Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2024

Schedule of Company's Fair Value Hierarchy Measured at Recurring Basis

The following table presents the Company's fair value hierarchy for financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the six months ended June 30, 2024 and 2023, there were no transfers between Level 1 and Level 2. As of June 30, 2024 and December 31, 2023, Level 3 invested assets comprised 9.5% of the Company’s total investment portfolio at fair value.


($ in millions)	Carrying Amount		Fair Value		Fair Value Measurements at Reporting Date Using
					Level 1		Level 2		Level 3
June 30, 2024
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	669.2	$	669.2	$	—	$	669.2	$	—
Other, including U.S. Treasury securities	373.5		373.5		24.6		348.9		—
Municipal bonds	1,176.7		1,176.7		—		1,104.6		72.1
Foreign government bonds	22.0		22.0		—		22.0		—
Corporate bonds	1,846.2		1,846.2		8.6		1,471.2		366.4
Other asset-backed securities	1,257.8		1,257.8		—		1,172.4		85.4
Total fixed maturity securities	5,345.4		5,345.4		33.2		4,788.3		523.9
Equity securities	82.6		82.6		17.7		62.2		2.7
Short-term investments	72.7		72.7		72.7		—		—
Other investments	19.4		19.4		—		19.4		—
Totals	$	5,520.1	$	5,520.1	$	123.6	$	4,869.9	$	526.6
Separate Account variable annuity assets(1)	$	3,544.7	$	3,544.7	$	3,544.7	$	—	$	—

Financial Liabilities(2)	$	81.8	$	81.8	$	—	$	3.9	$	77.9

December 31, 2023
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	653.2	$	653.2	$	—	$	653.2	$	—
Other, including U.S. Treasury securities	388.8		388.8		45.6		343.2		—
Municipal bonds	1,270.1		1,270.1		—		1,196.1		74.0
Foreign government bonds	22.1		22.1		—		22.1		—
Corporate bonds	1,772.7		1,772.7		10.1		1,420.1		342.5
Other asset-backed securities	1,128.4		1,128.4		—		1,030.9		97.5
Total fixed maturity securities	5,235.3		5,235.3		55.7		4,665.6		514.0
Equity securities	86.2		86.2		17.9		63.8		4.5
Short-term investments	132.9		132.9		132.9		—		—
Other investments	19.0		19.0		—		19.0		—
Totals	$	5,473.4	$	5,473.4	$	206.5	$	4,748.4	$	518.5
Separate Account (variable annuity) assets(1)	$	3,294.1	$	3,294.1	$	3,294.1	$	—	$	—

Financial Liabilities(2)	$	86.0	$	86.0	$	—	$	3.6	$	82.4

(1) Separate Account variable annuity assets represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Separate Account variable annuity liabilities are equal to the estimated fair value of the Separate Account variable annuity assets.

(2) Represents embedded derivatives related to fixed indexed annuity and indexed universal life products reported in Future policy benefit reserves and Other policyholder funds as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.

Schedule of Table for Reconciliations for All Level 3 Assets Measured at Fair Value on a Recurring Basis

The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows:


($ in millions)	Financial Assets												Financial Liabilities(1)
	Municipal Bonds		Corporate Bonds		Mortgage-Backed and Other Asset- Backed Securities(2)		Total Fixed Maturity Securities		Equity Securities		Total
Beginning balance, April 1, 2024	$	73.2	$	345.5	$	88.7	$	507.4	$	2.5	$	509.9	$	80.8
Transfers into Level 3(3)	—		—		—		—		—		—		—
Transfers out of Level 3(3)	—		—		—		—		—		—		—
Total gains or losses
Net investment gains (losses) included in net income	—		(0.8)		0.8		—		0.2		0.2		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(0.3)
Net unrealized gains (losses) included in OCI	(0.7)		0.4		(0.9)		(1.2)		—		(1.2)		0.1
Purchases	—		27.6		1.8		29.4		—		29.4		—
Issuances	—		—		—		—		—		—		1.4
Sales	—		—		—		—		—		—		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(0.4)		(6.3)		(5.0)		(11.7)		—		(11.7)		(4.1)
Ending balance, June 30, 2024	$	72.1	$	366.4	$	85.4	$	523.9	$	2.7	$	526.6	$	77.9

