UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM	10-Q

☒	Quarterly report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934
	for the quarterly period ended:	March 31, 2020
or
☐	Transition report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934

Commission File Number: 001-10607

OLD REPUBLIC INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-2678171
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

307 North Michigan Avenue	Chicago	Illinois	60601
(Address of principal executive office)			(Zip Code)

Registrant's telephone number, including area code: 312-346-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock / $1 par value	ORI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes: ☐  No: ☒

The number of shares of the Registrant's Common Stock outstanding at March 31, 2020 was 303,992,688.

There are 54 pages in this report

OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / March 31, 2020
INDEX
		PAGE NO.
PART I	FINANCIAL INFORMATION:
	CONSOLIDATED BALANCE SHEETS	3
	CONSOLIDATED STATEMENTS OF INCOME	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
	CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND COMMON
	SHAREHOLDERS' EQUITY	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8 - 19
	MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS	20 - 49
	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	50
	CONTROLS AND PROCEDURES	50
PART II	OTHER INFORMATION:
	ITEM 1 - LEGAL PROCEEDINGS	51
	ITEM 1A - RISK FACTORS	51
	ITEM 6 - EXHIBITS	52
SIGNATURE		53
EXHIBIT INDEX		54

2

Old Republic International Corporation and Subsidiaries
Consolidated Balance Sheets
($ in Millions, Except Share Data)
	(Unaudited)
	March 31,			December 31,
	2020			2019
Assets
Investments:
Available for sale:
Fixed maturity securities (at fair value) (amortized cost: $8,409.1 and $8,537.3)	$	8,495.4		$	8,796.5
Short-term investments (at fair value which approximates cost)	493.9			484.3
Total	8,989.4			9,280.9
Held to maturity:
Fixed maturity securities (at amortized cost) (fair value: $1,048.5 and $1,058.2)	1,015.8			1,021.7
Equity securities (at fair value) (cost: $3,236.3 and $3,089.1)	3,214.9			4,030.5
Other investments	24.7			26.0
Total investments	13,244.8			14,359.2
Other Assets:
Cash	144.5			78.8
Accrued investment income	90.0			89.3
Accounts and notes receivable	1,590.3			1,466.7
Federal income tax recoverable: Current	—			5.7
Deferred	130.1			—
Reinsurance balances and funds held	186.2			178.4
Reinsurance recoverable: Paid losses	76.0			68.5
Policy and claim reserves	3,808.0			3,755.3
Deferred policy acquisition costs	323.3			325.4
Sundry assets	758.6			748.5
Total Other Assets	7,107.3			6,717.1
Total Assets	$	20,352.2		$	21,076.3
Liabilities, Preferred Stock, and Common Shareholders' Equity
Liabilities:
Losses, claims, and settlement expenses	$	9,995.9		$	9,929.5
Unearned premiums	2,284.6			2,224.7
Other policyholders' benefits and funds	195.3			194.4
Total policy liabilities and accruals	12,475.8			12,348.7
Commissions, expenses, fees, and taxes	547.1			550.9
Reinsurance balances and funds	727.9			616.0
Federal income tax payable: Current	27.9			—
Deferred	—			112.2
Debt	967.8			974.0
Sundry liabilities	462.5			474.1
Commitments and contingent liabilities
Total Liabilities	15,209.3			15,076.1
Preferred Stock (1)	—			—
Common Shareholders' Equity:
Common stock (1)	303.9			303.6
Additional paid-in capital	1,304.2			1,297.5
Retained earnings	3,715.8			4,386.0
Accumulated other comprehensive income (loss)	(69.2		)	77.7
Unallocated ESSOP shares (at cost)	(111.9		)	(64.8		)
Total Common Shareholders' Equity	5,142.9			6,000.1
Total Liabilities, Preferred Stock and Common Shareholders' Equity	$	20,352.2		$	21,076.3

________

(1) At March 31, 2020 and December 31, 2019, there were 75,000,000 shares of $0.01 par value preferred stock authorized, of which no shares were outstanding. As of the same dates, there were 500,000,000 shares of common stock, $1.00 par value, authorized, of which 303,992,688 and 303,652,553 were issued as of March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, there were 100,000,000 shares of Class B Common Stock, $1.00 par value, authorized, of which no shares were issued.

