Investments

9 Months Ended

Sep. 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
September 30, 2024
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	44,231.3	$	771.4	$	(574.2)	$	0	$	44,428.5	56.0	%
State and local government obligations	2,681.0		10.7		(90.3)		0		2,601.4		3.3
Foreign government obligations	16.9		0		(0.5)		0		16.4		0
Corporate and other debt securities	14,969.8		221.9		(155.3)		(0.9)		15,035.5		18.9
Residential mortgage-backed securities	1,403.5		24.8		(6.4)		2.0		1,423.9		1.8
Commercial mortgage-backed securities	4,664.4		4.1		(376.9)		0		4,291.6		5.4
Other asset-backed securities	6,628.3		39.4		(53.8)		0		6,613.9		8.3
Total fixed maturities	74,595.2		1,072.3		(1,257.4)		1.1		74,411.2		93.7
Short-term investments	756.5		0		0		0		756.5		1.0
Total available-for-sale securities	75,351.7		1,072.3		(1,257.4)		1.1		75,167.7		94.7
Equity securities:
Nonredeemable preferred stocks	759.7		0		0		(24.7)		735.0		0.9
Common equities	733.5		0		0		2,763.5		3,497.0		4.4
Total equity securities	1,493.2		0		0		2,738.8		4,232.0		5.3
Total portfolio1	$	76,844.9	$	1,072.3	$	(1,257.4)	$	2,739.9	$	79,399.7	100.0	%

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
September 30, 2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	36,392.2	$	0	$	(2,098.4)	$	0	$	34,293.8	55.4	%
State and local government obligations	2,257.6		0		(203.3)		0		2,054.3		3.3
Foreign government obligations	16.9		0		(1.5)		0		15.4		0.1
Corporate and other debt securities	11,069.8		1.3		(596.1)		(53.7)		10,421.3		16.9
Residential mortgage-backed securities	530.4		0.2		(13.0)		(1.8)		515.8		0.8
Commercial mortgage-backed securities	4,699.5		2.1		(723.9)		0		3,977.7		6.4
Other asset-backed securities	5,524.2		0.1		(210.1)		(0.6)		5,313.6		8.6
Total fixed maturities	60,490.6		3.7		(3,846.3)		(56.1)		56,591.9		91.5
Short-term investments	1,795.2		0		0		0		1,795.2		2.9
Total available-for-sale securities	62,285.8		3.7		(3,846.3)		(56.1)		58,387.1		94.4
Equity securities:
Nonredeemable preferred stocks	976.9		0		0		(108.0)		868.9		1.4
Common equities	662.6		0		0		1,951.9		2,614.5		4.2
Total equity securities	1,639.5		0		0		1,843.9		3,483.4		5.6
Total portfolio1	$	63,925.3	$	3.7	$	(3,846.3)	$	1,787.8	$	61,870.5	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 and other debt securities	11,633.7		87.2		(334.7)		(28.8)		11,357.4		17.2
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
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 September 30, 2024 and 2023, we had $468.5 million and $167.3 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 both September 30, 2024 and 2023 included $4.1 billion of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions, compared to $4.2 billion at December 31, 2023.

Certain fixed-maturity securities previously categorized as redeemable preferred stocks in our footnote disclosures are currently classified as corporate and other debt securities to reflect the accurate categorization based on the underlying features of these securities. The September 30, 2023 and December 31, 2023 amounts, which were presented separately as redeemable preferred stocks in our Note 2 - Investments and Note 3 - Fair Value tables, were reclassified to conform to the current year presentation. The reclassification did not have an impact on our total fixed-maturity securities or our results of operations, financial condition, or cash flows.

