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Investments
6 Months Ended
Jun. 30, 2015
Investments Disclosures [Abstract]  
Investments
Note 3 - Investments
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at June 30, 2015 were:
 
 
Amortized
Cost
 
Gross Unrealized
 
Fair Value
(Dollars in Millions)
 
Gains
 
Losses
 
U.S. Government and Government Agencies and Authorities
 
$
318.3

 
$
27.7

 
$
(4.8
)
 
$
341.2

States and Political Subdivisions
 
1,439.7

 
97.5

 
(5.9
)
 
1,531.3

Corporate Securities:
 
 
 
 
 
 
 
 
Bonds and Notes
 
2,596.2

 
236.4

 
(22.4
)
 
2,810.2

Redeemable Preferred Stocks
 
5.3

 
0.1

 

 
5.4

Collateralized Loan Obligations
 
69.7

 
0.9

 
(0.2
)
 
70.4

Other Mortgage- and Asset-backed
 
3.8

 
1.7

 

 
5.5

Investments in Fixed Maturities
 
$
4,433.0

 
$
364.3

 
$
(33.3
)
 
$
4,764.0


The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2014 were:
 
 
Amortized
Cost
 
Gross Unrealized
 
Fair Value
(Dollars in Millions)
 
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


There were no unsettled sales of Investments in Fixed Maturities at June 30, 2015 or December 31, 2014. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $23.3 million at June 30, 2015, all of which settled in the following month. There were no unsettled purchases of Investments in Fixed Maturities at December 31, 2014.
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at June 30, 2015 by contractual maturity were:
(Dollars in Millions)
 
Amortized Cost
 
Fair Value
Due in One Year or Less
 
$
59.4

 
$
60.6

Due after One Year to Five Years
 
787.4

 
835.1

Due after Five Years to Ten Years
 
1,376.5

 
1,416.2

Due after Ten Years
 
1,998.5

 
2,230.1

Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date
 
211.2

 
222.0

Investments in Fixed Maturities
 
$
4,433.0

 
$
4,764.0


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 June 30, 2015 consisted of securities issued by the Government National Mortgage Association with a fair value of $120.2 million, securities issued by the Federal National Mortgage Association with a fair value of $19.4 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $6.5 million and securities of other non-governmental issuers with a fair value of $75.9 million.
Note 3 - Investments (continued)
Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at June 30, 2015 were:
 
 
 
 
Gross Unrealized
 
 
(Dollars in Millions)
 
Cost
 
Gains
 
Losses
 
Fair Value
Preferred Stocks:
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
$
83.7

 
$
4.5

 
$
(0.8
)
 
$
87.4

Other Industries
 
21.3

 
3.5

 
(0.1
)
 
24.7

Common Stocks:
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
20.8

 
3.7

 
(0.9
)
 
23.6

Other Industries
 
9.8

 
5.4

 

 
15.2

Other Equity Interests:
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
208.9

 
4.0

 
(0.8
)
 
212.1

Limited Liability Companies and Limited Partnerships
 
174.3

 
28.6

 
(3.0
)
 
199.9

Investments in Equity Securities
 
$
518.8

 
$
49.7

 
$
(5.6
)
 
$
562.9


Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2014 were:
 
 
 
 
Gross Unrealized
 
 
(Dollars in Millions)
 
Cost
 
Gains
 
Losses
 
Fair Value
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

Finance, Insurance and Real Estate
 
34.3

 
6.2

 

 
40.5

Other Industries
 
26.5

 
10.0

 
(0.4
)
 
36.1

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


There were $36.5 million of unsettled sales of Investments in Equity Securities at June 30, 2015, all of which settled in the following month. There were no unsettled sales of Investments in Equity Securities at December 31, 2014. There were no unsettled purchases of Investments in Equity Securities at June 30, 2015 or December 31, 2014.
Note 3 - Investments (continued)
An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at June 30, 2015 is presented below.
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(Dollars in Millions)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and Government Agencies and Authorities
 
$
83.0

 
$
(2.8
)
 
$
24.0

 
$
(2.0
)
 
$
107.0

 
$
(4.8
)
States and Political Subdivisions
 
355.7

 
(5.8
)
 
0.9

 
(0.1
)
 
356.6

 
(5.9
)
Corporate Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Bonds and Notes
 
638.7

 
(18.0
)
 
100.1

 
(4.4
)
 
738.8

 
(22.4
)
Collateralized Loan Obligations
 
19.2

 
(0.2
)
 

 

 
19.2

 
(0.2
)
Other Mortgage- and Asset-backed
 

 

 
0.4

 

 
0.4

 

Total Fixed Maturities
 
1,096.6

 
(26.8
)
 
125.4

 
(6.5
)
 
1,222.0

 
(33.3
)
Equity Securities:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
7.6

 
(0.2
)
 
12.4

 
(0.6
)
 
20.0

 
(0.8
)
Other Industries
 
0.9

 
(0.1
)
 
0.5

 

 
1.4

 
(0.1
)
Common Stocks:
 
 
 
 
 
 
 
 
 
 
 
 
Finance, Insurance and Real Estate
 
7.0

 
(0.9
)
 

 

