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FAIR VALUE OF ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2021

The fair value of financial instruments are presented in the below summary table. The fair value of financial instruments held by CIP is presented in Note 12, "Consolidated Investment Products". See the company’s most recently filed Form 10-K for additional disclosures on valuation methodology and fair value.


	September 30, 2021	December 31, 2020
$ in millions	Fair Value	Fair Value
Cash and cash equivalents	1,773.2	1,408.4
Restricted cash (1)	—	129.2
Equity investments	324.3	360.3

Foreign time deposits (2)	29.1	29.9
Assets held for policyholders (2)	2,232.2	7,582.1
Policyholder payables	(2,232.2)	(7,582.1)
Total return swaps related to deferred compensation plans	(8.2)	5.1
Contingent consideration liability	(3.4)	(18.6)

____________

(1) Restricted cash is recorded in Other assets on the Condensed Consolidated Balance Sheets.

(2) These financial instruments are not measured at fair value on a recurring basis. See the most recently filed Form 10-K for additional information about the carrying and fair values of these financial instruments. Foreign time deposits are measured at cost plus accrued interest, which approximates fair value, and are accordingly classified as Level 2 securities. Policyholder payables are indexed to the value of the assets held for policyholders.

The following table presents, by hierarchy levels, the carrying value of the company’s assets and liabilities, including major security type for equity and debt securities, which are measured at fair value on the company’s Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively:


	As of September 30, 2021
$ in millions	Fair Value Measurements	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds (1)	1,156.2	1,156.2	—	—
Investments (2):
Equity investments:
Seed money	102.8	102.8	—	—
Investments related to deferred compensation plans	218.3	218.3	—	—
Other equity securities	3.2	3.2	—	—



Assets held for policyholders (3)	2,232.2	2,232.2	—	—

Total	3,712.7	3,712.7	—	—
Liabilities:
Total return swaps related to deferred compensation plans	(8.2)	—	(8.2)	—
Contingent consideration liability	(3.4)	—		(3.4)
Total	(11.6)	—	(8.2)	(3.4)


	As of December 31, 2020
$ in millions	Fair Value Measurements	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds (1)	947.3	947.3	—	—
Investments (2):
Equity investments:
Seed money	153.5	153.5	—	—
Investments related to deferred compensation plans	202.7	202.7	—	—
Other equity securities	4.1	4.1	—	—



Assets held for policyholders (3)	7,582.1	7,582.1	—	—
Total return swaps related to deferred compensation plans	5.1	—	5.1	—
Total	8,894.8	8,889.7	5.1	—
Liabilities:
Contingent consideration liability	(18.6)	—	—	(18.6)
Total	(18.6)	—	—	(18.6)

____________

(1) The balance primarily represents cash held in affiliated money market funds.

(2) Foreign time deposits of $29.1 million (December 31, 2020: $29.9 million) are excluded from this table. Equity method and other investments of $545.1 million and $7.9 million, respectively, (December 31, 2020: $426.1 million and $10.5 million, respectively) are also excluded from this table. These investments are not measured at fair value, in accordance with applicable accounting standards.

(3) The majority of assets held for policyholders are held in affiliated funds.

Total Return Swaps

In addition to holding equity investments, the company has a total return swap (TRS) to economically hedge certain deferred compensation liabilities. The notional value of the total return swap at September 30, 2021 was $337.8 million. During the three and nine months ended September 30, 2021, market valuation losses of $7.7 million and gains of $18.3 million were recognized in other gains and losses, net (three and nine months ended September 30, 2020: $12.8 million net gains and $11.5 million net gains respectively).

The following tables show a reconciliation of the beginning and ending fair value measurements for level 3 assets and liabilities during the three and nine months ended September 30, 2021 and September 30, 2020, which are valued using significant unobservable inputs:


	Contingent Consideration Liability
$ in millions	Three months ended September 30, 2021	Nine months ended September 30, 2021
Beginning balance	(3.4)	(18.6)
Purchases/acquisitions	—	(1.3)


Net unrealized gains and losses included in other gains and losses, net	—	4.7



Disposition/settlements	—	11.8

Ending balance	(3.4)	(3.4)


	Contingent Consideration Liability
$ in millions	Three months ended September 30, 2020	Nine months ended September 30, 2020
Beginning balance	(29.3)	(60.2)
Revision to purchase price allocation	—	5.5


Net unrealized gains and losses included in other gains and losses, net	(0.5)	10.9



Disposition/settlements	2.8	16.8

Ending balance	(27.0)	(27.0)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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