Fair Value (Tables)

9 Months Ended

Sep. 30, 2013

Composition of Investment Portfolio by Major Security Type

The composition of the investment portfolio by major security type was:



	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
September 30, 2013
Fixed maturities:
U.S. government obligations	$	3,741.7	$	0	$	0	$	3,741.7	$	3,691.2
State and local government obligations	0		2,138.6		0		2,138.6		2,125.7
Foreign government obligations	15.9		0		0		15.9		15.9
Corporate debt securities	0		3,157.6		0		3,157.6		3,118.8
Subtotal	3,757.6		5,296.2		0		9,053.8		8,951.6
Asset-backed securities:
Residential mortgage-backed	0		1,009.7		.2		1,009.9		994.9
Commercial mortgage-backed	0		2,208.7		31.3		2,240.0		2,224.1
Other asset-backed	0		1,148.9		0		1,148.9		1,143.3
Subtotal asset-backed securities	0		4,367.3		31.5		4,398.8		4,362.3
Redeemable preferred stocks:
Financials	0		134.2		0		134.2		115.7
Utilities	0		65.3		0		65.3		64.9
Industrials	0		145.6		0		145.6		150.4
Subtotal redeemable preferred stocks	0		345.1		0		345.1		331.0
Total fixed maturities	3,757.6		10,008.6		31.5		13,797.7		13,644.9
Equity securities:
Nonredeemable preferred stocks:
Financials	244.0		429.1		36.1		709.2		427.9
Utilities	0		16.8		0		16.8		14.2
Subtotal nonredeemable preferred stocks	244.0		445.9		36.1		726.0		442.1
Common equities:
Common stocks	2,287.4		0		0		2,287.4		1,419.2
Other risk investments	0		0		38.7		38.7		3.1
Subtotal common equities	2,287.4		0		38.7		2,326.1		1,422.3
Total fixed maturities and equity securities	6,289.0		10,454.5		106.3		16,849.8		15,509.3
Short-term investments:
Other short-term investments	751.5		394.6		0		1,146.1		1,146.1
Total portfolio	$	7,040.5	$	10,849.1	$	106.3	$	17,995.9	$	16,655.4
Debt	$	0	$	2,231.4	$	0	$	2,231.4	$	2,010.6



	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
September 30, 2012
Fixed maturities:
U.S. government obligations	$	3,544.0	$	0	$	0	$	3,544.0	$	3,433.7
State and local government obligations	0		1,959.5		0		1,959.5		1,898.9
Foreign government obligations	0		0		0		0		0
Corporate debt securities	0		2,822.5		0		2,822.5		2,687.8
Subtotal	3,544.0		4,782.0		0		8,326.0		8,020.4
Asset-backed securities:
Residential mortgage-backed	0		358.8		49.9		408.7		399.5
Commercial mortgage-backed	0		2,065.0		22.6		2,087.6		1,998.2
Other asset-backed	0		1,092.0		.3		1,092.3		1,077.9
Subtotal asset-backed securities	0		3,515.8		72.8		3,588.6		3,475.6
Redeemable preferred stocks:
Financials	0		133.9		0		133.9		120.8
Utilities	0		66.9		0		66.9		65.9
Industrials	0		179.8		0		179.8		181.3
Subtotal redeemable preferred stocks	0		380.6		0		380.6		368.0
Total fixed maturities	3,544.0		8,678.4		72.8		12,295.2		11,864.0
Equity securities:
Nonredeemable preferred stocks:
Financials	265.2		524.4		29.3		818.9		407.3
Utilities	0		29.5		0		29.5		22.8
Subtotal nonredeemable preferred stocks	265.2		553.9		29.3		848.4		430.1
Common equities:
Common stocks	1,627.2		0		0		1,627.2		1,098.3
Other risk investments	0		0		12.0		12.0		3.2
Subtotal common equities	1,627.2		0		12.0		1,639.2		1,101.5
Total fixed maturities and equity securities	5,436.4		9,232.3		114.1		14,782.8		13,395.6
Short-term investments:
Other short-term investments	2,120.7		273.4		0		2,394.1		2,394.1
Total portfolio	$	7,557.1	$	9,505.7	$	114.1	$	17,176.9	$	15,789.7
Debt	$	0	$	2,405.9	$	0	$	2,405.9	$	2,062.7