At September 30, 2024, bonds and certificates of deposit in the principal amount of $712.0 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 September 30, 2024 or 2023, or December 31, 2023. At September 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:

	September 30,
(millions)	2024		2023		December 31, 2023
Fixed Maturities:
Corporate and other debt securities	$	637.3	$	647.5	$	672.5
Residential mortgage-backed securities	369.0		410.8		323.9
Other asset-backed securities	2.6		19.4		13.9
Total hybrid securities	$	1,008.9	$	1,077.7	$	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 September 30, 2024, was:

(millions)	Cost		Fair Value
Less than one year	$	7,895.5	$	7,852.8
One to five years	53,339.8		53,341.8
Five to ten years	13,103.1		12,954.6
Ten years or greater	256.8		262.0
Total	$	74,595.2	$	74,411.2

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
September 30, 2024
U.S. government obligations	86	$	12,919.6	$	(574.2)	3	$	2,069.3	$	(2.9)	83	$	10,850.3	$	(571.3)
State and local government obligations	302	1,778.8		(90.3)		44	207.8		(0.2)		258	1,571.0		(90.1)
Foreign government obligations	1	16.4		(0.5)		0	0		0		1	16.4		(0.5)
Corporate and other debt securities	224	5,250.6		(155.3)		14	426.1		(1.9)		210	4,824.5		(153.4)
Residential mortgage-backed securities	33	244.2		(6.4)		4	185.0		(0.2)		29	59.2		(6.2)
Commercial mortgage-backed securities	177	3,749.9		(376.9)		5	169.8		(0.3)		172	3,580.1		(376.6)
Other asset-backed securities	80	1,530.5		(53.8)		16	352.5		(0.1)		64	1,178.0		(53.7)
Total fixed maturities	903	$	25,490.0	$	(1,257.4)	86	$	3,410.5	$	(5.6)	817	$	22,079.5	$	(1,251.8)

	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
September 30, 2023
U.S. government obligations	173	$	34,293.8	$	(2,098.4)	37	$	16,686.2	$	(557.6)	136	$	17,607.6	$	(1,540.8)
State and local government obligations	356	2,033.9		(203.3)		46	359.6		(7.6)		310	1,674.3		(195.7)
Foreign government obligations	1	15.4		(1.5)		0	0		0		1	15.4		(1.5)
Corporate and other debt securities	470	9,520.6		(596.1)		164	3,380.4		(94.1)		306	6,140.2		(502.0)
Residential mortgage-backed securities	40	99.9		(13.0)		2	0.4		0		38	99.5		(13.0)
Commercial mortgage-backed securities	196	3,960.8		(723.9)		0	0		0		196	3,960.8		(723.9)
Other asset-backed securities	295	5,001.8		(210.1)		104	2,056.9		(8.8)		191	2,944.9		(201.3)
Total fixed maturities	1,531	$	54,926.2	$	(3,846.3)	353	$	22,483.5	$	(668.1)	1,178	$	32,442.7	$	(3,178.2)

	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 and other debt securities	316	6,674.9		(334.7)		26	617.2		(14.7)		290	6,057.7		(320.0)
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)
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 one security that had its credit ratings downgraded during the third quarter 2024, with a fair value of $39.3 million and an unrealized loss of $2.9 million as of September 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 nine months of 2024 or 2023, and did not have a material credit loss allowance balance as of September 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 September 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 September 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 September 30, 2024 and 2023, or December 31, 2023.

