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Investments
 12 Months Ended
Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
Investments
NOTE 3. INVESTMENTS
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2014 were:
DOLLARS IN MILLIONS
 
Amortized
Cost
 
Gross Unrealized
 
Fair Value
Gains
 
Losses
 
U.S. Government and Government Agencies and Authorities
 
$
315.2

 
$
32.3

 
$
(2.0
)
 
$
345.5

States and Political Subdivisions
 
1,352.5

 
126.4

 
(1.8
)
 
1,477.1

Corporate Securities:
 
 
 
 
 
 
 
 
Bonds and Notes
 
2,599.3

 
294.3

 
(15.1
)
 
2,878.5

Redeemable Preferred Stocks
 
5.9

 
0.8

 
—

 
6.7

Collateralized Loan Obligations
 
64.9

 
0.3

 
(0.8
)
 
64.4

Other Mortgage- and Asset-backed
 
3.9

 
1.5

 
—

 
5.4

Investments in Fixed Maturities
 
$
4,341.7

 
$
455.6

 
$
(19.7
)
 
$
4,777.6


Included in the fair value of Mortgage and Asset-backed investments at December 31, 2014 are $3.9 million of collateralized debt obligations, $1.3 million of non-governmental residential mortgage-backed securities and $0.2 million of other asset-backed securities.
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2013 were:
 
 
Amortized
Cost
 
Gross Unrealized
 
Fair Value
DOLLARS IN MILLIONS
 
Gains
 
Losses
 
U.S. Government and Government Agencies and Authorities
 
$
351.1

 
$
22.8

 
$
(11.7
)
 
$
362.2

States and Political Subdivisions
 
1,327.4

 
53.8

 
(20.2
)
 
1,361.0

Corporate Securities:
 
 
 
 
 
 
 
 
Bonds and Notes
 
2,636.4

 
205.0

 
(47.7
)
 
2,793.7

Redeemable Preferred Stocks
 
6.6

 
0.8

 
—

 
7.4

Collateralized Loan Obligations
 
44.2

 
0.5

 
—

 
44.7

Other Mortgage- and Asset-backed
 
4.8

 
1.3

 
(0.1
)
 
6.0

Investments in Fixed Maturities
 
$
4,370.5

 
$
284.2

 
$
(79.7
)
 
$
4,575.0


Included in the fair value of Mortgage and Asset-backed investments at December 31, 2013 are $4.6 million of collateralized debt obligations, $1.2 million of non-governmental residential mortgage-backed securities and $0.2 million of other asset-backed securities.
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2014 by contractual maturity were:
DOLLARS IN MILLIONS
 
Amortized Cost
 
Fair Value
Due in One Year or Less
 
$
51.0

 
$
52.7

Due after One Year to Five Years
 
769.6

 
820.2

Due after Five Years to Ten Years
 
1,340.7

 
1,398.0

Due after Ten Years
 
1,979.4

 
2,294.3

Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date
 
201.0

 
212.4

Investments in Fixed Maturities
 
$
4,341.7

 
$
4,777.6


NOTE 3. INVESTMENTS (Continued)
The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at December 31, 2014 consisted of securities issued by the Government National Mortgage Association with a fair value of $133.1 million, securities issued by the Federal National Mortgage Association with a fair value of $9.2 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $0.3 million and securities of other non-governmental issuers with a fair value of $69.8 million.
There were no unsettled purchases or sales of Investments in Fixed Maturities at December 31, 2014. There were no unsettled purchases of Investments in Fixed Maturities at December 31, 2013. Other Receivables at December 31, 2013 includes a receivable of $2.5 million primarily from sales of Investments in Fixed Maturities that settled in January 2014.
Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2014 were:
DOLLARS IN MILLIONS
 
Cost
 
Gross Unrealized
 
Fair Value
Gains
 
Losses
 
Preferred Stocks:
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
$
85.5

 
$
5.2

 
$
(1.0
)
 
$
89.7

Other Industries
 
16.3

 
3.5

 
—

 
19.8

Common Stocks:
 
 
 
 
 
 
 
 
Manufacturing
 
43.4

 
14.9

 
(1.1
)
 
57.2

Other Industries
 
60.8

 
16.2

 
(0.4
)
 
76.6

Other Equity Interests:
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
195.2

 
8.2

 
(0.7
)
 
202.7

Limited Liability Companies and Limited Partnerships
 
160.3

 
27.7

 
(1.8
)
 
186.2

Investments in Equity Securities
 
$
561.5

 
$
75.7

 
$
(5.0
)
 
$
632.2

Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2013 were:
DOLLARS IN MILLIONS
 
 
 
Gross Unrealized
 
 
 
Cost
 
Gains
 
Losses
 
Fair Value
Preferred Stocks:
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
$
85.4

 
$
2.9

 
$
(2.5
)
 
$
85.8

Other Industries
 
20.1

 
4.4

 
(0.1
)
 
24.4

Common Stocks:
 
 
 
 
 
 
 
 
Manufacturing
 
83.4

 
21.3

 
(0.1
)
 