See accompanying Notes to Consolidated Financial Statements.

3

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
($ in Millions, Except Share Data)
	Quarters Ended
	March 31,
	2020			2019
Revenues:
Net premiums earned	$	1,376.7		$	1,263.4
Title, escrow, and other fees	120.1			94.6
Total premiums and fees	1,496.8			1,358.1
Net investment income	114.1			112.1
Other income	34.6			30.4
Total operating revenues	1,645.7			1,500.6
Investment gains (losses):
Realized from actual transactions	18.5			12.3
Realized from impairments	—			—
Unrealized from changes in fair value of
equity securities	(962.7		)	355.6
Total realized and unrealized investment
gains (losses)	(944.1		)	368.0
Total revenues	701.5			1,868.6
Benefits, Claims and Expenses:
Benefits, claims and settlement expenses	619.7			598.5
Dividends to policyholders	2.9			7.5
Underwriting, acquisition, and other expenses	836.9			733.4
Interest and other charges	11.9			10.6
Total expenses	1,471.5			1,350.1
Income (loss) before income taxes (credits)	(769.9		)	518.5
Income Taxes (Credits):
Current	40.0			43.7
Deferred	(205.2		)	62.5
Total	(165.1		)	106.2
Net Income (Loss)	$	(604.8	)	$	412.2
Net Income (Loss) Per Share:
Basic	$	(2.01	)	$	1.38
Diluted	$	(2.01	)	$	1.37
Average shares outstanding: Basic	300,280,398			299,020,956
Diluted	300,280,398			300,172,853

See accompanying Notes to Consolidated Financial Statements.

4

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
($ in Millions)
	Quarters Ended
	March 31,
	2020			2019
Net Income (Loss) As Reported	$	(604.8	)	$	412.2
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized gains (losses) before reclassifications,
not included in the statements of income	(173.2		)	174.4
Amounts reclassified as realized investment (gains)
losses in the statements of income	(.3		)	.8
Pretax unrealized gains (losses) on securities	(173.5		)	175.3
Deferred income taxes (credits)	(36.3		)	36.9
Net unrealized gains (losses) on securities, net of tax	(137.1		)	138.3
Defined benefit pension plans:
Net pension adjustment before reclassifications	—			(2.6		)
Amounts reclassified as underwriting, acquisition,
and other expenses in the statements of income	.9			1.0
Pretax net adjustment related to defined benefit
pension plans	.9			(1.5		)
Deferred income taxes (credits)	.1			(.3		)
Net adjustment related to defined benefit pension
plans, net of tax	.7			(1.2		)
Foreign currency translation and other adjustments	(10.5		)	2.3
Total other comprehensive income (loss)	(146.9		)	139.3
Comprehensive Income (Loss)	$	(751.8	)	$	551.6

See accompanying Notes to Consolidated Financial Statements.