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

	Three Months				Nine Months
(millions)	2024		2023		2024		2023
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations	$	43.1	$	0.2	$	44.4	$	4.2
State and local government obligations	0		0		0.3		0
Corporate and other debt securities	2.0		0.7		5.6		0.8
Residential mortgage-backed securities	0		0		1.1		0
Other asset-backed securities	0		0		0.1		0
Total available-for-sale securities	45.1		0.9		51.5		5.0
Equity securities:
Nonredeemable preferred stocks	0		0		0		0.3
Common equities	14.1		0.3		25.3		354.2
Total equity securities	14.1		0.3		25.3		354.5
Subtotal gross realized gains on security sales	59.2		1.2		76.8		359.5
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations	(1.4)		(14.6)		(328.6)		(27.2)
State and local government obligations	(1.3)		0		(1.4)		0
Corporate and other debt securities	(5.3)		(19.1)		(42.8)		(69.3)
Commercial mortgage-backed securities	0		(20.6)		(15.0)		(100.6)
Other asset-backed securities	0		(5.2)		(0.1)		(5.6)
Short-term investments	0		0		0		(0.4)
Total available-for-sale securities	(8.0)		(59.5)		(387.9)		(203.1)
Equity securities:
Nonredeemable preferred stocks	(7.8)		(7.4)		(18.3)		(117.6)
Common equities	(11.7)		(8.9)		(11.8)		(21.8)
Total equity securities	(19.5)		(16.3)		(30.1)		(139.4)
Subtotal gross realized losses on security sales	(27.5)		(75.8)		(418.0)		(342.5)
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations	41.7		(14.4)		(284.2)		(23.0)
State and local government obligations	(1.3)		0		(1.1)		0
Corporate and other debt securities	(3.3)		(18.4)		(37.2)		(68.5)
Residential mortgage-backed securities	0		0		1.1		0
Commercial mortgage-backed securities	0		(20.6)		(15.0)		(100.6)
Other asset-backed securities	0		(5.2)		0		(5.6)
Short-term investments	0		0		0		(0.4)
Total available-for-sale securities	37.1		(58.6)		(336.4)		(198.1)
Equity securities:
Nonredeemable preferred stocks	(7.8)		(7.4)		(18.3)		(117.3)
Common equities	2.4		(8.6)		13.5		332.4
Total equity securities	(5.4)		(16.0)		(4.8)		215.1
Subtotal net realized gains (losses) on security sales	31.7		(74.6)		(341.2)		17.0
Other assets
Gain	36.3		8.4		36.3		21.6
Impairment	0		(2.3)		0		(6.8)
Subtotal net realized gains (losses) on other assets	36.3		6.1		36.3		14.8
Net holding period gains (losses)
Hybrid securities	19.7		(0.3)		30.2		18.4
Equity securities	199.7		(80.2)		591.4		(0.5)
Subtotal net holding period gains (losses)	219.4		(80.5)		621.6		17.9
Total net realized gains (losses) on securities	$	287.4	$	(149.0)	$	316.7	$	49.7

Realized gains (losses) on securities sold are computed using the first-in-first-out method. During the third quarter and first nine months of 2024, the majority of our security sales were U.S. Treasury Notes that were sold for duration management. During the third quarter and first nine months of both 2024 and 2023, we selectively sold securities that 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 for all periods presented 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				Nine Months
(millions)	2024		2023		2024		2023
Total net gains (losses) recognized during the period on equity securities	$	194.3	$	(96.2)	$	586.6	$	214.6
Less: Net gains (losses) recognized on equity securities sold during the period	(5.4)		(16.0)		(4.8)		215.1
Net holding period gains (losses) recognized during the period on equity securities held at period end	$	199.7	$	(80.2)	$	591.4	$	(0.5)

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

	Three Months				Nine Months
(millions)	2024		2023		2024		2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	396.0	$	237.0	$	1,064.2	$	591.7
State and local government obligations	16.2		12.3		42.0		34.5
Foreign government obligations	0.1		0.1		0.2		0.2
Corporate and other debt securities	155.0		97.4		416.9		270.1
Residential mortgage-backed securities	13.8		7.6		27.2		22.6
Commercial mortgage-backed securities	48.7		48.7		141.2		147.9
Other asset-backed securities	83.1		62.9		242.6		173.0
Total fixed maturities	712.9		466.0		1,934.3		1,240.0
Short-term investments	9.2		21.6		45.3		71.1
Total available-for-sale securities	722.1		487.6		1,979.6		1,311.1
Equity securities:
Nonredeemable preferred stocks	9.2		11.9		30.6		40.3
Common equities	8.2		10.7		31.9		32.9
Total equity securities	17.4		22.6		62.5		73.2
Investment income	739.5		510.2		2,042.1		1,384.3
Investment expenses	(7.2)		(7.2)		(20.2)		(18.8)
Net investment income	$	732.3	$	503.0	$	2,021.9	$	1,365.5

On a year-over-year basis, investment income (interest and dividends) increased 45% and 48% for the three and nine months ended September 30, 2024, respectively. Growth in invested assets and an increase in recurring investment book yield contributed to the increase in investment income. The book yield increase primarily reflected investing new cash from insurance operations, and proceeds from maturing bonds, in higher coupon rate securities.