Investments

6 Months Ended

Jun. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Investments

INVESTMENTS

The following tables present the composition of our investment portfolio by major security type. Our securities are reported in our consolidated balance sheets at fair value. The changes in fair value for our fixed-maturity securities (other than hybrid securities) are reported as a component of accumulated other comprehensive income (loss), net of deferred income taxes, in our consolidated

balance sheets. The net holding period gains (losses) reported below represent the inception-to-date changes in fair value for the hybrid and equity securities. The changes in the net holding period gains (losses) between periods are recorded as a component of net realized gains (losses) on securities in our consolidated statements of comprehensive income.

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
June 30, 2024
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	42,063.1	$	59.6	$	(1,228.7)	$	0	$	40,894.0	56.5	%
State and local government obligations	2,345.6		0.7		(144.3)		0		2,202.0		3.0
Foreign government obligations	16.7		0		(0.9)		0		15.8		0.1
Corporate debt securities	13,260.0		33.6		(303.8)		(15.2)		12,974.6		17.9
Residential mortgage-backed securities	980.4		2.6		(9.4)		2.1		975.7		1.3
Commercial mortgage-backed securities	4,457.2		1.9		(489.1)		0		3,970.0		5.5
Other asset-backed securities	6,366.4		7.7		(89.3)		(0.1)		6,284.7		8.7
Redeemable preferred stocks	178.8		0		(1.9)		(5.4)		171.5		0.2
Total fixed maturities	69,668.2		106.1		(2,267.4)		(18.6)		67,488.3		93.2
Short-term investments	733.4		0		0		0		733.4		1.0
Total available-for-sale securities	70,401.6		106.1		(2,267.4)		(18.6)		68,221.7		94.2
Equity securities:
Nonredeemable preferred stocks	886.9		0		0		(48.7)		838.2		1.2
Common equities	707.8		0		0		2,587.8		3,295.6		4.6
Total equity securities	1,594.7		0		0		2,539.1		4,133.8		5.8
Total portfolio1	$	71,996.3	$	106.1	$	(2,267.4)	$	2,520.5	$	72,355.5	100.0	%

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
June 30, 2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	33,277.1	$	0.1	$	(1,676.7)	$	0	$	31,600.5	53.3	%
State and local government obligations	2,336.5		0.1		(181.9)		0		2,154.7		3.6
Foreign government obligations	17.2		0		(1.4)		0		15.8		0.1
Corporate debt securities	10,866.4		14.4		(540.3)		(35.9)		10,304.6		17.4
Residential mortgage-backed securities	580.7		0.2		(13.0)		(5.2)		562.7		0.9
Commercial mortgage-backed securities	4,982.2		2.0		(718.7)		0		4,265.5		7.2
Other asset-backed securities	5,250.6		0		(232.0)		(1.0)		5,017.6		8.5
Redeemable preferred stocks	174.0		0		(3.6)		(13.7)		156.7		0.3
Total fixed maturities	57,484.7		16.8		(3,367.6)		(55.8)		54,078.1		91.3
Short-term investments	1,494.3		0		0		0		1,494.3		2.5
Total available-for-sale securities	58,979.0		16.8		(3,367.6)		(55.8)		55,572.4		93.8
Equity securities:
Nonredeemable preferred stocks	1,107.1		0		0		(122.0)		985.1		1.6
Common equities	662.0		0		0		2,046.1		2,708.1		4.6
Total equity securities	1,769.1		0		0		1,924.1		3,693.2		6.2
Total portfolio1	$	60,748.1	$	16.8	$	(3,367.6)	$	1,868.3	$	59,265.6	100.0	%

