Earnings			OCI1	Into						Out of					OCI1			Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	41.8		$	—		$	2.2		$	—		$	—		$	—		$	(28.5)		$	15.5	$	1.7	$	—
Foreign Governments	21.8			—			—			—			—			—			—			21.8		—		—
Public Utilities	14.6			—			3.8			—			—			175.9			(8.6)			185.7		3.7		—
Mortgage/Asset-Backed Securities	34.1			—			(3.0)			—			(67.9)			118.1			—			81.3		(3.5)		—
All Other Corporate Bonds	600.5			—			29.8			194.7			(36.1)			343.1			(188.9)			943.1		26.7		—

Total Fixed Maturity Securities	712.8			—			32.8			194.7			(104.0)			637.1			(226.0)			1,247.4		28.6		—

Perpetual Preferred Equity Securities	4.6			0.1			—			—			—			—			—			4.7		—		0.1
Embedded Derivative in Modified Coinsurance Arrangement	(22.8)			(17.0)			—			—			—			—			—			(39.8)		—		(17.0)

1Other Comprehensive Income (Loss)


	Year Ended December 31, 2019
			Total Realized and Unrealized Investment Gains (Losses) Included in
	Fair Value Beginning of Year		Earnings		Other Comprehensive Income or Loss		Purchases		Sales		Level 3 Transfers				Fair Value End of Year
											Into		Out of
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	—	$	—	$	2.8	$	13.3	$	—	$	25.7	$	—	$	41.8
Foreign Governments	31.4		—		0.6		—		(10.2)		—		—		21.8
Public Utilities	84.7		—		0.8		—		—		6.0		(76.9)		14.6
Mortgage/Asset-Backed Securities	—		—		(2.7)		—		—		36.8		—		34.1
All Other Corporate Bonds	1,495.8		—		(3.1)		93.0		(86.0)		190.6		(1,089.8)		600.5
Redeemable Preferred Stocks	21.1		—		—		—		—		—		(21.1)		—
Total Fixed Maturity Securities	1,633.0		—		(1.6)		106.3		(96.2)		259.1		(1,187.8)		712.8

Perpetual Preferred Equity Securities	4.6		—		—		—		—		—		—		4.6
Embedded Derivative in Modified Coinsurance Arrangement	(31.1)		8.3		—		—		—		—		—		(22.8)

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.

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.

December 31, 2020

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

45.7

Market Approach

Volatility of Credit

(b)

0.50% - 24.90% / 3.63%

Perpetual Preferred Equity Securities

4.7

Market Approach

Market Convention

(c)

Priced at Cost or Owner's Equity

Embedded Derivative in Modified Coinsurance Arrangement

(39.8)

Discounted Cash Flows

Projected Liability Cash Flows
Weighted Spread of Swap Curve

(d)

Actuarial Assumptions
1.0%

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

Perpetual Preferred Equity Securities

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:


	December 31, 2020
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,641.8	$	—	$	2,641.8	$	2,432.1
Policy Loans	—		—		3,850.8		3,850.8		3,683.9
Other Long-term Investments
Miscellaneous Long-term Investments	—		28.2		29.3		57.5		57.5
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,670.0	$	3,880.1	$	6,550.1	$	6,173.5

Liabilities
Long-term Debt	$	2,393.1	$	1,494.3	$	—	$	3,887.4	$	3,345.7
Payable for Collateral on FHLB Funding Agreements	—		312.2		—		312.2		312.2
Other Liabilities
Unfunded Commitments	—		0.9		—		0.9		0.9

Total Financial Instrument Liabilities Not Carried at Fair Value	$	2,393.1	$	1,807.4	$	—	$	4,200.5	$	3,658.8


	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