 
7.0

 
(0.9
)
Other Industries
 
0.8

 

 

 

 
0.8

 

Other Equity Interests:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
58.4

 
(0.8
)
 

 

 
58.4

 
(0.8
)
Limited Liability Companies and Limited Partnerships
 
65.6

 
(1.2
)
 
32.4

 
(1.8
)
 
98.0

 
(3.0
)
Total Equity Securities
 
140.3

 
(3.2
)
 
45.3

 
(2.4
)
 
185.6

 
(5.6
)
Total
 
$
1,236.9

 
$
(30.0
)
 
$
170.7

 
$
(8.9
)
 
$
1,407.6

 
$
(38.9
)

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 Condensed Consolidated Statements of Income in the periods when such determinations are made.
Unrealized losses on fixed maturities, which the Company has determined to be temporary at June 30, 2015, were $33.3 million, of which $6.5 million was related to fixed maturities that were in an unrealized loss position for 12 months or longer. There were $0.1 million of unrealized losses at June 30, 2015 related to securities for which the Company has recognized credit losses in earnings in the preceding table under the heading “Less Than 12 Months.” There were no unrealized losses included in the preceding table under the heading “12 Months or Longer” related to securities for which the Company has recognized credit losses in earnings. Investment-grade fixed maturity investments comprised $26.8 million, and below-investment-grade fixed maturity investments comprised $6.5 million of the unrealized losses on investments in fixed maturities at June 30, 2015. 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 June 30, 2015, 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 it recovered the amortized cost of such investments, which may be at maturity. Based on the Company’s evaluation at June 30, 2015 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 not to sell and its determination that it would not be required to sell before it recovered 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.
Note 3 - Investments (continued)
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 June 30, 2015 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 June 30, 2015.
An aging of unrealized losses on the Company’s Investments in Fixed Maturities and Equity Securities at December 31, 2014 is presented below.
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(Dollars in Millions)
 
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
)
Finance, Insurance and Real Estate
 

 

 

 

 

 

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
)

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 not to 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.
With respect to Investments in Equity Securities, the Company concluded that the unrealized losses on its investments at December 31, 2014 were temporary based on various factors, including the relative short length and magnitude of the losses and overall market volatility, as well as, the debt-like characteristics of investments in certain other equity interests.
Other-than-temporary impairment (“OTTI”) losses on Investments in Fixed Maturities may include a portion that is credit-related that is recognized in Retained Earnings and a portion related to factors other than credit that is recognized in Accumulated Other Comprehensive Income. The following table presents the pre-tax credit portion of OTTI losses on Investments in Fixed Maturities held with a credit-related loss recognized as of the beginning or end of the periods presented and the changes in the cumulative balances for the periods presented.
 
 
Six Months Ended
 
Three Months Ended
(Dollars in Millions)
 
Jun 30,
2015
 
Jun 30,
2014
 
Jun 30,
2015
 
Jun 30,
2014
Cumulative Balance of Pre-tax Credit Losses Recognized in Retained Earnings at Beginning of Period
 
$
5.3

 
$
9.9

 
$
5.3

 
$
10.2

Pre-tax Credit Losses on Fixed Maturities without Pre-tax Credit Losses Included in Cumulative Balance at Beginning of Period
 

 
2.4

 

 
2.4

Additional Pre-tax Credit Losses on Fixed Maturities with Pre-tax Credit Losses Included in Cumulative Balance at Beginning of Period
 

 
0.6

 

 
0.3

Cumulative Balance of Pre-tax Credit Losses Recognized in Retained Earnings at End of Period
 
$
5.3

 
$
12.9

 
$
5.3

 
$
12.9


Note 3 - Investments (continued)
Gross gains and losses on sales of investments in fixed maturities and equity securities for the six and three months ended June 30, 2015 and 2014 were:
 
 
Six Months Ended
 
Three Months Ended
(Dollars in Millions)
 
Jun 30,
2015
 
Jun 30,
2014
 
Jun 30,
2015
 
Jun 30,
2014
Fixed Maturities:
 
 
 
 
 
 
 
 
Gains on Sales
 
$
5.9

 
$
4.8

 
$
3.9

 
$
0.4

Losses on Sales
 
(0.6
)
 

 
(0.5
)
 

Equity Securities:
 
 
 
 
 
 
 
 
Gains on Sales
 
32.9

 
3.8

 
31.4

 
3.0

Losses on Sales
 
(0.7
)
 

 
(0.7
)
 


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 June 30, 2015 is limited to the total carrying value of $173.5 million. In addition, the Company had outstanding commitments totaling approximately $47.4 million to fund Equity Method Limited Liability Investments at June 30, 2015.
The carrying values of the Company’s Other Investments at June 30, 2015 and December 31, 2014 were:
(Dollars in Millions)
 
Jun 30,
2015
 
Dec 31,
2014
Loans to Policyholders at Unpaid Principal
 
$
284.8

 
$
283.4

Real Estate at Depreciated Cost
 
159.1

 
160.9

Trading Securities at Fair Value
 
5.0

 
4.9

Other
 
2.1

 
0.4

Total
 
$
451.0

 
$
449.6