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
December 31, 2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	37,823.2	$	204.1	$	(1,157.9)	$	0	$	36,869.4	55.9	%
State and local government obligations	2,338.4		2.8		(138.4)		0		2,202.8		3.3
Foreign government obligations	17.3		0		(1.0)		0		16.3		0.1
Corporate debt securities	11,446.0		87.2		(332.3)		(17.2)		11,183.7		16.9
Residential mortgage-backed securities	426.9		0.2		(10.0)		0.1		417.2		0.6
Commercial mortgage-backed securities	4,535.2		2.2		(597.7)		0		3,939.7		6.0
Other asset-backed securities	5,667.2		15.7		(107.1)		(0.4)		5,575.4		8.4
Redeemable preferred stocks	187.7		0		(2.4)		(11.6)		173.7		0.3
Total fixed maturities	62,441.9		312.2		(2,346.8)		(29.1)		60,378.2		91.5
Short-term investments	1,789.9		0		0		0		1,789.9		2.7
Total available-for-sale securities	64,231.8		312.2		(2,346.8)		(29.1)		62,168.1		94.2
Equity securities:
Nonredeemable preferred stocks	977.1		0		0		(75.0)		902.1		1.4
Common equities	706.0		0		0		2,222.4		2,928.4		4.4
Total equity securities	1,683.1		0		0		2,147.4		3,830.5		5.8
Total portfolio1	$	65,914.9	$	312.2	$	(2,346.8)	$	2,118.3	$	65,998.6	100.0	%

1 At June 30, 2024 and 2023, we had $74.1 million and $248.0 million, respectively, of net unsettled security purchase transactions included in other liabilities, compared to $45.6 million included in other assets at December 31, 2023.

The total fair value of the portfolio at June 30, 2024 and 2023, and December 31, 2023, included $4.1 billion, $4.3 billion, and $4.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At June 30, 2024, bonds and certificates of deposit in the principal amount of $713.2 million were on deposit to meet state insurance regulatory requirements. We did not hold any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at June 30, 2024 or 2023, or December 31, 2023. At June 30, 2024, we did not hold any debt securities that were non-income producing during the preceding 12 months.

Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature, or are redeemable, within one year.

Hybrid Securities Certain securities in our fixed-maturity portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments. These securities are reported at fair value:

	June 30,
(millions)	2024		2023		Dec. 31, 2023
Fixed Maturities:
Corporate debt securities	$	475.5	$	520.1	$	531.3
Residential mortgage-backed securities	272.5		448.7		323.9
Other asset-backed securities	5.3		26.1		13.9
Redeemable preferred stocks	135.0		125.4		141.2
Total hybrid securities	$	888.3	$	1,120.3	$	1,010.3

Since the embedded derivatives (e.g., change-in-control put option, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows) do not have observable intrinsic values, we use the fair value option to record the changes in fair value of these securities through income as a component of net realized gains (losses).

Fixed Maturities The composition of fixed maturities by maturity at June 30, 2024, was:

(millions)	Cost		Fair Value
Less than one year	$	7,654.0	$	7,529.6
One to five years	48,100.6		46,812.9
Five to ten years	13,731.4		12,966.0
Ten years or greater	182.2		179.8
Total	$	69,668.2	$	67,488.3

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities that do not have a single maturity date are reported based upon expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.

Gross Unrealized Losses The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses		Less than 12 Months					12 Months or Greater
($ in millions)						No. of Sec.	Fair Value		Unrealized Losses		No. of Sec.	Fair  Value		Unrealized Losses
June 30, 2024
U.S. government obligations	117	$	29,776.3	$	(1,228.7)	17	$	12,936.0	$	(109.4)	100	$	16,840.3	$	(1,119.3)
State and local government obligations	336	2,078.5		(144.3)		58	410.9		(2.0)		278	1,667.6		(142.3)
Foreign government obligations	1	15.8		(0.9)		0	0		0		1	15.8		(0.9)
Corporate debt securities	402	8,995.0		(303.8)		150	3,307.1		(18.4)		252	5,687.9		(285.4)
Residential mortgage-backed securities	39	308.0		(9.4)		7	244.1		(0.5)		32	63.9		(8.9)
Commercial mortgage-backed securities	183	3,883.2		(489.1)		7	314.4		(1.3)		176	3,568.8		(487.8)
Other asset-backed securities	176	3,133.3		(89.3)		62	1,447.0		(3.4)		114	1,686.3		(85.9)
Redeemable preferred stocks	3	36.6		(1.9)		0	0		0		3	36.6		(1.9)
Total fixed maturities	1,257	$	48,226.7	$	(2,267.4)	301	$	18,659.5	$	(135.0)	956	$	29,567.2	$	(2,132.4)