104.6

Other Industries
 
68.8

 
17.0

 
(0.9
)
 
84.9

Other Equity Interests:
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
122.0

 
3.9

 
(1.0
)
 
124.9

Limited Liability Companies and Limited Partnerships
 
150.3

 
25.2

 
(1.6
)
 
173.9

Investments in Equity Securities
 
$
530.0

 
$
74.7

 
$
(6.2
)
 
$
598.5


NOTE 3. INVESTMENTS (Continued)
An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2014 is presented below.
DOLLARS IN MILLIONS
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and Government Agencies and Authorities
 
$
24.9

 
$
(0.7
)
 
$
55.5

 
$
(1.3
)
 
$
80.4

 
$
(2.0
)
States and Political Subdivisions
 
1.0

 
—

 
126.3

 
(1.8
)
 
127.3

 
(1.8
)
Corporate Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Bonds and Notes
 
250.4

 
(5.1
)
 
360.5

 
(10.0
)
 
610.9

 
(15.1
)
Collateralized Loan Obligations
 
51.2

 
(0.7
)
 
3.4

 
(0.1
)
 
54.6

 
(0.8
)
Other Mortgage- and Asset-backed
 
—

 
—

 
0.4

 
—

 
0.4

 
—

Total Fixed Maturities
 
327.5

 
(6.5
)
 
546.1

 
(13.2
)
 
873.6

 
(19.7
)
Equity Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
7.5

 
(0.1
)
 
12.1

 
(0.9
)
 
19.6

 
(1.0
)
Other Industries
 
—

 
—

 
0.5

 
—

 
0.5

 
—

Common Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing
 
15.1

 
(1.1
)
 
—

 
—

 
15.1

 
(1.1
)
Other Industries
 
4.2

 
(0.4
)
 
1.0

 
—

 
5.2

 
(0.4
)
Other Equity Interests:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
14.9

 
(0.1
)
 
14.4

 
(0.6
)
 
29.3

 
(0.7
)
Limited Liability Companies and Limited Partnerships
 
54.4

 
(1.5
)
 
6.6

 
(0.3
)
 
61.0

 
(1.8
)
Total Equity Securities
 
96.1

 
(3.2
)
 
34.6

 
(1.8
)
 
130.7

 
(5.0
)
Total
 
$
423.6

 
$
(9.7
)
 
$
580.7

 
$
(15.0
)
 
$
1,004.3

 
$
(24.7
)

The Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other than temporary. The portions of the declines in the fair values of investments that are determined to be other than temporary are reported as losses in the Consolidated Statements of Income in the periods when such determinations are made.
NOTE 3. INVESTMENTS (Continued)
Unrealized losses on fixed maturities, which the Company has determined to be temporary at December 31, 2014, were $19.7 million, of which $13.2 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were no unrealized losses at December 31, 2014 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the headings “Less Than 12 Months” or “12 Months or Longer.” Investment-grade fixed maturity investments comprised $14.1 million and below-investment-grade fixed maturity investments comprised $5.6 million of the unrealized losses on investments in fixed maturities at December 31, 2014. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 4% of the amortized cost basis of the investment. At December 31, 2014, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at December 31, 2014 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.
For equity securities, the Company considers various factors when determining whether a decline in the fair value is other than temporary, including, but not limited to:
•
The financial condition and prospects of the issuer;
•
The length of time and magnitude of the unrealized loss;
•
The volatility of the investment;
•
Analyst recommendations and near term price targets;
•
Opinions of the Company’s external investment managers;
•
Market liquidity;
•
Debt-like characteristics of perpetual preferred stocks and issuer ratings; and
•
The Company’s intentions to sell or ability to hold the investments until recovery.
With respect to Investments in Equity Securities, the Company concluded that the unrealized losses on its investments in preferred and common stocks at December 31, 2014 were temporary based on various factors, including the relative short length and magnitude of the losses and overall market volatility. The Company’s investments in other equity interests include investments in limited liability companies and limited partnerships that primarily invest in mezzanine debt, distressed debt, and secondary transactions. By the nature of their underlying investments, the Company believes that some of its investments in the limited liability companies and limited partnerships exhibit debt-like characteristics which, among other factors, the Company also considers when evaluating these investments for impairment. Based on evaluations of the factors in the preceding paragraph, the Company concluded that the declines in the fair values of the Company’s investments in equity securities presented in the preceding table were temporary at December 31, 2014.
NOTE 3. INVESTMENTS (Continued)
An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2013 is presented below:
DOLLARS IN MILLIONS
 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and Government Agencies and Authorities
 
$
95.8

 
$
(10.9
)
 
$
4.4

 
$
(0.8
)
 
$
100.2

 
$
(11.7
)
States and Political Subdivisions
 
222.9

 
(20.1
)
 
2.0

 
(0.1
)
 
224.9

 
(20.2
)
Corporate Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Bonds and Notes
 
699.8

 
(39.4
)
 
103.2

 
(8.3
)
 