	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2012
Fixed maturities:
U.S. government obligations	$	2,896.5	$	0	$	0	$	2,896.5	$	2,806.4
State and local government obligations	0		1,964.4		0		1,964.4		1,914.4
Foreign government obligations	0		0		0		0		0
Corporate debt securities	0		3,113.0		0		3,113.0		2,982.9
Subtotal	2,896.5		5,077.4		0		7,973.9		7,703.7
Asset-backed securities:
Residential mortgage-backed	0		382.7		45.5		428.2		413.4
Commercial mortgage-backed	0		2,023.4		25.3		2,048.7		1,963.9
Other asset-backed	0		948.6		0		948.6		936.0
Subtotal asset-backed securities	0		3,354.7		70.8		3,425.5		3,313.3
Redeemable preferred stocks:
Financials	0		129.7		0		129.7		110.7
Utilities	0		66.7		0		66.7		64.9
Industrials	0		178.3		0		178.3		181.3
Subtotal redeemable preferred stocks	0		374.7		0		374.7		356.9
Total fixed maturities	2,896.5		8,806.8		70.8		11,774.1		11,373.9
Equity securities:
Nonredeemable preferred stocks:
Financials	259.6		494.5		31.9		786.0		383.3
Utilities	0		26.4		0		26.4		20.7
Subtotal nonredeemable preferred stocks	259.6		520.9		31.9		812.4		404.0
Common equities:
Common stocks	1,887.0		0		0		1,887.0		1,367.2
Other risk investments	0		0		12.0		12.0		3.1
Subtotal common equities	1,887.0		0		12.0		1,899.0		1,370.3
Total fixed maturities and equity securities	5,043.1		9,327.7		114.7		14,485.5		13,148.2
Short-term investments:
Other short-term investments	1,679.9		310.1		0		1,990.0		1,990.0
Total portfolio	$	6,723.0	$	9,637.8	$	114.7	$	16,475.5	$	15,138.2
Debt	$	0	$	2,394.4	$	0	$	2,394.4	$	2,063.1

Summary of Changes in Fair Value Associated With Level 3 Assets

The following tables provide a summary of changes in fair value associated with Level 3 assets for the three and nine months ended September 30, 2013 and 2012:



	Level 3 Fair Value
	Three months ended September 30, 2013
(millions)	Fair Value at June 30, 2013		Calls/Maturities/Paydowns			Purchases		Sales		Net Realized (gain)/loss on sales		Change in Valuation		Net Transfers in (out)¹			Fair Value at Sept. 30, 2013
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	157.1	$	(17.0	)	$	0	$	0	$	0	$	1.5	$	(141.4	)	$	.2
Commercial mortgage-backed	27.6		(.3		)	0		0		0		4.0		0			31.3
Other asset-backed	0		0			0		0		0		0		0			0
Total fixed maturities	184.7		(17.3		)	0		0		0		5.5		(141.4		)	31.5
Equity securities:
Nonredeemable preferred stocks:
Financials²	34.8		0			0		0		0		1.3		0			36.1
Common equities:
Other risk investments	38.7		0			0		0		0		0		0			38.7
Total Level 3 securities	$	258.2	$	(17.3	)	$	0	$	0	$	0	$	6.8	$	(141.4	)	$	106.3

¹The $(141.4) million was transferred out of Level 3 and into Level 2 due to an increase in liquidity and trading volume in the market.

²The $1.3 million represents net holding period gains on a hybrid security which is reflected in net realized gains (losses) on securities in the comprehensive income statement.



	Level 3 Fair Value
	Nine months ended September 30, 2013
(millions)	Fair Value at Dec. 31, 2012		Calls/Maturities/Paydowns			Purchases		Sales		Net Realized (gain)/loss on sales			Change in Valuation			Net Transfers in (out)¹			Fair Value at Sept. 30, 2013
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	45.5	$	(28.6	)	$	125.1	$	0	$	0		$	(.4	)	$	(141.4	)	$	.2
Commercial mortgage-backed	25.3		(1.1		)	0		0		0			7.1			0			31.3
Other asset-backed	0		0			0		0		0			0			0			0
Total fixed maturities	70.8		(29.7		)	125.1		0		0			6.7			(141.4		)	31.5
Equity securities:
Nonredeemable preferred stocks:
Financials²	31.9		0			0		0		0			4.2			0			36.1
Common equities:
Other risk investments	12.0		(.1		)	.3		0		(.5		)	27.0			0			38.7
Total Level 3 securities	$	114.7	$	(29.8	)	$	125.4	$	0	$	(.5	)	$	37.9		$	(141.4	)	$	106.3

¹The $(141.4) million was transferred out of Level 3 and into Level 2 due to an increase in liquidity and trading volume in the market.

