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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of fair value of financial assets and liabilities, including the supporting assumptions and methodologies, and uses independent third-party valuation service providers, broker quotes and internal pricing methodologies to determine fair values. The Company obtains or estimates only one single quote or price for each financial instrument. The Company uses a hierarchical framework for inputs to determine fair value which prioritizes the use of observable inputs and minimizes the use of unobservable inputs. Additionally, the Company categorizes fair value measurements based on the lowest level of input that is considered to be significant to the entire measurement. 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 Consolidated Balance Sheet. NOTE 10. FAIR VALUE MEASUREMENTS (Continued) The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2021 is summarized below. The Company has no material liabilities that are measured and reported at fair value.
DOLLARS IN MILLIONS |  | Fair Value Measurements |  |  |  | Total Fair Value
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 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 132.8 |  |  | $ | 504.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 637.4 |
States and Political Subdivisions |  | — |  |  | 1,890.1 |  |  | — |  |  | — |  |  | 1,890.1 |
Foreign Governments |  | — |  |  | 5.5 |  |  | — |  |  | — |  |  | 5.5 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | — |  |  | 4,150.1 |  |  | 236.8 |  |  | — |  |  | 4,386.9 |
Redeemable Preferred Stocks |  | — |  |  | 1.3 |  |  | 6.1 |  |  | — |  |  | 7.4 |
Collateralized Loan Obligations |  | — |  |  | 752.1 |  |  | — |  |  | — |  |  | 752.1 |
Other Mortgage- and Asset-backed |  | — |  |  | 300.5 |  |  | 7.0 |  |  | — |  |  | 307.5 |
Total Investments in Fixed Maturities |  | 132.8 |  |  | 7,604.2 |  |  | 249.9 |  |  | — |  |  | 7,986.9 |
Equity Securities at Fair Value: |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | — |  |  | 34.2 |  |  | — |  |  | — |  |  | 34.2 |
Other Industries |  | — |  |  | 16.1 |  |  | 1.5 |  |  | — |  |  | 17.6 |
Common Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 18.9 |  |  | — |  |  | — |  |  | — |  |  | 18.9 |
Other Industries |  | 2.9 |  |  | — |  |  | — |  |  | — |  |  | 2.9 |
Other Equity Interests: |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 432.0 |  |  | — |  |  | — |  |  | — |  |  | 432.0 |
Limited Liability Companies and Limited Partnerships |  | — |  |  | — |  |  | — |  |  | 325.0 |  |  | 325.0 |
Total Investments in Equity Securities at Fair Value |  | 453.8 |  |  | 50.3 |  |  | 1.5 |  |  | 325.0 |  |  | 830.6 |
Convertible Securities at Fair Value |  | — |  |  | 46.4 |  |  | — |  |  | — |  |  | 46.4 |
Total |  | $ | 586.6 |  |  | $ | 7,700.9 |  |  | $ | 251.4 |  |  | $ | 325.0 |  |  | $ | 8,863.9 |
NOTE 10. FAIR VALUE MEASUREMENTS (Continued) At December 31, 2021, the Company had unfunded commitments to invest an additional $102.3 million in certain limited liability investment companies and limited partnerships that will be included in Other Equity Interests when funded. The valuation of assets measured at fair value in the Company’s Consolidated Balance Sheet at December 31, 2020 is summarized below.
DOLLARS IN MILLIONS |  | Fair Value Measurements |  | Total Fair Value
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 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 134.0 |  |  | $ | 451.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 585.3 |
States and Political Subdivisions |  | — |  |  | 1,589.5 |  |  | — |  |  | — |  |  | 1,589.5 |
Foreign Governments |  | — |  |  | 5.2 |  |  | — |  |  | — |  |  | 5.2 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | — |  |  | 3,992.4 |  |  | 433.0 |  |  | — |  |  | 4,425.4 |
Redeemable Preferred Stocks |  | — |  |  | 1.3 |  |  | 6.2 |  |  | — |  |  | 7.5 |
Collateralized Loan Obligations |  | — |  |  | 767.7 |  |  | — |  |  | — |  |  | 767.7 |
Other Mortgage- and Asset-backed |  | — |  |  | 215.3 |  |  | 10.0 |  |  | — |  |  | 225.3 |
Total Investments in Fixed Maturities |  | 134.0 |  |  | 7,022.7 |  |  | 449.2 |  |  | — |  |  | 7,605.9 |
Equity Securities at Fair Value: |  |  |  |  |  |  |  |  |  |
Preferred Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | — |  |  | 43.7 |  |  | — |  |  | — |  |  | 43.7 |
Other Industries |  | — |  |  | 15.4 |  |  | — |  |  | — |  |  | 15.4 |
Common Stocks: |  |  |  |  |  |  |  |  |  |
Finance, Insurance and Real Estate |  | 8.7 |  |  | 1.7 |  |  | — |  |  | — |  |  | 10.4 |
Other Industries |  | 0.4 |  |  | — |  |  | — |  |  | — |  |  | 0.4 |
Other Equity Interests: |  |  |  |  |  |  |  |  |  |
Exchange Traded Funds |  | 496.4 |  |  | — |  |  | — |  |  | — |  |  | 496.4 |
Limited Liability Companies and Limited Partnerships |  | — |  |  | — |  |  | — |  |  | 292.2 |  |  | 292.2 |
Total Investments in Equity Securities at Fair Value |  | 505.5 |  |  | 60.8 |  |  | — |  |  | 292.2 |  |  | 858.5 |
Convertible Securities at Fair Value |  | — |  |  | 39.9 |  |  | — |  |  | — |  |  | 39.9 |
Total |  | $ | 639.5 |  |  | $ | 7,123.4 |  |  | $ | 449.2 |  |  | $ | 292.2 |  |  | $ | 8,504.3 |
