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Investments | 9 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
Investments | Note 7 - Investments Fixed Maturities The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at September 30, 2022 were:
|  | Amortized Cost |  | Gross Unrealized |  | Allowance for Expected Credit Losses |  | Fair Value
(Dollars in Millions) |  | Gains |  | Losses
U.S. Government and Government Agencies and Authorities |  | $ | 612.7 |  |  | $ | 1.3 |  |  | $ | (87.2) |  |  | $ | — |  |  | $ | 526.8 |
States and Political Subdivisions |  | 1,810.0 |  |  | 8.9 |  |  | (266.4) |  |  | (0.4) |  |  | 1,552.1 |
Foreign Governments |  | 4.8 |  |  | — |  |  | (1.1) |  |  | — |  |  | 3.7 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 3,913.9 |  |  | 10.5 |  |  | (575.8) |  |  | (7.1) |  |  | 3,341.5 |
Redeemable Preferred Stocks |  | 9.0 |  |  | — |  |  | (1.0) |  |  | — |  |  | 8.0 |
Collateralized Loan Obligations |  | 1,006.9 |  |  | — |  |  | (54.3) |  |  | — |  |  | 952.6 |
Other Mortgage- and Asset-backed |  | 339.1 |  |  | 0.8 |  |  | (45.5) |  |  | — |  |  | 294.4 |
Investments in Fixed Maturities (1) |  | $ | 7,696.4 |  |  | $ | 21.5 |  |  | $ | (1,031.3) |  |  | $ | (7.5) |  |  | $ | 6,679.1 |
(1) Includes securities classified as Held-for-Sale Assets on the Condensed Consolidated Balance Sheets. See Note 4, “Dispositions,” for more information.
The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at December 31, 2021 were:
|  | Amortized Cost |  | Gross Unrealized |  | Allowance for Expected Credit Losses |  | Fair Value
(Dollars in Millions) |  | Gains |  | Losses |  |
U.S. Government and Government Agencies and Authorities |  | $ | 610.1 |  |  | $ | 29.2 |  |  | $ | (1.9) |  |  | $ | — |  |  | $ | 637.4 |
States and Political Subdivisions |  | 1,752.5 |  |  | 144.6 |  |  | (7.0) |  |  | — |  |  | 1,890.1 |
Foreign Governments |  | 6.7 |  |  | — |  |  | (1.2) |  |  | — |  |  | 5.5 |
Corporate Securities: |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 3,929.0 |  |  | 481.4 |  |  | (16.0) |  |  | (7.5) |  |  | 4,386.9 |
Redeemable Preferred Stocks |  | 7.0 |  |  | 0.4 |  |  | — |  |  | — |  |  | 7.4 |
Collateralized Loan Obligations |  | 756.0 |  |  | 0.9 |  |  | (4.8) |  |  | — |  |  | 752.1 |
Other Mortgage- and Asset-backed |  | 296.9 |  |  | 12.4 |  |  | (1.8) |  |  | — |  |  | 307.5 |
Investments in Fixed Maturities |  | $ | 7,358.2 |  |  | $ | 668.9 |  |  | $ | (32.7) |  |  | $ | (7.5) |  |  | $ | 7,986.9 |
Other Receivables included $5.7 million and $0.6 million of unsettled sales of Investments in Fixed Maturities at September 30, 2022 and December 31, 2021, respectively. Accrued Expenses and Other Liabilities included unsettled purchases of Investments in Fixed Maturities of $7.6 million and $12.7 million at September 30, 2022 and December 31, 2021, respectively. Note 7 - Investments (Continued) The amortized cost and estimated fair values of the Company’s Investments in Fixed Maturities at September 30, 2022 by contractual maturity were:
(Dollars in Millions) |  | Amortized Cost |  | Fair Value
Due in One Year or Less |  | $ | 192.3 |  |  | $ | 188.5 |
Due after One Year to Five Years |  | 937.6 |  |  | 893.3 |
Due after Five Years to Ten Years |  | 1,339.7 |  |  | 1,156.2 |
Due after Ten Years |  | 3,407.5 |  |  | 2,797.4 |
Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date |  | 1,819.3 |  |  | 1,643.7 |
Investments in Fixed Maturities (1) |  | $ | 7,696.4 |  |  | $ | 6,679.1 |
(1) Includes securities classified as Held-for-Sale Assets on the Condensed Consolidated Balance Sheets. See Note 4, “Dispositions,” for more information.
