XML 32 R21.htm IDEA: XBRL DOCUMENT
v3.20.2

Fair Value Measurements | 6 Months Ended
--- | ---
Jun. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The Company classifies its investments in Fixed Maturities as available for sale and reports these investments at fair value. The Company reports equity investments with readily determinable fair values as Equity Securities at Fair Value. Certain investments that are measured at fair value using the net asset value practical expedient are not required to be classified using the fair value hierarchy, but are presented in the following two tables to permit reconciliation of the fair value hierarchy to the amounts presented in the Condensed Consolidated Balance Sheet. The valuation of assets measured at fair value in Company’s Condensed Consolidated Balance Sheet at June 30, 2020 is summarized below.
|  | Fair Value Measurements |  |
(Dollars in Millions) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Measured at Net Asset Value |  | Total Fair Value
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 147.2 |  |  | $ | 564.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 711.6 |
States and Political Subdivisions |  | — |  |  | 1,508.1 |  |  | — |  |  | — |  |  | 1,508.1 |
Foreign Governments |  | — |  |  | 5.0 |  |  | — |  |  | — |  |  | 5.0 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | — |  |  | 3,872.0 |  |  | 452.3 |  |  | — |  |  | 4,324.3 |
Redeemable Preferred Stock |  | — |  |  | 1.3 |  |  | 5.4 |  |  | — |  |  | 6.7 |
Collateralized Loan Obligations |  | — |  |  | 711.1 |  |  | — |  |  | — |  |  | 711.1 |
Other Mortgage- and Asset-backed |  | — |  |  | 203.3 |  |  | 10.3 |  |  | — |  |  | 213.6 |
Total Investments in Fixed Maturities |  | 147.2 |  |  | 6,865.2 |  |  | 468.0 |  |  | — |  |  | 7,480.4 |
Equity Securities at Fair Value: |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | — |  |  | 40.5 |  |  | — |  |  | — |  |  | 40.5 |
Other Industries |  | — |  |  | 14.0 |  |  | — |  |  | — |  |  | 14.0 |
Common Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 7.9 |  |  | — |  |  | — |  |  | — |  |  | 7.9 |
Other Industries |  | 0.5 |  |  | — |  |  | — |  |  | — |  |  | 0.5 |
Other Equity Interests: |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 445.5 |  |  | — |  |  | — |  |  | — |  |  | 445.5 |
Limited Liability Companies and Limited Partnerships |  | — |  |  | — |  |  | — |  |  | 274.9 |  |  | 274.9 |
Total Investments in Equity Securities at Fair Value |  | 453.9 |  |  | 54.5 |  |  | — |  |  | 274.9 |  |  | 783.3 |
Convertible Securities at Fair Value |  | — |  |  | 35.0 |  |  | — |  |  | — |  |  | 35.0 |
Total |  | $ | 601.1 |  |  | $ | 6,954.7 |  |  | $ | 468.0 |  |  | $ | 274.9 |  |  | $ | 8,298.7 |
At June 30, 2020, the Company had unfunded commitments to invest an additional $143.9 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests if funded. Note 13 - Fair Value Measurements (continued) The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2019 is summarized below.
