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Fair Value (Tables)
 12 Months Ended
Dec. 31, 2015
Fair Value Disclosures [Abstract]  
Composition of Investment Portfolio by Major Security Type
The composition of the investment portfolio by major security type and our outstanding debt was:
 
 
Fair Value
 
(millions)
Level 1

Level 2

Level 3

Total

Cost

December 31, 2015
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
U.S. government obligations
$
2,429.2

$
0

$
0

$
2,429.2

$
2,425.4

State and local government obligations
0

2,721.4

0

2,721.4

2,677.6

Foreign government obligations
18.6

0

0

18.6

18.6

Corporate debt securities
0

3,691.6

0

3,691.6

3,713.2

Subtotal
2,447.8

6,413.0

0

8,860.8

8,834.8

Asset-backed securities:
 
 
 
 
 
Residential mortgage-backed
0

1,726.7

0

1,726.7

1,726.0

Agency residential pass-through obligations
0

89.3

0

89.3

90.3

Commercial mortgage-backed
0

2,643.3

9.9

2,653.2

2,665.7

Other asset-backed
0

1,767.9

0

1,767.9

1,771.1

Subtotal asset-backed securities
0

6,227.2

9.9

6,237.1

6,253.1

Redeemable preferred stocks:
 
 
 
 
 
Financials
0

92.0

0

92.0

76.8

Utilities
0

51.2

0

51.2

65.1

Industrials
0

91.1

0

91.1

118.1

Subtotal redeemable preferred stocks
0

234.3

0

234.3

260.0

Total fixed maturities
2,447.8

12,874.5

9.9

15,332.2

15,347.9

Equity securities:
 
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
 
Financials
154.9

627.7

0

782.6

674.2

Subtotal nonredeemable preferred stocks
154.9

627.7

0

782.6

674.2

Common equities:
 
 
 
 
 
Common stocks
2,650.2

0

0

2,650.2

1,494.0

Other risk investments
0

0

0.3

0.3

0.3

Subtotal common equities
2,650.2

0

0.3

2,650.5

1,494.3

Total fixed maturities and equity securities
5,252.9

13,502.2

10.2

18,765.3

17,516.4

Short-term investments
2,056.3

115.7

0

2,172.0

2,172.0

Total portfolio
$
7,309.2

$
13,617.9

$
10.2

$
20,937.3

$
19,688.4

Debt
$
0

$
2,722.9

$
164.9

$
2,887.8

$
2,707.9


 
Fair Value
 
(millions)
Level 1

Level 2

Level 3

Total

Cost

December 31, 2014
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
U.S. government obligations
$
2,667.1

$
0

$
0

$
2,667.1

$
2,641.1

State and local government obligations
0

2,139.2

0

2,139.2

2,095.7

Foreign government obligations
14.2

0

0

14.2

14.2

Corporate debt securities
0

2,836.7

0

2,836.7

2,813.9

Subtotal
2,681.3

4,975.9

0

7,657.2

7,564.9

Asset-backed securities:
 
 
 
 
 
Residential mortgage-backed
0

1,658.5

0

1,658.5

1,635.5

Agency residential pass-through obligations
0

0

0

0

0

Commercial mortgage-backed
0

2,304.0

11.6

2,315.6

2,278.7

Other asset-backed
0

1,638.7

0

1,638.7

1,634.9

Subtotal asset-backed securities
0

5,601.2

11.6

5,612.8

5,549.1

Redeemable preferred stocks:
 
 
 
 
 
Financials
0

97.9

0

97.9

77.3

Utilities
0

65.3

0

65.3

65.0

Industrials
0

116.0

0

116.0

117.9

Subtotal redeemable preferred stocks
0

279.2

0

279.2

260.2

Total fixed maturities
2,681.3

10,856.3

11.6

13,549.2

13,374.2

Equity securities:
 
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
 
Financials
204.1

554.1

69.3

827.5

590.4

Subtotal nonredeemable preferred stocks
204.1

554.1

69.3

827.5

590.4

Common equities:
 
 
 
 
 
Common stocks
2,491.9

0

0

2,491.9

1,288.8

Other risk investments
0

0

0.4

0.4

0.4

Subtotal common equities
2,491.9

0

0.4

2,492.3

1,289.2

Total fixed maturities and equity securities
5,377.3

11,410.4

81.3

16,869.0

15,253.8

Short-term investments
1,937.0

212.0

0

2,149.0

2,149.0

Total portfolio
$
7,314.3

$
11,622.4

$
81.3

$
19,018.0

$
17,402.8

Debt
$
0

$
2,527.5

$
0

$
2,527.5

$
2,164.7
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 years ended December 31, 2015 and 2014:
 