The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at September 30, 2022 consisted of securities issued by the Government National Mortgage Association with a fair value of $251.4 million, securities issued by the Federal National Mortgage Association with a fair value of $77.0 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $68.3 million, and securities issued by other non-governmental issuers with a fair value of $1,247.0 million. An aging of unrealized losses on the Company’s Investments in Fixed Maturities at September 30, 2022 is presented below.
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in Millions) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 427.0 |  |  | $ | (79.0) |  |  | $ | 33.3 |  |  | $ | (8.2) |  |  | $ | 460.3 |  |  | $ | (87.2) |
States and Political Subdivisions |  | 1,095.5 |  |  | (221.7) |  |  | 123.5 |  |  | (44.7) |  |  | 1,219.0 |  |  | (266.4) |
Foreign Governments |  | 1.9 |  |  | (0.1) |  |  | 1.8 |  |  | (1.0) |  |  | 3.7 |  |  | (1.1) |
Corporate Securities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 2,903.1 |  |  | (507.2) |  |  | 250.5 |  |  | (68.6) |  |  | 3,153.6 |  |  | (575.8) |
Redeemable Preferred Stocks |  | 7.7 |  |  | (1.0) |  |  | — |  |  | — |  |  | 7.7 |  |  | (1.0) |
Collateralized Loan Obligations |  | 689.2 |  |  | (38.4) |  |  | 261.4 |  |  | (15.9) |  |  | 950.6 |  |  | (54.3) |
Other Mortgage- and Asset-backed |  | 228.3 |  |  | (32.4) |  |  | 61.2 |  |  | (13.1) |  |  | 289.5 |  |  | (45.5) |
Total Fixed Maturities (1) |  | $ | 5,352.7 |  |  | $ | (879.8) |  |  | $ | 731.7 |  |  | $ | (151.5) |  |  | $ | 6,084.4 |  |  | $ | (1,031.3) |
(1) Includes securities classified as Held-for-Sale Assets on the Condensed Consolidated Balance Sheets. See Note 4, “Dispositions,” for more information.
Investment-grade fixed maturity investments comprised $998.2 million and below-investment-grade fixed maturity investments comprised $33.1 million of the unrealized losses on investments in fixed maturities at September 30, 2022. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 11% of the amortized cost basis of the investment. Note 7 - Investments (Continued) An aging of unrealized losses on the Company’s Investments in Fixed Maturities at December 31, 2021 is presented below.