|  | Fair Value Measurements |  |
(Dollars in Millions) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Measured at Net Asset Value |  | Total Fair Value
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 144.3 |  |  | $ | 671.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 815.9 |
States and Political Subdivisions |  | — |  |  | 1,515.8 |  |  | — |  |  | — |  |  | 1,515.8 |
Foreign Governments |  | — |  |  | 16.8 |  |  | — |  |  | — |  |  | 16.8 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | — |  |  | 3,450.6 |  |  | 409.1 |  |  | — |  |  | 3,859.7 |
Redeemable Preferred Stocks |  | — |  |  | — |  |  | 6.7 |  |  | — |  |  | 6.7 |
Collateralized Loan Obligations |  | — |  |  | — |  |  | 618.2 |  |  | — |  |  | 618.2 |
Other Mortgage- and Asset-backed |  | — |  |  | 78.8 |  |  | 10.2 |  |  | — |  |  | 89.0 |
Total Investments in Fixed Maturities |  | 144.3 |  |  | 5,733.6 |  |  | 1,044.2 |  |  | — |  |  | 6,922.1 |
Equity Securities at Fair Value: |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | — |  |  | 44.5 |  |  | — |  |  | — |  |  | 44.5 |
Other Industries |  | 0.9 |  |  | 13.8 |  |  | — |  |  | — |  |  | 14.7 |
Common Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 12.8 |  |  | — |  |  | — |  |  | — |  |  | 12.8 |
Other Industries |  | 0.2 |  |  | 0.2 |  |  | — |  |  | — |  |  | 0.4 |
Other Equity Interests: |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 586.8 |  |  | — |  |  | — |  |  | — |  |  | 586.8 |
Limited Liability Companies and Limited Partnerships |  | — |  |  | — |  |  | — |  |  | 248.1 |  |  | 248.1 |
Total Investments in Equity Securities at Fair Value |  | 600.7 |  |  | 58.5 |  |  | — |  |  | 248.1 |  |  | 907.3 |
Convertible Securities at Fair Value |  | — |  |  | 37.3 |  |  | — |  |  | — |  |  | 37.3 |
Total |  | $ | 745.0 |  |  | $ | 5,829.4 |  |  | $ | 1,044.2 |  |  | $ | 248.1 |  |  | $ | 7,866.7 |
The Company’s investments in Fixed Maturities that are classified as Level 1 in the two preceding tables primarily consist of U.S. Treasury Bonds and Notes. The Company’s investments in Equity Securities at Fair Value that are classified as Level 1 in the two preceding tables consist of either investments in publicly-traded common stocks or exchange traded funds. The Company’s investments in Fixed Maturities that are classified as Level 2 in the two preceding tables primarily consist of investments in corporate bonds, obligations of states and political subdivisions, and bonds and mortgage-backed securities of U.S. government agencies. The Company’s investments in Equity Securities at Fair Value that are classified as Level 2 in the two preceding tables primarily consist of investments in preferred stocks. The Company uses a leading, nationally recognized provider of market data and analytics to price the vast majority of the Company’s Level 2 measurements. The provider utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Because many fixed maturity securities do not trade on a daily basis, the provider’s evaluated pricing applications apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, the provider uses model processes to develop prepayment and interest rate scenarios. The Note 13 - Fair Value Measurements (continued) pricing provider’s models and processes also take into account market convention. For each asset class, teams of its evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models. The Company generally validates the measurements obtained from its primary pricing provider by comparing them with measurements obtained from one additional pricing provider that provides either prices from recent market transactions, quotes in inactive markets or evaluations based on its own proprietary models. The Company investigates significant differences related to the values provided. On completion of its investigation, management exercises judgment to determine the price selected and whether adjustments, if any, to the price obtained from the Company’s primary pricing provider would warrant classification of the price as Level 3. In instances where a measurement cannot be obtained from either pricing provider, the Company generally will evaluate bid prices from one or more binding quotes obtained from market makers to value investments in inactive markets and classified by the Company as Level 2. The Company generally classifies securities when it receives non-binding quotes or indications as Level 3 securities unless the Company can validate the quote or indication against recent transactions in the market. The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments classified as Level 3 at June 30, 2020.
(Dollars in Millions) |  | Unobservable Input |  | Total Fair Value |  | Range of Unobservable Inputs |  | Weighted-average Yield
Investment-grade |  | Market Yield |  | $ | 222.0 |  |  | 1.3 | % | - | 9.6 | % |  | 4.0 | %
Non-investment-grade: |  |  |  |  |  |  |  |  |  |
Senior Debt |  | Market Yield |  | 139.9 |  |  | 2.4 |  | - | 20.5 |  |  | 10.0 |
Junior Debt |  | Market Yield |  | 78.0 |  |  | 8.9 |  | - | 21.5 |  |  | 14.3 |
Other |  | Various |  | 28.1 |  |  |  |  |  |  |
Total Level 3 Fixed Maturity Investments |  |  |  | $ | 468.0 |  |  |  |  |  |  |
The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments classified as Level 3 at December 31, 2019.