The fair value hierarchy by level is designed to distinguish between inputs that are observable in the marketplace, which are therefore more objective, and those that are unobservable, which are more subjective. This leveling helps to indicate the relative subjectivity and reliability of the fair value measurements. Assets and liabilities reported on the Consolidated Statement of Financial Position at fair value are categorized as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market. •The Company classifies investments in US Treasury Bonds, actively traded exchange traded funds, mutual funds, and public common stock as Level 1 securities. NOTE 10. FAIR VALUE MEASUREMENTS (Continued) Level 2: Observable inputs other than Level 1: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; or (c) valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. •The Company classifies investments in public corporate bonds, states and political subdivisions bonds, collateralized loan obligations, mortgage-backed securities, convertible bonds, majority of preferred stocks and certain private placement bonds and common stock as Level 2 securities. Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities. •The Company classifies investments in certain private placement bonds, private asset backed securities and certain preferred stock as Level 3 securities. The Company uses leading, nationally recognized valuation service providers of market data and analytics to price the vast majority of the Company’s investment portfolio. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed income and other securities for which a fair value has been requested under the terms of our agreements. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial instruments. The valuation models take into account, among other things, market observable information as of the measurement date, as well as the specific attributes of the security being valued including its term, interest rate, credit rating, industry sector, and where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience. For certain equity securities, valuation service providers provide market quotations for completed transactions on the measurement date. In cases where market transactions or other market observable data is limited, the extent to which judgment is applied varies inversely with the availability of market observable information. For most of the Company’s financial assets measured at fair value, all significant inputs are based on or corroborated by market observable data, and significant management judgment does not affect the periodic determination of fair value. Fixed income and equity securities valued using independent valuation service providers are classified as either Level 1 or Level 2 depending on the security type. These service providers utilize evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information when developing prices. Due to most fixed maturity securities trading on less than a daily basis, the service providers’ evaluated pricing applications apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. The Company classifies investments as Level 3 in the fair value hierarchy when specific inputs significant to the fair value estimation models are not market observable. Significant unobservable inputs used by Company include credit profile, credit spread, and resulting market yield, which involve considerable judgment by management. This primarily occurs when fair value is derived using non-binding broker quotes where the inputs have not been corroborated to be market observable, or internal valuation estimates that use significant non-market observable inputs. The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments in corporate securities classified as Level 3 at December 31, 2021. NOTE 10. FAIR VALUE MEASUREMENTS (Continued)
DOLLARS IN MILLIONS |  | Unobservable Input |  | Total Fair Value |  | Range of Unobservable Inputs |  | Weighted-average Yield
Investment-grade |  | Market Yield |  | $ | 87.9 |  |  | 2.3 | % | - | 10.3 | % |  | 5.4 | %
Non-investment-grade: |  |  |  |  |  |  |  |  |  |
Senior Debt |  | Market Yield |  | 76.1 |  |  | 5.1 |  | - | 20.2 |  |  | 8.5 |
Junior Debt |  | Market Yield |  | 53.9 |  |  | 6.0 |  | - | 27.5 |  |  | 15.0 |
Other |  | Various |  | 32.0 |  |  |  |  |  |  |
Total Level 3 Fixed Maturity Investments |  |  |  | $ | 249.9 |  |  |  |  |  |  |
The table below presents quantitative information about the significant unobservable inputs utilized by the Company in determining fair values for fixed maturity investments in corporate securities classified as Level 3 at December 31, 2020.
DOLLARS IN MILLIONS |  | Unobservable Input |  | Total Fair Value |  | Range of Unobservable Inputs |  | Weighted-average Yield
Investment-grade |  | Market Yield |  | $ | 246.7 |  |  | 1.4 | % | - | 13.0 | % |  | 3.8 | %
Non-investment-grade: |  |  |  |  |  |  |  |  |  |
Senior Debt |  | Market Yield |  | 111.1 |  |  | 2.4 |  | - | 23.4 |  |  | 9.5 |
Junior Debt |  | Market Yield |  | 64.6 |  |  | 3.1 |  | - | 27.9 |  |  | 13.7 |
Other |  | Various |  | 26.8 |  |  |  |  |  |  |
Total Level 3 Fixed Maturity Investments |  |  |  | $ | 449.2 |  |  |  |  |  |  |
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 for callable securities the fair value increase is generally limited to par, unless security is currently callable at a premium. Information by security type pertaining to the changes in the fair value of the Company’s investments classified as Level 3 for the year ended December 31, 2021 is presented below.