|  | Less Than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in Millions) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
Fixed Maturities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and Government Agencies and Authorities |  | $ | 168.7 |  |  | $ | (1.8) |  |  | $ | 1.2 |  |  | $ | (0.1) |  |  | $ | 169.9 |  |  | $ | (1.9) |
States and Political Subdivisions |  | 385.0 |  |  | (6.9) |  |  | 1.5 |  |  | (0.1) |  |  | 386.5 |  |  | (7.0) |
Foreign Governments |  | 2.2 |  |  | (0.6) |  |  | 2.6 |  |  | (0.6) |  |  | 4.8 |  |  | (1.2) |
Corporate Securities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds and Notes |  | 596.8 |  |  | (13.1) |  |  | 49.3 |  |  | (2.9) |  |  | 646.1 |  |  | (16.0) |
Redeemable Preferred Stocks |  | 0.1 |  |  | — |  |  | — |  |  | — |  |  | 0.1 |  |  | — |
Collateralized Loan Obligations |  | 250.9 |  |  | (2.6) |  |  | 192.6 |  |  | (2.2) |  |  | 443.5 |  |  | (4.8) |
Other Mortgage- and Asset-backed |  | 100.1 |  |  | (1.8) |  |  | — |  |  | — |  |  | 100.1 |  |  | (1.8) |
Total Fixed Maturities |  | $ | 1,503.8 |  |  | $ | (26.8) |  |  | $ | 247.2 |  |  | $ | (5.9) |  |  | $ | 1,751.0 |  |  | $ | (32.7) |
Investment-grade fixed maturity investments comprised $23.7 million and below-investment-grade fixed maturity investments comprised $9.0 million of the unrealized losses on investments in fixed maturities at December 31, 2021. For below-investment-grade fixed maturity investments in an unrealized loss position, the unrealized loss amount, on average, was approximately 4% of the amortized cost basis of the investment. At September 30, 2022 and December 31, 2021, the Company did not have the intent to sell these investments, and it was not more likely than not that the Company would be required to sell these investments before an anticipated recovery of value. The Company evaluated these investments for credit losses at September 30, 2022 and December 31, 2021. The Company considers many factors in evaluating whether the unrealized losses were credit related including, but not limited to, the extent to which the fair value has been less than amortized cost, conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the issuer’s ability to make contractual cashflows, defaults or other collectability concerns related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affect the investment’s expected performance. The Company determined that the unrealized losses on these securities were due to non-credit related factors at the evaluation date. Fixed Maturities - Expected Credit Losses The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security type for nine months ended September 30, 2022.
|  | States and Political Subdivisions |  |  |  | Corporate Bonds and Notes |  |  |  | Total
(Dollars in Millions)
Beginning of the Year |  | $ | — |  |  |  |  | $ | 7.5 |  |  |  |  | $ | 7.5 |
Additions for Securities for which No Previous Expected Credit Losses were Recognized |  | 0.4 |  |  |  |  | 5.2 |  |  |  |  | 5.6 |
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized |  | — |  |  |  |  | 5.1 |  |  |  |  | 5.1 |
Write-offs Charged Against Allowance |  | — |  |  |  |  | (10.7) |  |  |  |  | (10.7) |
End of the Period |  | $ | 0.4 |  |  |  |  | $ | 7.1 |  |  |  |  | $ | 7.5 |
Note 7 - Investments (Continued) The following table sets forth the change in allowance for credit losses on fixed maturities available-for-sale by major security type for the nine months ended September 30, 2021.
|  |  |  | Foreign Governments |  | Corporate Bonds and Notes |  |  |  | Total
(Dollars in Millions)
Beginning of the Year |  |  |  | $ | 0.3 |  |  | $ | 3.0 |  |  |  |  | $ | 3.3 |
Additions for Securities for which No Previous Expected Credit Losses were Recognized |  |  |  | — |  |  | 2.2 |  |  |  |  | 2.2 |
Net Increase (Decrease) in Allowance on Securities for which Expected Credit Losses were Previously Recognized |  |  |  | (0.3) |  |  | (0.6) |  |  |  |  | (0.9) |
Write-offs Charged Against Allowance |  |  |  | — |  |  | (0.2) |  |  |  |  | (0.2) |
End of the Period |  |  |  | $ | — |  |  | $ | 4.4 |  |  |  |  | $ | 4.4 |
