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Investments
 9 Months Ended
Sep. 30, 2018
Investments, Debt and Equity Securities [Abstract]  
Investments Investments
The following tables set forth the cost or amortized cost and fair value of investments by lot at September 30, 2018 and December 31, 2017:
($ millions)
Cost or amortized cost
 
Gross unrealized holding gains
 
Gross unrealized holding losses
 
Fair value
September 30, 2018
Available-for-sale fixed maturities:
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
409.4

 
$
4.3

 
$
(11.7
)
 
$
402.0

Obligations of states and political subdivisions
434.8

 
6.0

 
(2.0
)
 
438.8

Corporate securities
535.6

 
1.7

 
(11.4
)
 
525.9

U.S. government agencies mortgage-backed securities
805.4

 
1.7

 
(32.2
)
 
774.9

Total available-for-sale fixed maturities
$
2,185.2

 
$
13.7

 
$
(57.3
)
 
$
2,141.6

 
 
 
 
 
 
 
 
($ millions)
Cost or amortized cost
 
Gross unrealized holding gains
 
Gross unrealized holding losses
 
Fair value
December 31, 2017
Fixed maturities:
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
433.8

 
$
9.3

 
$
(6.2
)
 
$
436.9

Obligations of states and political subdivisions
507.1

 
19.1

 
(0.4
)
 
525.8

Corporate securities
527.5

 
4.5

 
(2.3
)
 
529.7

U.S. government agencies mortgage-backed securities
704.7

 
7.1

 
(11.4
)
 
700.4

Total fixed maturities
2,173.1

 
40.0

 
(20.3
)
 
2,192.8

Equity securities:
 
 
 
 
 
 
 
Large-cap securities
62.4

 
35.1

 
(0.7
)
 
96.8

Mutual and exchange traded funds
256.2

 
21.6

 
(9.3
)
 
268.5

Total equity securities
318.6

 
56.7

 
(10.0
)
 
365.3

Other invested assets
25.8

 
30.2

 
—

 
56.0

Total available-for-sale securities
$
2,517.5

 
$
126.9

 
$
(30.3
)
 
$
2,614.1

 
 
 
 
 
 
 
 

The following tables set forth the Company’s gross unrealized losses and fair value on its investments by lot, aggregated by investment category and length of time for individual securities that have been in a continuous unrealized loss position at September 30, 2018 and December 31, 2017:
($ millions, except # of positions)
Less than 12 months
 
12 months or more
 
Total
 
Fair value
 
Unrealized losses
 
Number of positions
 
Fair value
 
Unrealized losses
 
Number of positions
 
Fair value
 
Unrealized losses
 
Number of positions
September 30, 2018
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
106.1

 
$
(2.1
)
 
15

 
$
221.6

 
$
(9.6
)
 
29

 
$
327.7

 
$
(11.7
)
 
44

Obligations of states and political subdivisions
130.7

 
(1.8
)
 
19

 
23.3

 
(0.2
)
 
3

 
154.0

 
(2.0
)
 
22

Corporate securities
352.9

 
(5.7
)
 
46

 
114.3

 
$
(5.7
)
 
19

 
467.2

 
$
(11.4
)
 
65

U.S. government agencies mortgage-backed securities
390.1

 
(11.8
)
 
54

 
303.1

 
(20.4
)
 
52

 
693.2

 
(32.2
)
 
106

Total temporarily impaired securities
$
979.8

 
$
(21.4
)
 
134

 
$
662.3

 
$
(35.9
)
 
103

 
$
1,642.1

 
$
(57.3
)
 
237

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ millions, except # of positions)
Less than 12 months
 
12 months or more
 
Total
 
Fair value
 
Unrealized losses
 
Number of positions
 
Fair value
 
Unrealized losses
 
Number of positions
 
Fair value
 
Unrealized losses
 
Number of positions
December 31, 2017
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
102.4

 
$
(0.6
)
 
18

 
$
196.1

 
$
(5.6
)
 
22

 
$
298.5

 
$
(6.2
)
 
40

Obligations of states and political subdivisions
58.6

 
(0.4
)
 
10

 
—

 
—

 
—

 
58.6

 
(0.4
)
 
10

Corporate securities
153.2

 
(1.3
)
 
23

 
67.3

 
(1.0
)
 
10

 
220.5

 
(2.3
)
 
33

U.S. government agencies mortgage-backed securities
188.6

 
(2.9
)
 
31

 
252.2

 
(8.5
)
 
41

 
440.8

 
(11.4
)
 
72

Total fixed maturities
502.8

 
(5.2
)
 
82

 
515.6

 
(15.1
)
 
73

 
1,018.4

 
(20.3
)
 
155

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Large-cap equity securities
4.4

 
(0.7
)
 
4

 
—

 
—

 
—

 
4.4

 
(0.7
)
 
4

Mutual and exchange traded funds
66.9

 
(9.3
)
 
1

 
—

 
—

 
—

 
66.9

 
(9.3
)
 
1

Total equity securities
71.3

 
(10.0
)
 
5

 
—

 
—

 
—

 
71.3

 
(10.0
)
 
5

Total temporarily impaired securities
$
574.1

 
$
(15.2
)
 
87

 
$
515.6

 
$
(15.1
)
 
73

 
$
1,089.7

 
$
(30.3
)
 
160

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The Company reviewed its investments at September 30, 2018, and determined that no other-than-temporary impairment ("OTTI") existed in the gross unrealized holding losses.
The Company regularly monitors its available-for-sale investments that have fair values less than cost or amortized cost for signs of other-than-temporary impairment, an assessment that requires significant management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported. Among the factors that management considers for fixed maturity securities are the financial condition of the issuer including receipt of scheduled principal and interest cash flows, and intent to sell, including if it is more likely than not that the Company will be required to sell the investments before recovery. When a fixed maturity has been determined to have an other-than-temporary impairment, the impairment charge is separated into an amount representing the credit loss, which is recognized in earnings as a realized loss, and the amount related to non-credit factors, which is recognized in accumulated other comprehensive income. Future increases or decreases in fair value, if not other-than-temporary, are included in accumulated other comprehensive income.
The following table sets forth the amortized cost and fair value of available-for-sale fixed maturities by contractual maturity at September 30, 2018:
($ millions)
Amortized cost
 
Fair
value
Due in 1 year or less
$
28.1

 
$
28.0

Due after 1 year through 5 years
587.1

 
576.4

Due after 5 years through 10 years
369.9

 
364.2

Due after 10 years
394.7

 
398.1

U.S. government agencies mortgage-backed securities
805.4

 
774.9

Total
$
2,185.2

 
$
2,141.6

 
 
 
 

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations with or without call or prepayment penalties.
At September 30, 2018, State Auto P&C had U.S. government agencies mortgage-backed fixed maturity securities, with a carrying value of approximately $106.5 million, that were pledged as collateral for the FHLB Loans (as defined in Note 3). In accordance with the terms of the FHLB Loans, State Auto P&C retains all rights regarding these pledged securities.
Fixed maturities with fair values of $8.9 million and $9.3 million were on deposit with insurance regulators as required by law at September 30, 2018, and December 31, 2017, respectively. The Company retains all rights regarding these securities.
The following table sets forth the components of net investment income for the three and nine months ended September 30, 2018 and 2017:
 ($ millions)
Three months ended September 30
 
Nine months ended September 30
 
2018
 
2017
 
2018
 
2017
Fixed maturities
$
16.4

 
$
15.4

 
$
49.4

 
$
47.1

Equity securities
3.0

 
2.0

 
8.6

 
5.7

Cash and cash equivalents, and other
1.7

 
1.6

 
5.2

 
4.6

Investment income
21.1

 
19.0

 
63.2

 
57.4

Investment expenses
0.3

 
0.3

 
1.0

 
0.9

Net investment income
$
20.8

 
$
18.7

 
$
62.2

 
$
56.5

 
 
 
 
 
 
 
 

The Company’s current investment strategy does not rely on the use of derivative financial instruments.
Proceeds on sales of investments were $159.9 million and $328.4 million for the nine months ended September 30, 2018, and 2017, respectively.
The following table sets forth the realized and unrealized holding gains (losses) on the Company’s investment portfolio for the three and nine months ended September 30, 2018 and 2017:
($ millions)
Three months ended September 30
 
Nine months ended September 30
 
2018
 
2017
 
2018
 
2017
Realized gains:
 
 
 
 
 
 
 
Fixed maturities
$
—

 
$
0.4

 
$
1.7

 
$
2.7

Equity securities
1.0

 
20.9

 
6.0

 
45.2

Other invested assets
—

 
—

 
—

 
0.1

Total realized gains
1.0

 
21.3

 
7.7

 
48.0

Realized losses on securities:
 
 
 
 
 
 
 
Sales of equity securities
—

 
(0.5
)
 
(0.6
)
 
(0.7
)
OTTI
—

 
(0.6
)
 
—

 
(3.5
)
Total equity securities realized losses
—

 
(1.1
)
 
(0.6
)
 
(4.2
)
Net realized gain on investments
$
1.0

 
$
20.2

 
$
7.1

 
$
43.8

 
 
 
 
 
 
 
 
Net unrealized gain (loss) on investments(1)
 
 
 
 
 
 
 
Equity securities
16.4

 
$
—

 
$
12.8

 
$
—

Other invested assets
0.4

 
—

 
(1.7
)
 
—

Net unrealized gain on investments
16.8

 
—

 
11.1

 
—

Net investment gain
$
17.8

 
$
20.2

 
$
18.2

 
$
43.8

 
 
 
 
 
 
 
 
Change in unrealized holding (losses) gains, net of tax:
 
 
 
 
 
 
 
Fixed maturities
$
(14.7
)
 
$
0.4

 
$
(63.3
)
 
$
15.8

Equity securities
—

 
(12.1
)
 
—

 
(1.9
)
Other invested assets
—

 
2.5

 
—

 
7.9

Deferred federal income tax liability
3.1

 
3.2

 
13.3

 
(7.6
)
Change in net unrealized holding (losses) gains, net of tax
$
(11.6
)
 
$
(6.0
)
 
$
(50.0
)
 
$
14.2

 
 
 
 
 
 
 
 
(1)Unrealized holding gains (losses) recognized during the period on securities still held at the reporting date