(Dollars in Millions) |  | Unobservable Input |  | Total Fair Value |  | Range of Unobservable Inputs |  | Weighted-average Yield
Investment-grade |  | Market Yield |  | $ | 204.2 |  |  | 2.4 | % | - | 8.5 | % |  | 4.1 | %
Non-investment-grade: |  |  |  |  |  |  |  |  |  |
Senior Debt |  | Market Yield |  | 123.7 |  |  | 2.4 |  | - | 21.5 |  |  | 9.1 |
Junior Debt |  | Market Yield |  | 81.3 |  |  | 9.6 |  | - | 18.0 |  |  | 13.1 |
Collateralized Loan Obligations (investment grade and non-investment grade) |  | Market Yield |  | 613.5 |  |  | 3.2 |  | - | 12.5 |  |  | 5.1 |
Other |  | Various |  | 21.5 |  |  |  |  |  |  |
Total Level 3 Fixed Maturity Investments |  |  |  | $ | 1,044.2 |  |  |  |  |  |  |
For an investment in a fixed maturity security, an increase in the yield used to determine the fair value of the security will decrease the fair value of the security. A decrease in the yield used to determine fair value will increase the fair value of the security, but the fair value increase is generally limited to par, unless callable at a premium, if the security is currently callable. Note 13 - Fair Value Measurements (continued) Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the six months ended June 30, 2020 is presented below.
|  | Fixed Maturities |  |
(Dollars in Millions) |  | Corporate Bonds and Notes |  | States and Political Sub- divisions |  | Redeemable Preferred Stocks |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |  | Total
Balance at Beginning of Period |  | $ | 409.1 |  |  | $ | — |  |  | $ | 6.7 |  |  | $ | 618.2 |  |  | $ | 10.2 |  |  | $ | 1,044.2 |
Total Gains (Losses): |  |  |  |  |  |  |  |  |  |  |  |
Included in Condensed Consolidated Statement of Income |  | (5.0 | ) |  | — |  |  | — |  |  | (0.3 | ) |  | — |  |  | (5.3 | )
Included in Other Comprehensive Income (Loss) |  | (6.1 | ) |  | 0.1 |  |  | (0.1 | ) |  | (9.4 | ) |  | 0.4 |  |  | (15.1 | )
Purchases |  | 80.6 |  |  | 0.6 |  |  | — |  |  | 53.5 |  |  | — |  |  | 134.7 |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.1 | ) |  | (0.1 | )
Sales |  | (33.7 | ) |  | — |  |  | — |  |  | (26.4 | ) |  | (0.2 | ) |  | (60.3 | )
Transfers into Level 3 |  | 7.4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7.4 |
Transfers out of Level 3 |  | — |  |  | (0.7 | ) |  | (1.2 | ) |  | (635.6 | ) |  | — |  |  | (637.5 | )
Balance at End of Period |  | $ | 452.3 |  |  | $ | — |  |  | $ | 5.4 |  |  | $ | — |  |  | $ | 10.3 |  |  | $ | 468.0 |
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended June 30, 2020 is presented below.
|  | Fixed Maturities |  |
(Dollars in Millions) |  | Corporate Bonds and Notes |  | States and Political Sub- divisions |  | Redeemable Preferred Stocks |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |  | Total
Balance at Beginning of Period |  | $ | 390.6 |  |  | $ | 0.7 |  |  | $ | 6.7 |  |  | $ | 77.9 |  |  | $ | 9.4 |  |  | $ | 485.3 |
Total Gains (Losses): |  |  |  |  |  |  |  |  |  |  |  |
Included in Condensed Consolidated Statement of Income |  | (2.3 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (2.3 | )
Included in Other Comprehensive Income (Loss) |  | 18.7 |  |  | — |  |  | (0.1 | ) |  | 0.1 |  |  | 1.0 |  |  | 19.7 |
Purchases |  | 53.4 |  |  | — |  |  | — |  |  | (0.1 | ) |  | — |  |  | 53.3 |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.1 | ) |  | (0.1 | )
Sales |  | (15.5 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (15.5 | )
Transfers into Level 3 |  | 7.4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7.4 |
Transfers out of Level 3 |  | — |  |  | (0.7 | ) |  | (1.2 | ) |  | (77.9 | ) |  | — |  |  | (79.8 | )
Balance at End of Period |  | $ | 452.3 |  |  | $ | — |  |  | $ | 5.4 |  |  | $ | — |  |  | $ | 10.3 |  |  | $ | 468.0 |
There was $637.5 million in transfers out of Level 3 for the six months ended June 30, 2020. The transfers out of Level 3 were due to primarily to changes in the availability of market observable inputs due to change in pricing provider. Note 13 - Fair Value Measurements (continued) Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the six months ended June 30, 2019 is presented below.