Equity Securities at Fair Value Investments in Equity Securities at Fair Value were $322.7 million and $830.6 million at September 30, 2022 and December 31, 2021, respectively. Net unrealized losses arising during the nine months ended September 30, 2022 and recognized in earnings, related to such investments still held as of September 30, 2022, were $24.4 million. There were no unsettled purchases of Investments in Equity Securities at Fair Value at September 30, 2022. There were $2.7 million of unsettled purchases of Investments in Equity Securities at Fair Value at December 31, 2021. There were no unsettled sales of Investments in Equity Securities at Fair Value at September 30, 2022 and December 31, 2021, respectively. Equity Method Limited Liability Investments Equity Method Limited Liability Investments include investments in limited liability investment companies and limited partnerships in which the Company’s interests are not deemed minor and are accounted for under the equity method of accounting. The Company’s investments in Equity Method Limited Liability Investments are generally of a passive nature in that the Company does not take an active role in the management of the investment entity. The Company’s maximum exposure to loss at September 30, 2022 is limited to the total carrying value of $226.0 million. In addition, the Company had outstanding commitments totaling approximately $83.7 million to fund Equity Method Limited Liability Investments at September 30, 2022. At September 30, 2022, 4.7% of Equity Method Limited Liability Investments were reported without a reporting lag. Of the total carrying value, 0.2% was reported with a one month lag and the remainder was reported with more than a one month lag. There were $1.0 million unsettled purchases of Equity Method Limited Liability Investments at September 30, 2022. There were no unsettled purchases of Equity Method Limited Liability Investments at December 31, 2021. There were $27.8 million and $1.2 million unsettled sales of Equity Method Limited Liability Investments at September 30, 2022 and December 31, 2021, respectively. Alternative Energy Partnership Investments Alternative Energy Partnership Investments include partnerships formed to invest in newly installed residential solar leases and power purchase agreements. As a result of this investment, the Company has the right to certain investment tax credits and tax depreciation benefits, and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. The Hypothetical Liquidation at Book Value (“HLBV”) equity method of accounting is used for the Company’s investments in Alternative Energy Partnership Investments. Alternative Energy Partnership Investments are reported on a three month lag. The Company’s maximum exposure to loss at September 30, 2022 is limited to the total carrying value of $16.9 million. The Company has no outstanding commitments to fund Alternative Energy Partnership Investments as of September 30, 2022. Note 7 - Investments (Continued) Company-Owned Life Insurance The Company has purchased life insurance policies on certain key employees. Company-Owned Life Insurance (“COLI”) is recorded at the amount that can be realized under the insurance contract, which is the cash surrender value. The carrying values of the Company’s COLI investment at September 30, 2022 and December 31, 2021 was $578.6 million and $448.1 million, respectively. Loans to Policyholders Loans to Policyholders represents funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in “Net investment income” at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies. The carrying values of the Company’s Loans to Policyholders at Unpaid Principal investment at September 30, 2022 and December 31, 2021 was $283.9 million and $286.2 million, respectively. The September 30, 2022 Loans to Policyholders at Unpaid Principal balance includes $0.7 million of Loans to Policyholders classified as Held-for-Sale Assets on the Condensed Consolidated Balance Sheets. See Note 4, “Dispositions,” for more information. Other Investments The carrying values of the Company’s Other Investments at September 30, 2022 and December 31, 2021 were:
