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Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

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:


		March 31, 2021
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	247.5	Not redeemable	$	190.3

		41.9		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	1.1
Total Private Credit		289.4			191.4

Private Equity	(b)	249.8		Not redeemable	216.4
		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		259.0			250.7

Real Assets	(c)	187.7		Not redeemable	198.9
		56.3		Quarterly / 90 days notice	—
Total Real Assets		244.0			198.9

Total Partnerships		$	792.4		$	641.0


		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

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:


	March 31, 2021
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	101.1	$	475.5	$	—	$	—	$	576.6
States, Municipalities, and Political Subdivisions	54.1		4,149.8		—		—		4,203.9
Foreign Governments	—		1,098.9		21.7		—		1,120.6
Public Utilities	594.2		5,746.9		103.4		—		6,444.5
Mortgage/Asset-Backed Securities	—		847.9		77.2		—		925.1
All Other Corporate Bonds	9,144.4		19,157.6		499.2		—		28,801.2
Redeemable Preferred Stocks	—		4.1		—		—		4.1
Total Fixed Maturity Securities	9,893.8		31,480.7		701.5		—		42,076.0

Other Long-term Investments
Derivatives

Forwards	—		0.1		—		—		0.1
Foreign Exchange Contracts	—		17.4		—		—		17.4
Credit Default Swaps	—		0.1		—		—		0.1
Total Derivatives	—		17.6		—		—		17.6
Perpetual Preferred Equity Securities	26.1		0.2		5.2		—		31.5
Private Equity Partnerships	—		—		—		792.4		792.4
Total Other Long-term Investments	26.1		17.8		5.2		792.4		841.5
Total Financial Instrument Assets Carried at Fair Value	$	9,919.9	$	31,498.5	$	706.7	$	792.4	$	42,917.5

Liabilities
Other Liabilities
Derivatives
Forwards	$	—	$	0.1	$	—	$	—	$	0.1
Foreign Exchange Contracts	—		54.8		—		—		54.8

Embedded Derivative in Modified Coinsurance Arrangement	—		—		22.9		—		22.9
Total Derivatives	—		54.9		22.9		—		77.8
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	54.9	$	22.9	$	—	$	77.8


	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

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 March 31, 2021
	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(1)		Purchases		Sales		Into		Out of				OCI		Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	15.5	$	—	$	—	$	—	$	—	$	—	$	(15.5)	$	—	$	—	$	—
Foreign Governments	21.8		—		(0.1)		—		—		—		—		21.7		(0.1)		—
Public Utilities	185.7		—		(4.6)		—		—		36.0		(113.7)		103.4		(4.6)		—
Mortgage/Asset-Backed Securities	81.3		—		(34.5)		—		(32.6)		86.1		(23.1)		77.2		(34.5)		—
All Other Corporate Bonds	943.1		—		(13.8)		—		—		—		(430.1)		499.2		(13.8)		—

Total Fixed Maturity Securities	1,247.4		—		(53.0)		—		(32.6)		122.1		(582.4)		701.5		(53.0)		—

Perpetual Preferred Equity Securities	4.7		—		—		—		—		0.5		—		5.2		—		—
Embedded Derivative in Modified Coinsurance Arrangement	(39.8)		16.9		—		—		—		—		—		(22.9)		—		16.9

(1) Other Comprehensive Income (Loss)


	Three Months Ended March 31, 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	$	—	$	2.8	$	—	$	—	$	—	$	(13.3)	$	31.3	$	2.9	$	—
Foreign Governments	21.8		—		(0.9)		—		—		—		—		20.9		(0.9)		—
Public Utilities	14.6		—		(0.3)		—		—		18.0		(6.0)		26.3		—		—
Mortgage/Asset-Backed Securities	34.1		—		(0.8)		—		—		49.2		(7.4)		75.1		(0.2)		—
All Other Corporate Bonds	600.5		—		(50.6)		20.9		—		236.2		(254.0)		553.0		(2.2)		—

Total Fixed Maturity Securities	712.8		—		(49.8)		20.9		—		303.4		(280.7)		706.6		(0.4)		—

Perpetual Preferred Equity Securities	4.6		—		—		—		—		—		—		4.6		—		—
Embedded Derivative in Modified Coinsurance Arrangement	(22.8)		(86.9)		—		—		—		—		—		(109.7)		—		(86.9)

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.

March 31, 2021

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

45.0

Market Approach

Volatility of Credit

(a)

0.50% - 47.79% / 6.58%

Perpetual Preferred Equity Securities

5.2

Market Approach

Market Convention

(b)

Priced at Cost or Owner's Equity

Embedded Derivative in Modified Coinsurance Arrangement

(22.9)

Discounted Cash Flows

Projected Liability Cash Flows

Weighted Spread of Swap Curve

(c)

Actuarial Assumptions

0.7%

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

(a)

0.50% - 24.90% / 3.63%

Perpetual Preferred Equity Securities

4.7

Market Approach

Market Convention

(b)

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

(c)

Actuarial Assumptions

1.0%

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

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

(c)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:


	March 31, 2021
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,456.1	$	—	$	2,456.1	$	2,402.2
Policy Loans	—		—		3,761.3		3,761.3		3,628.8
Other Long-term Investments
Miscellaneous Long-term Investments	—		26.9		24.4		51.3		51.3
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,483.0	$	3,785.7	$	6,268.7	$	6,082.3

Liabilities
Long-term Debt	$	3,230.9	$	557.9	$	—	$	3,788.8	$	3,346.8


Payable for Collateral on Federal Home Loan Bank (FHLB) Funding Agreements	—		302.2		—		302.2		302.2
Other Liabilities
Unfunded Commitments	—		0.9		—		0.9		0.9

Total Financial Instrument Liabilities Not Carried at Fair Value	$	3,230.9	$	861.0	$	—	$	4,091.9	$	3,649.9


	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
Payables 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