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses		Less than 12 Months					12 Months or Greater
($ in millions)						No. of Sec.	Fair Value		Unrealized Losses		No. of Sec.	Fair  Value		Unrealized Losses
June 30, 2023
U.S. government obligations	171	$	31,496.1	$	(1,676.7)	51	$	17,704.6	$	(427.9)	120	$	13,791.5	$	(1,248.8)
State and local government obligations	346	1,998.2		(181.9)		57	346.8		(5.2)		289	1,651.4		(176.7)
Foreign government obligations	1	15.8		(1.4)		0	0		0		1	15.8		(1.4)
Corporate debt securities	414	8,565.9		(540.3)		109	2,397.4		(56.0)		305	6,168.5		(484.3)
Residential mortgage-backed securities	41	108.5		(13.0)		7	2.4		(0.1)		34	106.1		(12.9)
Commercial mortgage-backed securities	211	4,247.9		(718.7)		4	13.6		(0.1)		207	4,234.3		(718.6)
Other asset-backed securities	292	4,900.0		(232.0)		78	1,564.7		(7.6)		214	3,335.3		(224.4)
Redeemable preferred stocks	3	31.3		(3.6)		0	0		0		3	31.3		(3.6)
Total fixed maturities	1,479	$	51,363.7	$	(3,367.6)	306	$	22,029.5	$	(496.9)	1,173	$	29,334.2	$	(2,870.7)

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses		Less than 12 Months					12 Months or Greater
($ in millions)						No. of Sec.	Fair Value		Unrealized Losses		No. of Sec.	Fair  Value		Unrealized Losses
December 31, 2023
U.S. government obligations	147	$	28,225.0	$	(1,157.9)	25	$	11,890.0	$	(100.0)	122	$	16,335.0	$	(1,057.9)
State and local government obligations	324	1,846.2		(138.4)		31	169.9		(0.9)		293	1,676.3		(137.5)
Foreign government obligations	1	16.3		(1.0)		0	0		0		1	16.3		(1.0)
Corporate debt securities	313	6,642.4		(332.3)		26	617.2		(14.7)		287	6,025.2		(317.6)
Residential mortgage-backed securities	39	88.4		(10.0)		2	0.4		0		37	88.0		(10.0)
Commercial mortgage-backed securities	189	3,912.2		(597.7)		1	30.7		(2.5)		188	3,881.5		(595.2)
Other asset-backed securities	207	3,299.1		(107.1)		41	639.4		(1.2)		166	2,659.7		(105.9)
Redeemable preferred stocks	3	32.5		(2.4)		0	0		0		3	32.5		(2.4)
Total fixed maturities	1,223	$	44,062.1	$	(2,346.8)	126	$	13,347.6	$	(119.3)	1,097	$	30,714.5	$	(2,227.5)

A review of the securities in an unrealized loss position indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity.

We had ten securities, across five issuers, that had their credit ratings downgraded during the second quarter 2024, with a combined fair value of $203.0 million and an unrealized loss of $66.7 million as of June 30, 2024.

Allowance For Credit and Uncollectible Losses We are required to measure the amount of potential credit losses for all fixed-maturity securities in an unrealized loss position. We did not record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible during the first six months of 2024 or 2023, and did not have a material credit loss allowance balance as of June 30, 2024 and 2023, or December 31, 2023. We considered several factors and inputs related to the individual securities as part of our analysis. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included:

•current performance indicators on the business model or underlying assets (e.g., delinquency rates, foreclosure rates, and default rates);

•credit support (via current levels of subordination);

•historical credit ratings; and

•updated cash flow expectations based upon these performance indicators.