Beginning balance, January 1, 2024	$	74.0	$	342.5	$	97.5	$	514.0	$	4.5	$	518.5	$	82.4
Transfers into Level 3(3)	—		—		—		—		—		—		—
Transfers out of Level 3(3)	—		(4.4)		—		(4.4)		—		(4.4)		—
Total gains or losses
Net investment gains (losses) included in net income	—		(0.8)		0.8		—		0.3		0.3		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		1.0
Net unrealized gains (losses) included in OCI	(1.4)		(0.2)		1.5		(0.1)		—		(0.1)		—
Purchases	—		41.7		1.8		43.5		—		43.5		—
Issuances	—		—		—		—		—		—		2.8
Sales	—		—		—		—		—		—		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(0.5)		(12.4)		(16.2)		(29.1)		(2.1)		(31.2)		(8.3)
Ending balance, June 30, 2024	$	72.1	$	366.4	$	85.4	$	523.9	$	2.7	$	526.6	$	77.9

(1)Represents embedded derivatives related to fixed indexed annuity and indexed universal life products reported in Future policy benefit reserves and Other policyholder funds as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.

(2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.

(3)Transfers into and out of Level 3 during the three and six months ended June 30, 2024 were related to changes in the primary pricing source and changes in observability of external information used in determining fair value. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.


($ in millions)	Financial Assets												Financial Liabilities(1)
	Municipal Bonds		Corporate Bonds		Mortgage-Backed and Other Asset- Backed Securities(2)		Total Fixed Maturity Securities		Equity Securities		Total
Beginning balance, April 1, 2023	$	55.4	$	284.0	$	104.6	$	444.0	$	2.0	$	446.0	$	91.2
Transfers into Level 3(3)	—		30.2		0.4		30.6		—		30.6		—
Transfers out of Level 3(3)	—		—		—		—		—		—		—
Total gains or losses
Net investment gains (losses) included in net income	—		—		—		—		—		—		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(3.4)
Net unrealized gains (losses) included in OCI	(0.8)		(2.2)		(0.7)		(3.7)		—		(3.7)		(0.9)
Purchases	9.5		6.6		—		16.1		—		16.1		—
Issuances	—		—		—		—		—		—		2.2
Sales	—		(5.1)		—		(5.1)		—		(5.1)		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(0.2)		(2.0)		(2.9)		(5.1)		—		(5.1)		(5.5)
Ending balance, June 30, 2023	$	63.9	$	311.5	$	101.4	$	476.8	$	2.0	$	478.8	$	83.6

Beginning balance, January 1, 2023	$	54.4	$	261.3	$	107.6	$	423.3	$	2.0	$	425.3	$	91.3
Transfers into Level 3(3)	—		36.1		0.8		36.9		—		36.9		—
Transfers out of Level 3(3)	—		—		—		—		—		—		—
Total gains or losses
Net investment gains (losses) included in net income	—		—		—		—		—		—		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		(2.5)
Net unrealized gains/losses included in OCI	0.5		(1.2)		(1.1)		(1.8)		—		(1.8)		(0.6)
Purchases	9.5		25.6		0.3		35.4		—		35.4		—
Issuances	—		—		—		—		—		—		4.3
Sales	—		(7.7)		—		(7.7)		—		(7.7)		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(0.5)		(2.6)		(6.2)		(9.3)		—		(9.3)		(8.9)
Ending balance, June 30, 2023	$	63.9	$	311.5	$	101.4	$	476.8	$	2.0	$	478.8	$	83.6

(1) Represents embedded derivatives related to fixed indexed annuity and indexed universal life products reported in Future policy benefit reserves and Other policyholder funds as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.

(2) Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities.

(3) Transfers into and out of Level 3 during the three and six months ended June 30, 2023 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined

Schedule of Fair Value Measurement Inputs and Valuation Techniques

Level 3 Assets and Liabilities by Price Source

The table below presents the balances of Level 3 assets and liabilities measured at fair value with their corresponding pricing sources:


($ in millions)
	Total		Internal		External
June 30, 2024
Financial Assets
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	—	$	—	$	—
Municipal bonds	72.1		—		72.1
Corporate bonds	366.4		219.2		147.2
Other asset-backed securities	85.4		—		85.4
Total fixed maturity securities	523.9		219.2		304.7
Equity securities	2.7		—		2.7
Totals	$	526.6	$	219.2	$	307.4

Financial Liabilities(1)	$	77.9	$	77.9	$	—

December 31, 2023
Financial Assets
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	—	$	—	$	—
Municipal bonds	74.0		—		74.0
Corporate bonds	342.5		180.4		162.1
Other asset-backed securities	97.5		—		97.5
Total fixed maturity securities	514.0		180.4		333.6
Equity securities	4.5		—		4.5
Totals	$	518.5	$	180.4	$	338.1

Financial Liabilities(1)	$	82.4	$	82.4	$	—

(1) Represents embedded derivatives related to fixed indexed annuity and indexed universal life products reported in Future policy benefit reserves and Other policyholder funds as well as net MRBs reported in Policyholders' account balances in the Company's Consolidated Balance Sheets.

External pricing sources for securities represent prices from prior transactions or unadjusted third-party pricing information where pricing inputs are not readily available.

Quantitative Information about Level 3 Fair Value Measurements

The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized with Level 3.

($ in millions)

Fair Value

as of

June 30, 2024

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Impact of Increase in Input on Fair Value

Financial Assets

Corporate bonds

219.2

discounted cash flow

yield

4.6% - 16.4%

decrease

discounted cash flow

option adjusted spread

313 bps - 839 bps

decrease

Financial Liabilities

Derivatives embedded in fixed indexed annuity products

84.1

discounted cash flow

lapse rate

5.9%

decrease

mortality multiplier(2)

69.4%

decrease

option budget

0.9% - 3.8%

increase

non-performance adjustment(3)

5.0%

decrease

Net MRBs

(6.2)

discounted cash flow

lapse rate

5.9%

decrease

mortality multiplier(2)

69.4%

increase

(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.

(2) Mortality multiplier is applied to the Annuity 2000 table.

(3) Determined as a percentage of the risk-free rate.

The following table summarizes the ranges of actual experience and expected experience for mortality and lapses of LFPB:


	June 30, 2024
	Whole Life		Term Life	Experience Life		Limited-Pay Whole Life		SPIA (life contingent)
Mortality
Actual experience	0.7	%	0.1% - 0.3%	1.9	%	0.2	%	N.M.
Expected experience	0.7	%	0.1% - 0.8%	1.7	%	0.3	%	N.M.
Lapses
Actual experience	2.9	%	3.7% - 28.6%	3.0	%	3.5	%	N.M.
Expected experience	4.4	%	5.4% - 12.8%	3.0	%	4.7	%	N.M.

	June 30, 2023
	Whole Life		Term Life	Experience Life		Limited-Pay Whole Life		SPIA (life contingent)
Mortality
Actual experience	0.7	%	0.1% - 0.4%	1.7	%	0.1	%	N.M.
Expected experience	0.7	%	0.1% - 1.2%	1.6	%	0.2	%	N.M.
Lapses
Actual experience	3.4	%	3.6% - 5.6%	3.1	%	3.6	%	N.M.
Expected experience	4.7	%	5.6% - 25.9%	3.1	%	5.2	%	N.M.

Schedule of Fair Value Assets and Liabilities Measured on Nonrecurring Basis


($ in millions)	Carrying Amount		Fair Value		Fair Value Measurements at Reporting Date Using
					Level 1		Level 2		Level 3
June 30, 2024
Financial Assets
Other investments	$	219.1	$	222.5	$	—	$	35.3	$	187.2
Deposit asset on reinsurance	2,466.2		2,148.0		—		—		2,148.0
Financial Liabilities
Policyholders' account balances	5,037.3		4,747.1		—		—		4,747.1
Reverse repurchase agreement	45.0		46.9		—		46.9		—
Other policyholder funds	951.1		951.1		—		943.7		7.4
Long-term debt	546.5		569.6		—		569.6		—

December 31, 2023
Financial Assets
Other investments	$	218.4	$	221.7	$	—	$	33.8	$	187.9
Deposit asset on reinsurance	2,496.6		2,259.6		—		—		2,259.6
Financial Liabilities
Policyholders' account balances	4,996.3		4,861.8		—		—		4,861.8
Other policyholder funds	916.0		916.0		—		908.7		7.3
Long-term debt	546.0		571.4		—		571.4		—

- 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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