|  | Fixed Maturities |  |  |  |
(Dollars in Millions) |  | Corporate Bonds and Notes |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |  | Total
Balance at Beginning of Period |  | $ | 382.6 |  |  | $ | 504.9 |  |  | $ | 9.9 |  |  | $ | 897.4 |
Total Gains (Losses): |  |  |  |  |  |  |  |
Included in Condensed Consolidated Statement of Income |  | (7.7 | ) |  | 0.1 |  |  | — |  |  | (7.6 | )
Included in Other Comprehensive Income (Loss) |  | 10.2 |  |  | 7.7 |  |  | 0.8 |  |  | 18.7 |
Purchases |  | 161.4 |  |  | 24.2 |  |  | — |  |  | 185.6 |
Settlements |  | (16.1 | ) |  | (12.0 | ) |  | (0.3 | ) |  | (28.4 | )
Sales |  | (115.7 | ) |  | (2.9 | ) |  | — |  |  | (118.6 | )
Transfers into Level 3 |  | 2.5 |  |  | 17.0 |  |  | — |  |  | 19.5 |
Transfers out of Level 3 |  | (1.6 | ) |  | — |  |  | — |  |  | (1.6 | )
Balance at End of Period |  | $ | 415.6 |  |  | $ | 539.0 |  |  | $ | 10.4 |  |  | $ | 965.0 |
Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the three months ended June 30, 2019 is presented below.
|  | Fixed Maturities |  |  |  |
(Dollars in Millions) |  | Corporate Bonds and Notes |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |  | Total
Balance at Beginning of Period |  | $ | 411.9 |  |  | $ | 528.5 |  |  | $ | 10.3 |  |  | $ | 950.7 |
Total Gains (Losses): |  |  |  |  |  |  |  |
Included in Condensed Consolidated Statement of Income |  | (5.2 | ) |  | 0.4 |  |  | — |  |  | (4.8 | )
Included in Other Comprehensive Income (Loss) |  | 4.8 |  |  | 1.7 |  |  | 0.3 |  |  | 6.8 |
Purchases |  | 60.1 |  |  | 20.3 |  |  | — |  |  | 80.4 |
Settlements |  | (4.6 | ) |  | (12.0 | ) |  | (0.2 | ) |  | (16.8 | )
Sales |  | (49.8 | ) |  | (2.9 | ) |  | — |  |  | (52.7 | )
Transfers into Level 3 |  | — |  |  | 3.0 |  |  | — |  |  | 3.0 |
Transfers out of Level 3 |  | (1.6 | ) |  | — |  |  | — |  |  | (1.6 | )
Balance at End of Period |  | $ | 415.6 |  |  | $ | 539.0 |  |  | $ | 10.4 |  |  | $ | 965.0 |
There were $1.6 million transfers out of Level 3 were for the six months ended June 30, 2019. The transfers into Level 3 were due to changes in the availability of market observable inputs. Note 13 - Fair Value Measurements (continued) Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.
|  | June 30, 2020 |  | December 31, 2019
(Dollars in Millions) |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial Assets: |  |  |  |  |  |  |  |
Loans to Policyholders |  | $ | 301.0 |  |  | $ | 301.0 |  |  | $ | 305.6 |  |  | $ | 612.4 |
Short-term Investments |  | 154.2 |  |  | 154.2 |  |  | 470.9 |  |  | 470.9 |
Mortgage Loans |  | 30.7 |  |  | 30.7 |  |  | 27.5 |  |  | 27.5 |
Financial Liabilities: |  |  |  |  |  |  |  |
Debt |  | $ | 777.7 |  |  | $ | 824.1 |  |  | $ | 778.4 |  |  | $ | 820.2 |
Policyholder Contract Liabilities |  | 454.3 |  |  | 454.3 |  |  | 243.4 |  |  | 243.4 |
The fair value measurement for loans to policyholders are categorized as Level 3 within the fair value hierarchy. Effective June 30, 2020, the Company revised its method of estimating the fair value of loans to policyholders. The fair value measurement of Short-term Investments is estimated using inputs that are considered either Level 1 or Level 2 measurements. The fair value measurement of Mortgage Loans is estimated using inputs that are considered Level 2 measurements. The fair value of Debt is estimated using quoted prices for similar liabilities in markets that are not active. The inputs used in the valuation are considered Level 2 measurements. Policyholder Contract Liabilities consist of advances from the FHLB of Chicago, and the inputs used in the valuation are considered Level 2 measurements.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
Name: | us-gaap_FairValueMeasurementInputsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration