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Investments
 9 Months Ended
Sep. 30, 2019
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, 2019 and December 31, 2018:
($ millions)
Cost or amortized cost
 
Gross unrealized holding gains
 
Gross unrealized holding losses
 
Fair value
September 30, 2019
Available-for-sale fixed maturities:
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
516.4

 
$
14.8

 
$
(1.2
)
 
$
530.0

Obligations of states and political subdivisions
415.3

 
21.8

 
—

 
437.1

Corporate securities
492.3

 
10.9

 
(1.1
)
 
502.1

U.S. government agencies mortgage-backed securities
705.0

 
18.2

 
(3.1
)
 
720.1

Total available-for-sale fixed maturities
$
2,129.0

 
$
65.7

 
$
(5.4
)
 
$
2,189.3

 
 
 
 
 
 
 
 
($ millions)
Cost or amortized cost
 
Gross unrealized holding gains
 
Gross unrealized holding losses
 
Fair value
December 31, 2018
Available-for-sale fixed maturities:
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
438.4

 
$
3.2

 
$
(9.2
)
 
$
432.4

Obligations of states and political subdivisions
408.2

 
7.3

 
(0.9
)
 
414.6

Corporate securities
551.7

 
0.6

 
(11.7
)
 
540.6

U.S. government agencies mortgage-backed securities
789.9

 
3.3

 
(21.3
)
 
771.9

Total available-for-sale fixed maturities
$
2,188.2

 
$
14.4

 
$
(43.1
)
 
$
2,159.5

 
 
 
 
 
 
 
 

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, 2019 and December 31, 2018:
($ 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, 2019
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
41.1

 
$
(0.1
)
 
9

 
$
184.5

 
$
(1.1
)
 
16

 
$
225.6

 
$
(1.2
)
 
25

Obligations of states and political subdivisions
—

 
—

 
—

 
4.1

 
—

 
1

 
4.1

 
—

 
1

Corporate securities
20.3

 
(0.3
)
 
2

 
56.9

 
$
(0.8
)
 
9

 
77.2

 
$
(1.1
)
 
11

U.S. government agencies mortgage-backed securities
50.9

 
(0.3
)
 
7

 
161.1

 
(2.8
)
 
35

 
212.0

 
(3.1
)
 
42

Total temporarily impaired securities
$
112.3

 
$
(0.7
)
 
18

 
$
406.6

 
$
(4.7
)
 
61

 
$
518.9

 
$
(5.4
)
 
79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ 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, 2018
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities and obligations of U.S. government agencies
$
83.1

 
$
(1.8
)
 
7

 
$
259.6

 
$
(7.4
)
 
35

 
$
342.7

 
$
(9.2
)
 
42

Obligations of states and political subdivisions
63.6

 
(0.5
)
 
7

 
39.6

 
(0.4
)
 
8

 
103.2

 
(0.9
)
 
15

Corporate securities
244.0

 
(3.0
)
 
31

 
189.5

 
(8.7
)
 
30

 
433.5

 
(11.7
)
 
61

U.S. government agencies mortgage-backed securities
169.5

 
(2.8
)
 
18

 
385.5

 
(18.5
)
 
70

 
555.0

 
(21.3
)
 
88

Total temporarily impaired securities
$
560.2

 
$
(8.1
)
 
63

 
$
874.2

 
$
(35.0
)
 
143

 
$
1,434.4

 
$
(43.1
)
 
206

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The Company reviewed its investments at September 30, 2019, 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, 2019:
($ millions)
Amortized cost
 
Fair
value
Due in 1 year or less
$
55.7

 
$
56.6

Due after 1 year through 5 years
562.7

 
569.4

Due after 5 years through 10 years
239.9

 
249.7

Due after 10 years
565.7

 
593.5

U.S. government agencies mortgage-backed securities
705.0

 
720.1

Total
$
2,129.0

 
$
2,189.3

 
 
 
 

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, 2019, 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.
At September 30, 2019, State Auto P&C had fixed maturities with fair values of approximately $23.2 million pledged as collateral for the performance obligations under its reinsurance agreement with Home State County Mutual Insurance Company. In accordance with the terms of the trust agreement, State Auto P&C retains all rights regarding these securities, which are included in the “U.S. treasury securities and obligations of U.S. government agencies” classification of the Company’s fixed maturity securities portfolio.
Fixed maturities with fair values of $9.3 million and $8.9 million were on deposit with insurance regulators as required by law at September 30, 2019, and December 31, 2018, respectively. The Company retains all rights regarding these securities.
The following table sets forth the components of net investment income for the three and nine months ended September 30, 2019 and 2018:
 ($ millions)
Three months ended September 30
 
Nine months ended September 30
 
2019
 
2018
 
2019
 
2018
Fixed maturities
$
15.3

 
$
16.4

 
$
47.7

 
$
49.4

Equity securities
3.0

 
3.0

 
8.9

 
8.6

Cash and cash equivalents, and other
1.1

 
1.7

 
4.2

 
5.2

Investment income
19.4

 
21.1

 
60.8

 
63.2

Investment expenses
0.1

 
0.3

 
0.4

 
1.0

Net investment income
$
19.3

 
$
20.8

 
$
60.4

 
$
62.2

 
 
 
 
 
 
 
 

The Company’s current investment strategy does not rely on the use of derivative financial instruments.
Proceeds on sales of investments were $284.1 million and $159.9 million for the nine months ended September 30, 2019, and 2018, respectively.
The following table sets forth the realized and unrealized holding gains (losses) on the Company’s investment portfolio for the three and nine months ended September 30, 2019 and 2018:
($ millions)
Three months ended September 30
 
Nine months ended September 30
 
2019
 
2018
 
2019
 
2018
Investment gains (losses), net:
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Realized gains on sales of securities
1.2

 
—

 
2.8

 
1.7

Net gains on fixed maturities
1.2

 
—

 
2.8

 
1.7

Equity securities:
 
 
 
 
 
 
 
Realized (losses) gains on sales of securities, net
(1.8
)
 
1.0

 
(2.5
)
 
5.4

Unrealized (losses) gains on securities still held, net
(4.1
)
 
16.4

 
46.4

 
12.8

Net (losses) gains on equity securities
(5.9
)
 
17.4

 
43.9

 
18.2

Other invested assets:
 
 
 
 
 
 
 
Unrealized (losses) gains on securities still held, net
(0.3
)
 
0.4

 
4.8

 
(1.7
)
Net (losses) gains on other invested assets
(0.3
)
 
0.4

 
4.8

 
(1.7
)
Other net realized loss
—

 
—

 
(1.3
)
 
—

Net (losses) gains on investments
$
(5.0
)
 
$
17.8

 
$
50.2

 
$
18.2

 
 
 
 
 
 
 
 
Change in unrealized holding gains (losses), net of tax:
 
 
 
 
 
 
 
Fixed maturities
$
21.4

 
$
(14.7
)
 
$
89.0

 
$
(63.3
)
Deferred federal income tax (liability) benefit
(4.5
)
 
3.1

 
(18.7
)
 
13.3

Change in net unrealized holding gains (losses), net of tax
$
16.9

 
$
(11.6
)
 
$
70.3

 
$
(50.0
)