(Dollars in Millions) |  | Sep 30, 2022 |  | Dec 31, 2021
Equity Securities at Modified Cost |  | $ | 37.0 |  |  | $ | 32.3 |
Convertible Securities at Fair Value |  | 42.6 |  |  | 46.4 |
Real Estate at Depreciated Cost |  | 94.3 |  |  | 94.0 |
Mortgage Loans |  | 98.7 |  |  | 96.8 |
Other |  | 1.6 |  |  | 0.5 |
Total |  | $ | 274.2 |  |  | $ | 270.0 |
Investments in Equity Securities at Modified Cost were $37.0 million and $32.3 million at September 30, 2022 and December 31, 2021, respectively. The Company performs a qualitative impairment analysis on a quarterly basis consisting of various factors such as earnings performance, current market conditions, changes in credit ratings, changes in the regulatory environment and other factors. If the qualitative analysis identifies the presence of impairment indicators, the Company estimates the fair value of the investment. If the estimated fair value is below the carrying value, the Company records an impairment in the Condensed Consolidated Statement of Income to reduce the carrying value to the estimated fair value. When the Company identifies observable transactions of the same or similar securities to those held by the Company, the Company increases or decreases the carrying value to the observable transaction price. The Company did not recognize any changes in carrying value due to observable transactions for the nine months ended September 30, 2022. The Company did not recognize any impairment on Equity Securities at Modified Cost for nine months ended September 30, 2022 as a result of the Company’s impairment analysis. The Company recognized no cumulative increases or decreases in the carrying value due to observable transactions and $9.6 million of cumulative impairments on Equity Securities at Modified Cost held as of September 30, 2022. Note 7 - Investments (Continued) Net Investment Income Net Investment Income for the nine and three months ended September 30, 2022 and 2021 was:
|  | Nine Months Ended |  | Three Months Ended
(Dollars in Millions) |  | Sep 30, 2022 |  | Sep 30, 2021 |  | Sep 30, 2022 |  | Sep 30, 2021
Investment Income: |  |  |  |  |  |  |  |
Interest on Fixed Income Securities |  | $ | 218.4 |  |  | $ | 207.1 |  |  | $ | 76.9 |  |  | $ | 68.4 |
Dividends on Equity Securities Excluding Alternative Investments |  | 4.3 |  |  | 9.8 |  |  | 1.1 |  |  | 2.9 |
Alternative Investments: |  |  |  |  |  |  |  |
Equity Method Limited Liability Investments |  | 28.0 |  |  | 50.9 |  |  | (0.6) |  |  | 12.0 |
Limited Liability Investments Included in Equity Securities |  | 34.9 |  |  | 29.3 |  |  | 8.8 |  |  | 9.5 |
Total Alternative Investments |  | 62.9 |  |  | 80.2 |  |  | 8.2 |  |  | 21.5 |
Short-term Investments |  | 1.4 |  |  | 0.6 |  |  | 1.1 |  |  | 0.2 |
Loans to Policyholders |  | 16.3 |  |  | 16.3 |  |  | 5.5 |  |  | 5.4 |
Real Estate |  | 7.6 |  |  | 7.1 |  |  | 3.1 |  |  | 2.3 |
Company-Owned Life Insurance |  | 28.0 |  |  | 18.3 |  |  | 9.9 |  |  | 7.2 |
Other |  | 5.1 |  |  | 4.8 |  |  | 1.7 |  |  | 1.9 |
Total Investment Income |  | 344.0 |  |  | 344.2 |  |  | 107.5 |  |  | 109.8 |
Investment Expenses: |  |  |  |  |  |  |  |
Real Estate |  | 5.8 |  |  | 6.8 |  |  | 2.3 |  |  | 2.6 |
Other Investment Expenses |  | 21.9 |  |  | 18.5 |  |  | 7.4 |  |  | 5.3 |
Total Investment Expenses |  | 27.7 |  |  | 25.3 |  |  | 9.7 |  |  | 7.9 |
Net Investment Income |  | $ | 316.3 |  |  | $ | 318.9 |  |  | $ | 97.8 |  |  | $ | 101.9 |
Gross gains and losses on sales of investments in fixed maturities for the nine and three months ended September 30, 2022 and 2021 were:
|  | Nine Months Ended |  | Three Months Ended
(Dollars in Millions) |  | Sep 30, 2022 |  | Sep 30, 2021 |  | Sep 30, 2022 |  | Sep 30, 2021
Fixed Maturities: |  |  |  |  |  |  |  |
Gains on Sales |  | $ | 28.0 |  |  | $ | 42.7 |  |  | $ | 14.2 |  |  | $ | 10.3 |
Losses on Sales |  | (27.5) |  |  | (1.7) |  |  | (23.9) |  |  | (0.4) |
Gains (Losses) on Hedging Activity |  | — |  |  | — |  |  | (0.3) |  |  | — |

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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