In order to determine the amount of credit loss, if any, we initially reviewed securities in a loss position to determine whether it was likely that we would be required, or intended, to sell any of the securities prior to the recovery of their respective cost bases (which could be maturity). If we were likely to, or intended to, sell prior to a potential recovery, we would write off the unrealized loss. For those securities that we determined we were not likely to, or did not intend to, sell prior to a potential recovery, we performed additional analysis to determine if the loss was

credit related. For securities subject to credit related loss, we calculated the net present value (NPV) of the cash flows expected (i.e., expected recovery value) using the current book yield for each security. The NPV was then compared to the security’s current amortized value to determine if a credit loss existed. In the event that the NPV was below the amortized value, and the amount was determined to be material on any specific security, or in the aggregate, a credit loss would be deemed to exist, and either an allowance for credit losses would be created, or if an allowance currently existed, either a recovery of the previous allowance, or an incremental loss, would be recorded to net realized gains (losses) on securities.

As of June 30, 2024 and 2023, and December 31, 2023, we believe that none of the unrealized losses on our fixed-maturity securities were related to material credit losses on any specific securities, or in the aggregate. We continue to expect all the securities in our fixed-maturity portfolio to pay their principal and interest obligations.

In addition, we reviewed our accrued investment income outstanding on those securities in an unrealized loss position at June 30, 2024 and 2023, and December 31, 2023, to determine if the accrued interest amounts were uncollectible. Based on our analysis, we believe the issuers have sufficient liquidity and capital reserves to meet their current interest, and future principal, obligations and, therefore, did not write off any accrued income as uncollectible at June 30, 2024 and 2023, or December 31, 2023.

Realized Gains (Losses) The components of net realized gains (losses) for the three and six months ended June 30, were:

	Three Months				Six Months
(millions)	2024		2023		2024		2023
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations	$	1.3	$	0.2	$	1.3	$	4.0
State and local government obligations	0		0		0.3		0
Corporate debt securities	0.7		0		3.6		0.1
Residential mortgage-backed securities	1.1		0		1.1		0
Other asset-backed securities	0.1		0		0.1		0
Total available-for-sale securities	3.2		0.2		6.4		4.1
Equity securities:
Nonredeemable preferred stocks	0		0.2		0		0.3
Common equities	0		221.9		11.2		353.9
Total equity securities	0		222.1		11.2		354.2
Subtotal gross realized gains on security sales	3.2		222.3		17.6		358.3
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations	(191.9)		(1.1)		(327.2)		(12.6)
State and local government obligations	0		0		(0.1)		0
Corporate debt securities	(21.6)		(29.8)		(36.4)		(50.2)
Commercial mortgage-backed securities	(10.7)		(45.5)		(15.0)		(80.0)
Other asset-backed securities	0		(0.2)		(0.1)		(0.4)
Redeemable preferred stocks	(0.8)		0		(1.1)		0
Short-term investments	0		(0.3)		0		(0.4)
Total available-for-sale securities	(225.0)		(76.9)		(379.9)		(143.6)
Equity securities:
Nonredeemable preferred stocks	(4.6)		(9.2)		(10.5)		(110.2)
Common equities	0		(1.1)		(0.1)		(12.9)
Total equity securities	(4.6)		(10.3)		(10.6)		(123.1)
Subtotal gross realized losses on security sales	(229.6)		(87.2)		(390.5)		(266.7)
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations	(190.6)		(0.9)		(325.9)		(8.6)
State and local government obligations	0		0		0.2		0
Corporate debt securities	(20.9)		(29.8)		(32.8)		(50.1)
Residential mortgage-backed securities	1.1		0		1.1		0
Commercial mortgage-backed securities	(10.7)		(45.5)		(15.0)		(80.0)
Other asset-backed securities	0.1		(0.2)		0		(0.4)
Redeemable preferred stocks	(0.8)		0		(1.1)		0
Short-term investments	0		(0.3)		0		(0.4)
Total available-for-sale securities	(221.8)		(76.7)		(373.5)		(139.5)
Equity securities:
Nonredeemable preferred stocks	(4.6)		(9.0)		(10.5)		(109.9)
Common equities	0		220.8		11.1		341.0
Total equity securities	(4.6)		211.8		0.6		231.1
Subtotal net realized gains (losses) on security sales	(226.4)		135.1		(372.9)		91.6
Other assets
Gain	0		0		0		13.2
Impairment	0		(2.2)		0		(4.5)
Subtotal net realized gains (losses) on other assets	0		(2.2)		0		8.7
Net holding period gains (losses)
Hybrid securities	3.3		4.8		10.5		18.7
Equity securities	96.8		(10.8)		391.7		79.7
Subtotal net holding period gains (losses)	100.1		(6.0)		402.2		98.4
Total net realized gains (losses) on securities	$	(126.3)	$	126.9	$	29.3	$	198.7