²The $4.2 million represents net holding period gains on a hybrid security which is reflected in net realized gains (losses) on securities in the comprehensive income statement.



	Level 3 Fair Value
	Three months ended September 30, 2012
(millions)	Fair Value at June 30, 2012		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (gain)/loss on sales		Change in Valuation		Net Transfers in (out)		Fair Value at Sept. 30, 2012
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	54.5	$	(5.0	)	$	0	$	0	$	0	$	.4	$	0	$	49.9
Commercial mortgage-backed	23.2		(2.6		)	0		0		0		2.0		0		22.6
Other asset-backed	1.1		(.8		)	0		0		0		0		0		.3
Total fixed maturities	78.8		(8.4		)	0		0		0		2.4		0		72.8
Equity securities:
Nonredeemable preferred stocks:
Financials¹	0		0			28.5		0		0		.8		0		29.3
Common equities:
Other risk investments	12.2		(.2		)	0		0		0		0		0		12.0
Total Level 3 securities	$	91.0	$	(8.6	)	$	28.5	$	0	$	0	$	3.2	$	0	$	114.1

¹The $0.8 million represents net holding period gains on a hybrid security which is reflected in net realized gains (losses) on securities in the comprehensive income statement.



	Level 3 Fair Value
	Nine months ended September 30, 2012
(millions)	Fair Value at Dec. 31, 2011		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (gain)/loss on sales		Change in Valuation		Net Transfers in (out)		Fair Value at Sept. 30, 2012
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	62.3	$	(12.8	)	$	0	$	0	$	0	$	.4	$	0	$	49.9
Commercial mortgage-backed	21.3		(2.7		)	0		0		0		4.0		0		22.6
Other asset-backed	2.6		(2.3		)	0		0		0		0		0		.3
Total fixed maturities	86.2		(17.8		)	0		0		0		4.4		0		72.8
Equity securities:
Nonredeemable preferred stocks:
Financials¹	0		0			28.5		0		0		.8		0		29.3
Common equities:
Other risk investments	11.5		(.2		)	0		0		0		.7		0		12.0
Total Level 3 securities	$	97.7	$	(18.0	)	$	28.5	$	0	$	0	$	5.9	$	0	$	114.1

¹The $0.8 million represents net holding period gains on a hybrid security which is reflected in net realized gains (losses) on securities in the comprehensive income statement.

Summary of Quantitative Information about Level 3 Fair Value Measurements

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at September 30, 2013 and 2012, and December 31, 2012:



	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Sept. 30, 2013		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	.2	External vendor	Prepayment rate¹	0
Commercial mortgage-backed	31.3		External vendor	Prepayment rate²	0
Total fixed maturities	31.5
Equity securities:
Nonredeemable preferred stocks:
Financials	36.1		Multiple of tangible net book value	Price to book ratio multiple	1.9
Common equities:
Other risk investments	0
Subtotal Level 3 securities	$	67.6
Pricing exemption securities³	38.7
Total Level 3 securities	$	106.3

¹Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

²Assumes that two securities have 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

³The fair values for $0.7 million of these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us. The remaining $38.0 million reflects a negotiated sale on a private common equity security that is expected to be completed by the end of 2013.



	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Sept. 30, 2012		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	15.3	External vendor	Prepayment rate¹	0,16
Commercial mortgage-backed	0
Total fixed maturities	15.3
Equity securities:
Nonredeemable preferred stocks:
Financials	29.3		Multiple of tangible net book value	Price to Book Ratio Multiple	1.9
Common equities:
Other risk investments	11.2		Discounted consolidated equity	Discount for lack of marketability	20	%
Subtotal Level 3 securities	$	55.8
Pricing exemption securities²	58.3
Total Level 3 securities	$	114.1

¹Assumes that two securities have 0% and one security has 16% of the principal amount of the underlying loans that will be paid off prematurely in each year.

²The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.



	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2012		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	.2	External vendor	Prepayment rate¹	16
Commercial mortgage-backed	25.3		External vendor	Prepayment rate²	0
Total fixed maturities	25.5
Equity securities:
Nonredeemable preferred stocks:
Financials	31.9		Multiple of tangible net book value	Price to book ratio multiple	1.9
Common equities:
Other risk investments	11.2		Discounted consolidated equity	Discount for lack of marketability	20	%
Subtotal Level 3 securities	$	68.6
Pricing exemption securities³	46.1
Total Level 3 securities	$	114.7

¹Assumes that one security has 16% of the principal amount of the underlying loans that will be paid off prematurely in each year.

²Assumes that three securities have 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

³The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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