803.0

 
(47.7
)
Other Mortgage- and Asset-backed
 
13.9

 
(0.1
)
 
1.1

 
—

 
15.0

 
(0.1
)
Total Fixed Maturities
 
1,032.4

 
(70.5
)
 
110.7

 
(9.2
)
 
1,143.1

 
(79.7
)
Equity Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
22.5

 
(2.5
)
 
2.5

 
—

 
25.0

 
(2.5
)
Other Industries
 
4.3

 
(0.1
)
 
0.7

 
—

 
5.0

 
(0.1
)
Common Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing
 
5.0

 
(0.1
)
 
0.2

 
—

 
5.2

 
(0.1
)
Other Industries
 
14.2

 
(0.9
)
 
0.5

 
—

 
14.7

 
(0.9
)
Other Equity Interests:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
67.6

 
(1.0
)
 
—

 
—

 
67.6

 
(1.0
)
Limited Liability Companies and Limited Partnerships
 
53.1

 
(0.9
)
 
5.0

 
(0.7
)
 
58.1

 
(1.6
)
Total Equity Securities
 
166.7

 
(5.5
)
 
8.9

 
(0.7
)
 
175.6

 
(6.2
)
Total
 
$
1,199.1

 
$
(76.0
)
 
$
119.6

 
$
(9.9
)
 
$
1,318.7

 
$
(85.9
)

Unrealized losses on fixed maturities, which the Company determined to be temporary at December 31, 2013, were $79.7 million, of which $9.2 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were no unrealized losses at December 31, 2013 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” Included in the preceding table under the heading “12 Months or Longer” there were unrealized losses of $0.3 million at December 31, 2013 related to securities for which the Company has recognized credit losses in earnings. Investment-grade fixed maturity investments comprised $74.2 million and below-investment-grade fixed maturity investments comprised $5.5 million of the unrealized losses on investments in fixed maturities at December 31, 2013. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was less than 5% of the amortized cost basis of the investment. At December 31, 2013, the Company did not have the intent to sell these investments and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost basis, which may be at maturity. Based on the Company’s evaluation at December 31, 2013 of the prospects of the issuers, including, but not limited to, the credit ratings of the issuers of the investments in the fixed maturities, and the Company’s intention to not sell and its determination that it would not be required to sell before recovery of the amortized cost of such investments, the Company concluded that the declines in the fair values of the Company’s investments in fixed maturities presented in the preceding table were temporary at the evaluation date.
The Company concluded that the unrealized losses on its investments in preferred and common stocks at December 31, 2013 were temporary based on the relative short length and magnitude of the losses and overall market volatility. The Company’s investments in other equity interests include investments in limited liability companies and limited liability partnerships that primarily invest in distressed debt, mezzanine debt and secondary transactions. By the nature of their underlying investments, the Company believes that some of its investments in the limited liability companies and limited liability partnerships also exhibit debt-like characteristics which, among other factors, the Company considers when evaluating these investments for
NOTE 3. INVESTMENTS (Continued)
impairment. Based on Company’s evaluations, the Company concluded that the declines in the fair values of the Company’s investments in equity securities presented in the preceding table were temporary at December 31, 2013.
The following table sets forth the pre-tax amount of OTTI credit losses, recognized in Retained Earnings for Investments in Fixed Maturities held by the Company as of December 31, 2014, 2013 and 2012, for which a portion of the OTTI loss related to factors other than credit has been recognized in AOCI, and the corresponding changes in such amounts.
DOLLARS IN MILLIONS
 
2014
 
2013
 
2012
Balance at Beginning of Year
 
$
9.9

 
$
4.6

 
$
3.9

Additions for Previously Unrecognized OTTI Credit Losses
 
2.4

 
1.8

 
1.1

Increases to Previously Recognized OTTI Credit Losses
 
0.6

 
7.3

 
—

Reductions to Previously Recognized OTTI Credit Losses
 
—

 
—

 
(0.1
)
Reductions for Change in Impairment Status:
 
 
 
 
 
 
From Status of Credit Loss to Status of Intent-to-sell or Required-to-sell
 
(2.4
)
 
(3.2
)
 
—

Reductions for Investments Sold During Period
 
(5.2
)
 
(0.6
)
 
(0.3
)
Balance at End of Year
 
$
5.3

 
$
9.9

 
$
4.6


Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity. The Company’s maximum exposure to loss at December 31, 2014 is limited to the total carrying value of $184.8 million. In addition, the Company had outstanding commitments totaling approximately $37.7 million to fund Equity Method Limited Liability Investments at December 31, 2014.
The carrying values of the Company’s Other Investments at December 31, 2014 and 2013 were:
DOLLARS IN MILLIONS
 
2014
 
2013
Loans to Policyholders at Unpaid Principal
 
$
283.4

 
$
275.4

Real Estate at Depreciated Cost
 
160.9

 
167.1

Trading Securities at Fair Value
 
4.9

 
5.0

Other
 
0.4

 
0.5

Total
 
$
449.6

 
$
448.0