Realized gains (losses) on securities sold are computed using the first-in-first-out method. During the second quarter and first six months of 2024, the majority of our gross realized losses on security sales were U.S. Treasury Notes that were sold for duration management. During the second quarter and first six months of both 2024 and 2023, we sold corporate debt securities and select commercial mortgage-backed securities, which we viewed as having less attractive risk/reward profiles. During 2023, the gross gains in common equities reflected sales of securities, as part of our plan to incrementally reduce risk in the

portfolio in response to our view of the potential of a more difficult economic environment. The gross loss incurred in our nonredeemable preferred stocks was primarily related to the sale of certain holdings in U.S. bank preferred stocks.

The other asset gain in 2023 is related to proceeds received as a result of litigation in conjunction with three renewable energy investments we made from 2016 through 2018 (the original investments were previously written down in full).

The following table reflects our holding period realized gains (losses) recognized on equity securities held at the respective quarter ends:

	Three Months				Six Months
(millions)	2024		2023		2024		2023
Total net gains (losses) recognized during the period on equity securities	$	92.2	$	201.0	$	392.3	$	310.8
Less: Net gains (losses) recognized on equity securities sold during the period	(4.6)		211.8		0.6		231.1
Net holding period gains (losses) recognized during the period on equity securities held at period end	$	96.8	$	(10.8)	$	391.7	$	79.7

Net Investment Income The components of net investment income for the three and six months ended June 30, were: 

	Three Months				Six Months
(millions)	2024		2023		2024		2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	361.3	$	191.5	$	668.2	$	354.7
State and local government obligations	13.4		11.6		25.8		22.2
Foreign government obligations	0		0		0.1		0.1
Corporate debt securities	134.8		83.5		256.3		167.1
Residential mortgage-backed securities	8.0		5.8		13.4		15.0
Commercial mortgage-backed securities	46.1		49.2		92.5		99.2
Other asset-backed securities	81.3		61.6		159.5		110.1
Redeemable preferred stocks	2.7		2.7		5.6		5.6
Total fixed maturities	647.6		405.9		1,221.4		774.0
Short-term investments	17.2		24.8		36.1		49.5
Total available-for-sale securities	664.8		430.7		1,257.5		823.5
Equity securities:
Nonredeemable preferred stocks	10.4		13.3		21.4		28.4
Common equities	9.8		10.5		23.7		22.2
Total equity securities	20.2		23.8		45.1		50.6
Investment income	685.0		454.5		1,302.6		874.1
Investment expenses	(7.3)		(6.1)		(13.0)		(11.6)
Net investment income	$	677.7	$	448.4	$	1,289.6	$	862.5

On a year-over-year basis, investment income (interest and dividends) increased 51% and 49% for the first three and six months of 2024, respectively, and recurring investment book yield increased 26% for each of the three and six months ended June 30, 2024, compared to the same periods last year. The increases primarily reflected investing new cash from operations and proceeds from maturing bonds in higher coupon rate securities.