DOLLARS IN MILLIONS |  | Fixed Maturities |  | Equity Securities |  |  |  |
| Corporate Bonds and Notes |  |  |  | Redeemable Preferred Stocks |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |  | Preferred and Common Stocks |  |  |  |  |  | Total
Balance at Beginning of Year |  | $ | 433.0 |  |  |  |  | $ | 6.2 |  |  | $ | — |  |  | $ | 10.0 |  |  | $ | — |  |  |  |  |  |  | $ | 449.2 |
Total Gains (Losses): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in Consolidated Statement of Income |  | 2.8 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | 2.8 |
Included in Other Comprehensive Income (Loss) |  | 1.2 |  |  |  |  | (0.1) |  |  | 0.1 |  |  | (0.5) |  |  | 0.7 |  |  |  |  |  |  | 1.4 |
Purchases |  | 104.6 |  |  |  |  | — |  |  | 17.7 |  |  | 16.2 |  |  | 1.7 |  |  |  |  |  |  | 140.2 |
Settlements |  | — |  |  |  |  | — |  |  | — |  |  | (0.1) |  |  | — |  |  |  |  |  |  | (0.1) |
Sales |  | (128.1) |  |  |  |  | — |  |  | (10.0) |  |  | (0.2) |  |  | — |  |  |  |  |  |  | (138.3) |
Transfers into Level 3 |  | 8.1 |  |  |  |  | — |  |  | 10.0 |  |  | — |  |  | 1.7 |  |  |  |  |  |  | 19.8 |
Transfers out of Level 3 |  | (184.8) |  |  |  |  | — |  |  | (17.8) |  |  | (18.4) |  |  | (2.6) |  |  |  |  |  |  | (223.6) |
Balance at End of Year |  | $ | 236.8 |  |  |  |  | $ | 6.1 |  |  | $ | — |  |  | $ | 7.0 |  |  | $ | 1.5 |  |  |  |  |  |  | $ | 251.4 |
The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. NOTE 10. 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 year ended December 31, 2020 is presented below.
DOLLARS IN MILLIONS |  | Fixed Maturities |  | Total
Corporate Bonds and Notes |  | States and Political Sub-divisions |  | Redeemable Preferred Stocks |  | Collateralized Loan Obligations |  | Other Mortgage- and Asset- backed |
Balance at Beginning of Year |  | $ | 409.1 |  |  | $ | — |  |  | $ | 6.7 |  |  | $ | 618.2 |  |  | $ | 10.2 |  |  | $ | 1,044.2 |
Total Gains (Losses): |  |  |  |  |  |  |  |  |  |  |  |
Included in Consolidated Statement of Income |  | (9.0) |  |  | — |  |  | — |  |  | (0.3) |  |  | — |  |  | (9.3) |
Included in Other Comprehensive Income (Loss) |  | 3.2 |  |  | 0.1 |  |  | 0.5 |  |  | (9.3) |  |  | 0.4 |  |  | (5.1) |
Purchases |  | 185.9 |  |  | 0.6 |  |  | 0.2 |  |  | 53.5 |  |  | — |  |  | 240.2 |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | (0.1) |  |  | (0.1) |
Sales |  | (165.2) |  |  | — |  |  | — |  |  | (26.4) |  |  | (0.5) |  |  | (192.1) |
Transfers into Level 3 |  | 9.0 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9.0 |
Transfers out of Level 3 |  | — |  |  | (0.7) |  |  | (1.2) |  |  | (635.7) |  |  | — |  |  | (637.6) |
Balance at End of Year |  | $ | 433.0 |  |  | $ | — |  |  | $ | 6.2 |  |  | $ | — |  |  | $ | 10.0 |  |  | $ | 449.2 |
The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.
|  | December 31, 2021 |  | December 31, 2020
(Dollars in Millions) |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial Assets: |  |  |  |  |  |  |  |
Loans to Policyholders |  | $ | 286.2 |  |  | $ | 286.2 |  |  | $ | 297.9 |  |  | $ | 297.9 |
Short-term Investments |  | 284.1 |  |  | 284.1 |  |  | 875.4 |  |  | 875.4 |
Mortgage Loans |  | 96.8 |  |  | 96.8 |  |  | 54.6 |  |  | 54.6 |
Company-Owned Life Insurance |  | 448.1 |  | 448.1 |  | 327.4 |  | 327.4
Equity Securities at Modified Cost |  | 32.3 |  | 32.3 |  | 40.1 |  | 40.1
Financial Liabilities: |  |  |  |  |  |  |  |
Long-term Debt, Current and Non-current |  | $ | 1,121.9 |  |  | $ | 1,152.1 |  |  | $ | 1,172.8 |  |  | $ | 1,247.8 |
Policyholder Contract Liabilities |  | 401.9 |  |  | 401.9 |  |  | 407.8 |  |  | 407.8 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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