5

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Preferred Stock
and Common Shareholders' Equity (Unaudited)
($ in Millions)
	Quarters Ended
	March 31,
	2020			2019
Convertible Preferred Stock:
Balance, beginning and end of period	$	—		$	—
Common Stock:
Balance, beginning of period	$	303.6		$	302.7
Dividend reinvestment plan	—			—
Net issuance of shares under stock based compensation plans	.3			.2
Balance, end of period	$	303.9		$	302.9
Additional Paid-in Capital:
Balance, beginning of period	$	1,297.5		$	1,277.6
Dividend reinvestment plan	.2			.2
Net issuance of shares under stock based compensation plans	4.4			2.8
Stock based compensation	1.1			2.8
ESSOP shares released	.8			.5
Balance, end of period	$	1,304.2		$	1,284.1
Retained Earnings:
Balance, beginning of period	$	4,386.0		$	3,849.8
Change in accounting principle	(2.3		)	18.4
Balance, beginning of period, as adjusted	4,383.6			3,868.3
Net income (loss)	(604.8		)	412.2
Dividends on common shares ($.21 and $.20 per common share)	(62.9		)	(59.6		)
Balance, end of period	$	3,715.8		$	4,220.8
Accumulated Other Comprehensive Income (Loss):
Balance, beginning of period	$	77.7		$	(210.0	)
Net unrealized gains (losses) on securities, net of tax	(137.1		)	138.3
Net adjustment related to defined benefit pension plans,
net of tax	.7			(1.2		)
Foreign currency translation and other adjustments	(10.5		)	2.3
Balance, end of period	$	(69.2	)	$	(70.6	)
Unallocated ESSOP Shares:
Balance, beginning of period	$	(64.8	)	$	(73.9	)
ESSOP shares released	2.8			2.2
Purchase of unallocated ESSOP shares	(50.0		)	—
Balance, end of period	$	(111.9	)	$	(71.7	)

See accompanying Notes to Consolidated Financial Statements.

6

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($ in Millions)
	Quarters Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(604.8	)	$	412.2
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Deferred policy acquisition costs	2.0			(3.2		)
Premiums and other receivables	(119.9		)	(85.7		)
Unpaid claims and related items	73.7			29.8
Unearned premiums and other policyholders' liabilities	.7			12.1
Income taxes	(171.5		)	101.0
Reinsurance balances and funds	89.9			43.1
Realized investment (gains) losses from actual transactions and impairments	(18.5		)	(12.3		)
Unrealized investment (gains) losses from changes in fair value
of equity securities	962.7			(355.6		)
Accounts payable, accrued expenses and other	1.9			(5.3		)
Total	216.3			136.2
Cash flows from investing activities:
Fixed maturity securities:
Available for sale:
Maturities and early calls	297.3			155.8
Sales	88.8			126.7
Sales of:
Equity securities	140.5			184.2
Other - net	3.2			3.0
Purchases of:
Fixed maturity securities:
Available for sale	(274.4		)	(369.6		)
Equity securities	(271.2		)	(172.8		)
Other - net	(10.9		)	(12.3		)
Net decrease (increase) in short-term investments	(9.8		)	3.9
Total	(36.4		)	(80.9		)
Cash flows from financing activities:
Issuance of common shares	5.0			3.2
Redemption of debentures and notes	(6.5		)	(6.5		)
Purchase of unallocated common shares by ESSOP	(50.0		)	—
Dividends on common shares	(62.9		)	(59.6		)
Other - net	.1			.1
Total	(114.2		)	(62.7		)
Increase (decrease) in cash	65.6			(7.5		)
Cash, beginning of period	78.8			100.3
Cash, end of period	$	144.5		$	92.8
Supplemental cash flow information:
Cash paid (received) during the period for: Interest	$	20.6		$	20.7
Income taxes	$	6.7		$	5.3

See accompanying Notes to Consolidated Financial Statements.

7

OLD REPUBLIC INTERNATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

($ in Millions, Except Share Data)

1. Accounting Policies and Basis of Presentation:

The accompanying consolidated financial statements have been prepared in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") of accounting principles generally accepted in the United States of America ("GAAP"). These interim financial statements should be read in conjunction with these notes and those included in the Company's 2019 Annual Report on Form 10-K incorporated herein by reference.

Pertinent accounting and disclosure pronouncements issued from time to time by the FASB are adopted by the Company as they become effective. Recent pronouncements are discussed below.

a) Effective January 1, 2019, the Company adopted FASB guidance on lease accounting which requires balance sheet recognition of all leases with a term greater than 12 months. The Company's adoption of this guidance is discussed in Note 7.

b) Effective January 1, 2020, the Company adopted the FASB’s current expected credit loss standard ("CECL") which requires the immediate recognition of estimated credit losses expected to occur over the remaining life of certain financial assets measured at amortized cost, including the Company’s reinsurance recoverables, held to maturity securities and its accounts and notes receivable. CECL replaces the current incurred loss impairment model that recognizes losses when a probability threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased and at subsequent measurement dates. The expected credit losses, and subsequent adjustment to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the asset presented on the consolidated balance sheet.

The guidance also modifies the impairment model for available for sale fixed maturity securities by requiring the recognition of other than temporary impairments ("OTTI") relating to credit losses through an allowance account, as opposed to a charge that cannot be revised should the underlying security recover. Under the revised guidance, the length of time a security has been in an unrealized loss position will no longer impact the determination as to whether an OTTI loss exists.

The guidance relating to financial assets measured at amortized cost was adopted on a modified retrospective basis, resulting in a net of tax adjustment to January 1, 2020 retained earnings of $2.3. The Company’s total credit loss allowance relating to financial assets was $30.1 as of January 1, 2020, comprised of $14.5 related to reinsurance recoverables, $15.5 related to accounts and notes receivable, and an immaterial amount related to held to maturity securities. No significant adjustments were made to the allowance during the first quarter of 2020.

The Company performs an ongoing evaluation of reinsurance balances outstanding and uses a probability-of-default methodology to estimate the credit allowance for uncollectible amounts. Allowances for uncollectible accounts and notes receivable are established based on a review of amounts outstanding, historical charge off activity, and current and forecasted economic conditions.

The revised impairment guidance for available for sale fixed maturity securities was adopted on a prospective basis. Related disclosures relative to this standard’s impact on the Company’s investment portfolio are included in Note 3.

The financial accounting and reporting process relies on estimates and on the exercise of judgment. In the opinion of management all adjustments consisting only of normal recurring accruals necessary for a fair presentation of interim periods' results and financial position have been recorded. Amounts shown in the consolidated financial statements and applicable notes are stated (except as otherwise indicated and as to share data) in millions, which amounts may not add to totals shown due to truncation. Necessary reclassifications are made in prior periods' financial statements whenever appropriate to conform to the most current presentation.

2. Common Share Data:

Earnings Per Share - Consolidated basic earnings per share excludes the dilutive effect of common stock equivalents and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares actually outstanding for the quarterly and year-to-date periods. Diluted earnings per share are similarly calculated with the inclusion of dilutive common stock equivalents. The following table provides a reconciliation of net income (loss) and the number of shares used in basic and diluted earnings per share calculations.

8

	Quarters Ended
	March 31,
	2020			2019
Numerator:
Basic and diluted earnings per share -
income (loss) available to common stockholders	$	(604.8	)	$	412.2
Denominator:
Basic earnings per share -
weighted-average shares (a)	300,280,398			299,020,956
Effect of dilutive securities - stock based
compensation awards	—			1,151,897
Diluted earnings per share -
adjusted weighted-average shares (a)	300,280,398			300,172,853
Earnings per share: Basic	$	(2.01	)	$	1.38
Diluted	$	(2.01	)	$	1.37
Anti-dilutive common stock equivalents
excluded from earnings per share computations:
Stock based compensation awards	9,620,404			3,284,700

__________

(a) In calculating earnings per share, pertinent accounting rules require that common shares owned by the Company's Employee Savings and Stock Ownership Plan that are not yet allocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, and have the same voting and other rights applicable to all common shares.

3. Investments:

The Company classifies its fixed maturity securities as those it either (1) has the positive intent and ability to hold until maturity, (2) has available for sale or (3) has the intention of trading.

Fixed maturity securities classified as "available for sale" are reported at fair value with changes in such values, net of deferred income taxes, reflected directly in shareholders' equity. Fixed maturity securities classified as "held to maturity" are carried at amortized cost. Equity securities are reported at fair value with changes in such values reflected as unrealized investment gains (losses) in the consolidated statements of income. Fair values for fixed maturity securities and equity securities are based on quoted market prices or estimates using values obtained from recognized independent pricing services.

The status and fair value changes of each of the fixed maturity investments are reviewed at least once per quarter during the year, and estimates of other-than-temporary impairments ("OTTI") in the portfolio's value are evaluated and established at each quarterly balance sheet date. In reviewing investments for OTTI, the Company, in addition to a security's market price history, considers the totality of such factors as the issuer's operating results, financial condition and liquidity, its ability to access capital markets, credit rating trends, most current audited financial statements, industry and securities markets conditions, and analyst expectations to reach its conclusions. Sudden fair value declines caused by such adverse developments as newly emerged or imminent bankruptcy filings, issuer default on significant obligations, or reports of financial accounting developments that bring into question the validity of the issuer's previously reported earnings or financial condition, are recognized as realized losses as soon as credible publicly available information emerges to confirm such developments. In the event the Company's estimate of OTTI is insufficient at any point in time, future periods' net income (loss) would be adversely affected by the recognition of additional impairment losses, but its financial position would not necessarily be affected adversely inasmuch as such losses, or a portion of them, could have been recognized previously as unrealized losses directly in shareholders' equity. The Company recognized no OTTI adjustments for the quarters ended March 31, 2020 and 2019.

A summary of fixed maturity securities by type, contractual maturity and credit quality are shown in the following tables. Expected maturities will differ from contractual maturities since borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

9

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed Maturity Securities by Type:
March 31, 2020:
Available for sale:
U.S. & Canadian Governments	$	1,752.3	$	108.1	$	—	$	1,860.4
Corporate	6,656.8		135.1		157.0		6,634.9
	$	8,409.1	$	243.3	$	157.0	$	8,495.4
Held to maturity:
Tax-exempt	$	1,015.8	$	32.7	$	—	$	1,048.5
December 31, 2019:
Available for sale:
U.S. & Canadian Governments	$	1,842.3	$	36.9	$	.4	$	1,878.8
Corporate	6,694.9		225.5		2.8		6,917.6
	$	8,537.3	$	262.5	$	3.3	$	8,796.5
Held to maturity:
Tax-exempt	$	1,021.7	$	36.5	$	—	$	1,058.2

	Amortized Cost		Estimated Fair Value
Fixed Maturity Securities Stratified by Contractual Maturity at March 31, 2020:
Available for sale:
Due in one year or less	$	1,029.6	$	1,027.7
Due after one year through five years	4,914.0		4,961.4
Due after five years through ten years	2,423.3		2,465.1
Due after ten years	42.1		41.1
	$	8,409.1	$	8,495.4
Held to maturity:
Due in one year or less	$	1.0	$	1.0
Due after one year through five years	459.4		469.6
Due after five years through ten years	555.3		577.5
Due after ten years	—		—
	$	1,015.8	$	1,048.5

Fixed Maturity Securities Stratified by Credit Quality (a):
	All Fixed Maturity Securities				Held to Maturity
	March 31,		December 31,		March 31,		December 31,
	2020		2019		2020		2019
Aaa	23.7	%	23.9	%	39.5	%	39.5	%
Aa	12.9		13.1		52.5		52.5
A	32.1		32.6		8.0		8.0
Baa	26.6		26.1		—		—
Total investment grade	95.3		95.7		100.0		100.0
All other (b)	4.7		4.3		—		—
Total	100.0	%	100.0	%	100.0	%	100.0	%

__________

(a) Credit quality ratings referred to herein are a blend of those assigned by the major credit rating agencies for U.S. and Canadian Governments, Agencies, Corporates and Municipal issuers.

(b) "All other" includes non-investment grade or non-rated issuers.

10

As described in Note 1, the Company adopted the FASB's accounting guidance on CECL effective January 1, 2020. The credit allowance for the Company's held to maturity fixed maturity securities is evaluated using a probability-of-default methodology and due to the high credit quality of the portfolio, the resulting allowances established as of January 1, 2020 and March 31, 2020 were not material.

The following tables reflect the Company's gross unrealized losses and fair value, aggregated by category and length of time that individual available for sale and held to maturity fixed maturity securities have been in an unrealized loss position. Fair value and issuer's cost comparisons follow:

	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2020:
Fixed Maturity Securities:
Available for sale:
U.S. & Canadian Governments	$	12.8	$	—	$	—	$	—	$	12.9	$	—
Corporate	2,253.5		148.1		27.6		8.9		2,281.2		157.0
	$	2,266.4	$	148.1	$	27.6	$	8.9	$	2,294.1	$	157.0
Number of available for sale
securities in unrealized
loss position			459				26				485
Held to maturity:
Tax-exempt	$	6.5	$	—	$	21.5	$	—	$	28.1	$	—
Number of held to maturity
securities in unrealized
loss position			3				8				11
December 31, 2019:
Fixed Maturity Securities:
Available for sale:
U.S. & Canadian Governments	$	217.2	$	.3	$	53.0	$	.1	$	270.3	$	.4
Corporate	176.4		1.9		54.3		.8		230.7		2.8
	$	393.7	$	2.3	$	107.4	$	1.0	$	501.1	$	3.3
Number of available for sale
securities in unrealized
loss position			54				47				101
Held to maturity:
Tax-exempt	$	—	$	—	$	21.7	$	—	$	21.7	$	—
Number of held to maturity
securities in unrealized
loss position			—				8				8

In the above tables the unrealized losses on fixed income securities reflect changes in the interest rate environment. Additionally, the COVID-19 pandemic and the associated governmental responses caused substantial financial market disruption, which generally led to significant declines in fixed maturity security valuations, resulting in an increase in the unrealized losses on the available for sale portfolio at March 31, 2020. As part of its assessment of other-than-temporary impairments, the Company considers its intent to continue to hold the securities, and the likelihood that it will not be required to sell investment securities in an unrealized loss position until cost recovery, principally in consideration of its asset and liability matching objectives.

11

The following table shows cost and fair value information for equity securities:

	Equity Securities
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2020	$	3,236.3	$	420.1	$	441.5	$	3,214.9
December 31, 2019	$	3,089.1	$	968.0	$	26.6	$	4,030.5

During the first quarter of 2020 and 2019, the Company recognized pretax unrealized investment gains (losses) of $(962.7) and $355.6, respectively, emanating from changes in the fair value of equity securities in the consolidated statements of income. Changes in the fair value of equity securities still held at March 31, 2020 and 2019 were $(956.8) and $367.6, respectively.

Fair Value Measurements - Fair value is defined as the estimated price that is likely to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date. A fair value hierarchy is established that prioritizes the sources ("inputs") used to measure fair value into three broad levels: Level 1 inputs are based on quoted market prices in active markets; Level 2 observable inputs are based on corroboration with available market data; and Level 3 unobservable inputs are based on uncorroborated market data or a reporting entity's own assumptions. Following is a description of the valuation methodologies and general classification used for financial instruments measured at fair value.

The Company uses quoted values and other data provided by a nationally recognized independent pricing source as inputs into its quarterly process for determining fair values of fixed maturity and equity securities. To validate the techniques or models used by pricing sources, the Company's review process includes, but is not limited to: (i) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; and (ii) comparisons with other sources including the fair value estimates based on current market quotations, and with independent fair value estimates provided by the independent investment custodian. The independent pricing source obtains market quotations and actual transaction prices for securities that have quoted prices in active markets and uses their own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of "matrix pricing" in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

Level 1 securities include U.S. and Canadian Treasury notes, publicly traded common stocks, mutual funds, and short-term investments in highly liquid money market instruments. Level 2 securities generally include corporate bonds, municipal bonds, and certain U.S. and Canadian government agency securities. Securities classified within Level 3 include non-publicly traded bonds and equity securities. There were no significant changes in the fair value of Level 3 assets as of March 31, 2020 and December 31, 2019.

The following tables show a summary of the fair value of financial assets segregated among the various input levels described above:

	Fair Value Measurements
As of March 31, 2020:	Level 1	Level 2	Level 3	Total
Available for sale: