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Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2023

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, 2023
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	244.3	Not redeemable	$	97.9

		39.2		Quarterly / 90 days notice	11.3
Total Private Credit		283.5			109.2

Private Equity	(b)	477.5		Not redeemable	401.6
		22.2		Initial 5.5 year lock on each new investment / Quarterly after 5.5 year lock with 90 days notice	19.4
Total Private Equity		499.7			421.0

Real Assets	(c)	384.7		Not redeemable	242.0
		60.9		Quarterly / 90 days notice	—
Total Real Assets		445.6			242.0

Total Partnerships		$	1,228.8		$	772.2


		December 31, 2022
Investment Category		Fair Value		Redemption Term / Redemption Notice	Unfunded Commitments
		(in millions of dollars)			(in millions of dollars)
Private Credit	(a)	$	239.3	Not redeemable	$	90.9

		35.7		Initial 2 year lock on each new investment / Quarterly after 2 year lock with 90 days notice	13.4
Total Private Credit		275.0			104.3

Private Equity	(b)	453.6		Not redeemable	377.2
		31.7		Initial 5.5 year lock on each new investment / Quarterly after 5.5 year lock with 90 days notice	39.1
Total Private Equity		485.3			416.3

Real Assets	(c)	373.9		Not redeemable	256.3
		60.1		Quarterly / 90 days notice	—
Total Real Assets		434.0			256.3

Total Partnerships		$	1,194.3		$	776.9

(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 March 31, 2023, the estimated remaining life of the investments that do not allow for redemptions is approximately 66 percent in the next 3 years, 21 percent during the period from 3 to 5 years, 11 percent during the period from 5 to 10 years, and 2 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 March 31, 2023, the estimated remaining life of the investments that do not allow for redemptions is approximately 36 percent in the next 3 years, 17 percent during the period from 3 to 5 years, 40 percent during the period from 5 to 10 years, and 7 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 March 31, 2023, the estimated remaining life of the investments that do not allow for redemptions is approximately 22 percent in the next 3 years, 36 percent during period from 3 to 5 years, and 42 percent during the period from 5 to 10 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:


	March 31, 2023
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	83.5	$	457.8	$	—	$	—	$	541.3
States, Municipalities, and Political Subdivisions	9.2		3,631.9		0.1		—		3,641.2
Foreign Governments	—		876.0		—		—		876.0
Public Utilities	944.1		4,300.3		—		—		5,244.4
Mortgage/Asset-Backed Securities	—		547.5		28.8		—		576.3
All Other Corporate Bonds	8,636.7		16,501.6		139.1		—		25,277.4
Redeemable Preferred Stocks	—		3.6		—		—		3.6
Total Fixed Maturity Securities	9,673.5		26,318.7		168.0		—		36,160.2

Other Long-term Investments
Derivatives

Forwards	—		12.7		—		—		12.7
Foreign Exchange Contracts	—		82.4		—		—		82.4

Total Derivatives	—		95.1		—		—		95.1
Perpetual Preferred and Equity Securities	—		10.3		16.2		—		26.5
Private Equity Partnerships	—		—		—		1,228.8		1,228.8
Total Other Long-term Investments	—		105.4		16.2		1,228.8		1,350.4
Total Financial Instrument Assets Carried at Fair Value	$	9,673.5	$	26,424.1	$	184.2	$	1,228.8	$	37,510.6

Liabilities
Other Liabilities
Derivatives
Forwards	$	—	$	23.8	$	—	$	—	$	23.8
Foreign Exchange Contracts	—		25.5		—		—		25.5

Embedded Derivative in Modified Coinsurance Arrangement	—		—		13.6		—		13.6
Total Derivatives	—		49.3		13.6		—		62.9
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	49.3	$	13.6	$	—	$	62.9


	December 31, 2022
	Level 1		Level 2		Level 3		NAV		Total
	(in millions of dollars)
Assets
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	81.7	$	416.5	$	—	$	—	$	498.2
States, Municipalities, and Political Subdivisions	8.7		3,448.3		0.2		—		3,457.2
Foreign Governments	—		827.1		—		—		827.1
Public Utilities	160.1		4,796.8		—		—		4,956.9
Mortgage/Asset-Backed Securities	—		551.3		22.0		—		573.3
All Other Corporate Bonds	4,268.6		20,097.3		158.7		—		24,524.6
Redeemable Preferred Stocks	—		3.5		—		—		3.5
Total Fixed Maturity Securities	4,519.1		30,140.8		180.9		—		34,840.8

Other Long-term Investments
Derivatives

Forwards	—		5.6		—		—		5.6
Foreign Exchange Contracts	—		83.5		—		—		83.5

Total Derivatives	—		89.1		—		—		89.1
Perpetual Preferred and Equity Securities	—		9.6		16.2		—		25.8
Private Equity Partnerships	—		—		—		1,194.3		1,194.3
Total Other Long-term Investments	—		98.7		16.2		1,194.3		1,309.2
Total Financial Instrument Assets Carried at Fair Value	$	4,519.1	$	30,239.5	$	197.1	$	1,194.3	$	36,150.0

Liabilities
Other Liabilities
Derivatives
Forwards	$	—	$	48.5	$	—	$	—	$	48.5
Foreign Exchange Contracts	—		25.5		—		—		25.5

Embedded Derivative in Modified Coinsurance Arrangement	—		—		13.9		—		13.9
Total Derivatives	—		74.0		13.9		—		87.9
Total Financial Instrument Liabilities Carried at Fair Value	$	—	$	74.0	$	13.9	$	—	$	87.9

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, 2023
	Fair Value Beginning of Year		Total Realized and Unrealized Investment Gains (Losses) in						Sales/Maturities		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				Into		Out of				OCI		Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	0.2	$	—	$	(0.1)	$	—	$	—	$	—	$	—	$	0.1	$	(0.1)	$	—


Mortgage/Asset-Backed Securities	22.0		—		(0.6)		7.2		(0.2)		0.4		—		28.8		(0.6)		—
All Other Corporate Bonds	158.7		—		8.6		1.5		(59.3)		84.4		(54.8)		139.1		8.6		—

Total Fixed Maturity Securities	180.9		—		7.9		8.7		(59.5)		84.8		(54.8)		168.0		7.9		—

Perpetual Preferred and Equity Securities	16.2		—		—		—		—		—		—		16.2		—		—
Embedded Derivative in Modified Coinsurance Arrangement	(13.9)		0.3		—		—		—		—		—		(13.6)		—		0.3


	Three Months Ended March 31, 2022
	Fair Value Beginning of Year		Total Realized and Unrealized Investment Gains (Losses) in						Sales/Maturities		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				Into		Out of				OCI		Earnings
	(in millions of dollars)
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	13.4	$	—	$	—	$	—	$	—	$	—	$	(13.4)	$	—	$	—	$	—
Foreign Governments	20.8		—		(0.4)		—		—		—		—		20.4		(0.4)		—
Public Utilities	44.5		(4.1)		2.2		—		—		15.6		(44.5)		13.7		2.2		—
Mortgage/Asset-Backed Securities	187.2		—		(9.2)		7.3		—		—		(135.5)		49.8		(9.2)		—
All Other Corporate Bonds	861.5		—		(5.7)		2.6		—		13.2		(790.9)		80.7		(5.7)		—

Total Fixed Maturity Securities	1,127.4		(4.1)		(13.1)		9.9		—		28.8		(984.3)		164.6		(13.1)		—

Perpetual Preferred and Equity Securities	5.8		2.8		—		1.9		—		—		—		10.5		—		2.8
Embedded Derivative in Modified Coinsurance Arrangement	(30.1)		(3.4)		—		—		—		—		—		(33.5)		—		(3.4)

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, 2023

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

16.8

Market Approach

Volatility of Credit

Market Convention

(a)

(b)

4.62% - 4.62% / 4.62%

Priced at Par Value

Perpetual Preferred and Equity Securities

16.2

Market Approach

Market Convention

(b)

Priced at Cost, Owner's Equity, or Most Recent Round

Embedded Derivative in Modified Coinsurance Arrangement

(13.6)

Discounted Cash Flows

Projected Liability Cash Flows

Weighted Spread of Swap Curve

(c)

Actuarial Assumptions

0.6%

December 31, 2022

Fair Value

Valuation Method

Unobservable Input

Range/Weighted Average

(in millions of dollars)

Fixed Maturity Securities

All Other Corporate Bonds - Private

15.3

Market Approach

Volatility of Credit

Market Convention

(a)

(b)

5.41% - 5.41% / 5.41%

Priced at Par Value

Perpetual Preferred and Equity Securities

16.2

Market Approach

Market Convention

(b)

Priced at Cost, Owner's Equity, or Most Recent Round

Embedded Derivative in Modified Coinsurance Arrangement

(13.9)

Discounted Cash Flows

Projected Liability Cash Flows

Weighted Spread of Swap Curve

(c)

Actuarial Assumptions

0.6%

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

(b)Represents a decision to price based on par value, cost, owner's equity, or the price of the most recent capital funding round 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, 2023
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,157.5	$	—	$	2,157.5	$	2,390.0
Policy Loans	—		—		3,633.3		3,633.3		3,552.5
Other Long-term Investments
Miscellaneous Long-term Investments	—		15.7		1.1		16.8		16.8
Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,173.2	$	3,634.4	$	5,807.6	$	5,959.3

Liabilities
Long-term Debt	$	2,630.7	$	517.2	$	—	$	3,147.9	$	3,428.5



Other Liabilities
Unfunded Commitments	—		0.7		—		0.7		0.7
Payable for Collateral on FHLB Funding Agreements	—		68.0		—		68.0		68.0

Total Financial Instrument Liabilities Not Carried at Fair Value	$	2,630.7	$	585.9	$	—	$	3,216.6	$	3,497.2


	December 31, 2022
	Estimated Fair Value
	Level 1		Level 2		Level 3		Total		Carrying Value
	(in millions of dollars)
Assets
Mortgage Loans	$	—	$	2,159.5	$	—	$	2,159.5	$	2,435.4
Policy Loans	—		—		3,677.0		3,677.0		3,601.2
Other Long-term Investments
Miscellaneous Long-term Investments	—		17.1		1.3		18.4		18.4

Total Financial Instrument Assets Not Carried at Fair Value	$	—	$	2,176.6	$	3,678.3	$	5,854.9	$	6,055.0

Liabilities
Long-term Debt	$	2,288.9	$	783.1	$	—	$	3,072.0	$	3,427.8

Other Liabilities
Unfunded Commitments	—		0.7		—		0.7		0.7
Payable for Collateral on FHLB Funding Agreements	—		99.1		—		99.1		99.1
Total Financial Instrument Liabilities Not Carried at Fair Value	$	2,288.9	$	882.9	$	—	$	3,171.8	$	3,527.6