 
Level 3 Fair Value
(millions)
Fair Value at Dec. 31, 2014

Calls/
Maturities/
Paydowns

Purchases

Sales

Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out) 

Fair Value at Dec. 31, 2015

Fixed maturities:
 
 
 
 
 
 
 
 
Asset-backed securities:
 
 
 
 
 
 
 
 
Residential mortgage-backed
$
0

$
0

$
0

$
0

$
0

$
0

$
0

$
0

Commercial mortgage-backed
11.6

(1.3
)
0

0

0

(0.4
)
0

9.9

Total fixed maturities
11.6

(1.3
)
0

0

0

(0.4
)
0

9.9

Equity securities:
 
 
 
 
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
 
 
 
 
Financials1 
69.3

0

0

0

(39.4
)
(1.4
)
(28.5
)
0

Common equities:
 
 
 
 
 
 
 
 
Other risk investments
0.4

0

0

0

0

(0.1
)
0

0.3

Total Level 3 securities
$
81.3

$
(1.3
)
$
0

$
0

$
(39.4
)
$
(1.9
)
$
(28.5
)
$
10.2



1 The $69.3 million decrease during the year reflects the reclassification of our 5% interest in ARX upon our acquisition of a controlling interest in ARX. The $39.4 million reflects our inception-to-date gain recognized, including the $1.4 million reduction in valuation that occurred during the first six months of 2015.
 
  
Level 3 Fair Value
(millions)
Fair Value at Dec. 31, 2013

Calls/
Maturities/
Paydowns

Purchases

Sales

Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out)1 

Fair Value at Dec. 31, 2014

Fixed maturities:
 
 
 
 
 
 
 
 
Asset-backed securities:
 
 
 
 
 
 
 
 
Residential mortgage-backed
$
0.2

$
0

$
0

$
(0.1
)
$
0.1

$
(0.2
)
$
0

$
0

Commercial mortgage-backed
29.0

(3.6
)
0

0

0

(0.2
)
(13.6
)
11.6

Total fixed maturities
29.2

(3.6
)
0

(0.1
)
0.1

(0.4
)
(13.6
)
11.6

Equity securities:
 
 
 
 
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
 
 
 
 
Financials2 
39.0

0

0

0

0

30.3

0

69.3

Common equities:
 
 
 
 
 
 
 
 
Other risk investments
0.5

(0.1
)
0

0

0

0

0

0.4

Total Level 3 securities
$
68.7

$
(3.7
)
$
0

$
(0.1
)
$
0.1

$
29.9

$
(13.6
)
$
81.3


1 The $13.6 million was transferred out of Level 3 and into Level 2 due to an improvement in the security's underlying collateral and an increase in liquidity and market activity in comparable securities.
2 The $30.3 million represents a net holding period gain on our investment in ARX, 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 table provides a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at December 31:
 
 
Quantitative Information about Level 3 Fair Value Measurements
($ in millions)
Fair Value at Dec. 31, 2015

Valuation Technique
Unobservable Input
Unobservable Input Assumption
Fixed maturities:
 
 
 
 
Asset-backed securities:
 
 
 
 
Commercial mortgage-backed
$
9.9

External vendor
Prepayment rate1
0
Total fixed maturities
9.9

 
 
 
Equity securities:
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
Financials
0

NA
NA
NA
Subtotal Level 3 securities
9.9

 
 
 
Third-party pricing exemption securities2 
0.3

 
 
 
Total Level 3 securities
$
10.2

 
 
 

NA= Not Applicable since we did not hold any nonredeemable preferred stock Level 3 securities at December 31, 2015.
1 Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.
2 The 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, 2014

Valuation Technique
Unobservable Input
Unobservable Input Assumption

Fixed maturities:
 
 
 
 
Asset-backed securities:
 
 
 
 
Commercial mortgage-backed
$
11.6

External vendor
Prepayment rate1
0

Total fixed maturities
11.6

 
 
 
Equity securities:
 
 
 
 
Nonredeemable preferred stocks:
 
 
 
 
Financials
69.3

Multiple of tangible net book value
Price to book ratio multiple
2.6

Subtotal Level 3 securities
80.9

 
 
 
Third-party pricing exemption securities2
0.4

 
 
 
Total Level 3 securities
$
81.3

 
 
 

1 Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.
2 The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.