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Fair Value of Financial Instruments (Tables) | 3 Months Ended
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Mar. 31, 2021
Fair Value Disclosures [Abstract] |
Summary of Company's fair value hierarchy measured at recurring basis | The following table presents the Company's fair value hierarchy for those financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the three months ended March 31, 2021 and 2020, there were no transfers between Level 1 and Level 2. At March 31, 2021, Level 3 invested assets comprised 5.1% of the Company’s total investment portfolio at fair value.
($ in millions) |  |  |  | Fair Value Measurements at
|  | Carrying |  | Fair |  | Reporting Date Using
|  | Amount |  | Value |  | Level 1 |  | Level 2 |  | Level 3
March 31, 2021 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 678.3 |  |  | $ | 678.3 |  |  | $ | — |  |  | $ | 668.0 |  |  | $ | 10.3 |
Other, including U.S. Treasury securities |  | 458.3 |  |  | 458.3 |  |  | 27.1 |  |  | 431.2 |  |  | — |
Municipal bonds |  | 1,768.1 |  |  | 1,768.1 |  |  | — |  |  | 1,709.5 |  |  | 58.6 |
Foreign government bonds |  | 44.5 |  |  | 44.5 |  |  | — |  |  | 44.5 |  |  | — |
Corporate bonds |  | 2,194.2 |  |  | 2,194.2 |  |  | 14.4 |  |  | 2,030.7 |  |  | 149.1 |
Other asset-backed securities |  | 1,212.9 |  |  | 1,212.9 |  |  | — |  |  | 1,091.0 |  |  | 121.9 |
Total fixed maturity securities |  | 6,356.3 |  |  | 6,356.3 |  |  | 41.5 |  |  | 5,974.9 |  |  | 339.9 |
Equity securities |  | 140.0 |  |  | 140.0 |  |  | 38.1 |  |  | 101.6 |  |  | 0.3 |
Short-term investments |  | 101.8 |  |  | 101.8 |  |  | 98.7 |  |  | 3.1 |  |  | — |
Other investments |  | 42.8 |  |  | 42.8 |  |  | — |  |  | 42.8 |  |  | — |
Totals |  | $ | 6,640.9 |  |  | $ | 6,640.9 |  |  | $ | 178.3 |  |  | $ | 6,122.4 |  |  | $ | 340.2 |
Separate Account (variable annuity) assets(1) |  | $ | 3,052.9 |  |  | $ | 3,052.9 |  |  | $ | 3,052.9 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, embedded derivatives |  | $ | 2.7 |  |  | $ | 2.7 |  |  | $ | — |  |  | $ | 2.7 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 107.6 |  |  | $ | 107.6 |  |  | $ | — |  |  | $ | — |  |  | $ | 107.6 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 684.8 |  |  | $ | 684.8 |  |  | $ | — |  |  | $ | 673.7 |  |  | $ | 11.1 |
Other, including U.S. Treasury securities |  | 433.1 |  |  | 433.1 |  |  | 18.3 |  |  | 414.8 |  |  | — |
Municipal bonds |  | 1,827.5 |  |  | 1,827.5 |  |  | — |  |  | 1,767.9 |  |  | 59.6 |
Foreign government bonds |  | 45.1 |  |  | 45.1 |  |  | — |  |  | 45.1 |  |  | — |
Corporate bonds |  | 2,122.9 |  |  | 2,122.9 |  |  | 14.9 |  |  | 1,952.2 |  |  | 155.8 |
Other asset-backed securities |  | 1,231.9 |  |  | 1,231.9 |  |  | — |  |  | 1,103.6 |  |  | 128.3 |
Total fixed maturity securities |  | 6,345.3 |  |  | 6,345.3 |  |  | 33.2 |  |  | 5,957.3 |  |  | 354.8 |
Equity securities |  | 121.6 |  |  | 121.6 |  |  | 39.2 |  |  | 82.1 |  |  | 0.3 |
Short-term investments |  | 141.8 |  |  | 141.8 |  |  | 137.7 |  |  | 4.1 |  |  | — |
Other investments |  | 36.3 |  |  | 36.3 |  |  | — |  |  | 36.3 |  |  | — |
Totals |  | $ | 6,645.0 |  |  | $ | 6,645.0 |  |  | $ | 210.1 |  |  | $ | 6,079.8 |  |  | $ | 355.1 |
Separate Account (variable annuity) assets(1) |  | $ | 2,891.4 |  |  | $ | 2,891.4 |  |  | $ | 2,891.4 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, embedded derivatives |  | $ | 2.5 |  |  | $ | 2.5 |  |  | $ | — |  |  | $ | 2.5 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 104.5 |  |  | $ | 104.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 104.5 |
(1) Separate Account (variable annuity) liabilities are equal to the estimated fair value of the Separate Account (variable annuity) assets.
Schedule of reconciliations for all Level 3 financial assets and financial liabilities measured at fair value on a recurring basis | The reconciliation for all financial assets and financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) was as follows:
($ in millions) |  | Financial Assets |  | Financial Liabilities(1)
|  | Municipal Bonds |  | Corporate Bonds |  | Mortgage-Backed and Other Asset- Backed Securities(2) |  | Total Fixed Maturity Securities |  | Equity Securities |  | Total |  |
Beginning balance, January 1, 2021 |  | $ | 59.6 |  |  | $ | 155.8 |  |  | $ | 139.4 |  |  | $ | 354.8 |  |  | $ | 0.3 |  |  | $ | 355.1 |  |  | $ | 104.5 |
Transfers into Level 3(3) |  | — |  |  | 24.1 |  |  | 3.1 |  |  | 27.2 |  |  | — |  |  | 27.2 |  |  | — |
Transfers out of Level 3(3) |  | — |  |  | (27.3) |  |  | (5.9) |  |  | (33.2) |  |  | — |  |  | (33.2) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4.3 |
Net unrealized investment gains (losses) included in OCI |  | (0.9) |  |  | (2.0) |  |  | (0.3) |  |  | (3.2) |  |  | — |  |  | (3.2) |  |  | — |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.7 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.1) |  |  | (1.5) |  |  | (4.1) |  |  | (5.7) |  |  | — |  |  | (5.7) |  |  | (1.9) |
Ending balance, March 31, 2021 |  | $ | 58.6 |  |  | $ | 149.1 |  |  | $ | 132.2 |  |  | $ | 339.9 |  |  | $ | 0.3 |  |  | $ | 340.2 |  |  | $ | 107.6 |
Beginning balance, January 1, 2020 |  | $ | 44.3 |  |  | $ | 104.0 |  |  | $ | 146.8 |  |  | $ | 295.1 |  |  | $ | 0.1 |  |  | $ | 295.2 |  |  | $ | 93.7 |
Transfers into Level 3(3) |  | 63.7 |  |  | 18.9 |  |  | 22.5 |  |  | 105.1 |  |  | — |  |  | 105.1 |  |  | — |
Transfers out of Level 3(3) |  | — |  |  | (10.1) |  |  | (2.9) |  |  | (13.0) |  |  | — |  |  | (13.0) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5.0) |
Net unrealized investment gains (losses) included in OCI |  | (3.0) |  |  | (5.5) |  |  | (24.4) |  |  | (32.9) |  |  | — |  |  | (32.9) |  |  | — |
Purchases |  | — |  |  | 6.9 |  |  | 1.9 |  |  | 8.8 |  |  | — |  |  | 8.8 |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.3 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.1) |  |  | (2.5) |  |  | (3.4) |  |  | (6.0) |  |  | — |  |  | (6.0) |  |  | (2.5) |
Ending balance, March 31, 2020 |  | $ | 104.9 |  |  | $ | 111.7 |  |  | $ | 140.5 |  |  | $ | 357.1 |  |  | $ | 0.1 |  |  | $ | 357.2 |  |  | $ | 87.5 |
(1)Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets. (2)Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other asset-backed securities. (3)Transfers into and out of Level 3 during the three months ended March 31, 2021 and 2020 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company's policy is to recognize transfers into and out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
Quantitative Information about Level 3 Fair Value Measurements | The following table provides quantitative information about the significant unobservable inputs for recurring fair value measurements categorized within Level 3.
($ in millions)
Financial Assets |  | Fair Value at March 31, 2021 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Municipal bonds |  | $ | 58.6 |  |  | discounted cash flow |  | I spread(2) |  | 307 - 391 bps
Corporate bonds |  | 149.1 |  |  | discounted cash flow |  | N spread(3) |  | 272 - 553 bps
|  |  |  | market comparable |  | option adjusted spread |  | 12.54%
Other asset-backed securities |  | 121.9 |  |  | vendor price |  | haircut |  | 3.00% - 5.00%
|  |  |  | discounted cash flow |  | constant prepayment rate |  | 20.00%
|  |  |  | discounted cash flow |  | T spread(4) |  | 235 - 800 bps
|  |  |  | discounted cash flow |  | PDI interest margin(5) |  | 7.13%
|  |  |  | discounted cash flow |  | SBL interest margin(6) |  | 4.50%
Government mortgage-backed securities |  | 10.3 |  |  | vendor price |  | haircut |  | 3.00% - 5.00%
Equity securities |  | 0.3 |  |  | Black Scholes |  | equity value |  | low - 31.00%; high - 41.00%
($ in millions)
Financial Liabilities |  | Fair Value at March 31, 2021 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Derivatives embedded in fixed indexed annuity products |  | $ | 107.6 |  |  | discounted cash flow |  | lapse rate |  | 5.30%
|  |  |  |  |  | mortality multiplier(7) |  | 63.00%
|  |  |  |  |  | option budget |  | 0.90% - 2.50%
|  |  |  |  |  | non-performance adjustment(8) |  | 5.00%
(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate. (2) "I spread" is the interpolated weighted average life point on the "on the run" (OTR) point of the curve. (3) "N spread" is the interpolated weighted average life point on the swap curve. (4) "T spread" is a specific point on the OTR curve. (5) "PDI" stands for private debt investment. (6) "SBL" stands for broadly syndicated loans. (7) Mortality multiplier is applied to the Annuity 2000 table. (8) Determined as a percentage of a risk-free rate.
Summary of fair value assets and liabilities measured on nonrecurring basis | The following table presents the carrying amount, fair value and fair value hierarchy of these financial assets and financial liabilities.
($ in millions) |  |  |  | Fair Value Measurements at
|  | Carrying |  | Fair |  | Reporting Date Using
|  | Amount |  | Value |  | Level 1 |  | Level 2 |  | Level 3
March 31, 2021 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 167.1 |  |  | $ | 170.8 |  |  | $ | — |  |  | $ | — |  |  | $ | 170.8 |
Deposit asset on reinsurance |  | 2,442.2 |  |  | 2,796.3 |  |  | — |  |  | — |  |  | 2,796.3 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, fixed annuity contracts |  | 4,876.0 |  |  | 4,995.1 |  |  | — |  |  | — |  |  | 4,995.1 |
Investment contract and policy reserves, account values on life contracts |  | 99.9 |  |  | 109.4 |  |  | — |  |  | — |  |  | 109.4 |
Other policyholder funds |  | 777.4 |  |  | 777.4 |  |  | — |  |  | 720.7 |  |  | 56.7 |
Short-term debt |  | 135.0 |  |  | 135.0 |  |  | — |  |  | — |  |  | 135.0 |
Long-term debt |  | 302.4 |  |  | 331.5 |  |  | — |  |  | 331.5 |  |  | — |
December 31, 2020 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 168.3 |  |  | $ | 172.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 172.1 |
Deposit asset on reinsurance |  | 2,420.9 |  |  | 3,030.6 |  |  | — |  |  | — |  |  | 3,030.6 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and policy reserves, fixed annuity contracts |  | 4,847.6 |  |  | 4,963.3 |  |  | — |  |  | — |  |  | 4,963.3 |
Investment contract and policy reserves, account values on life contracts |  | 98.7 |  |  | 108.4 |  |  | — |  |  | — |  |  | 108.4 |
Other policyholder funds |  | 646.8 |  |  | 646.8 |  |  | — |  |  | 590.7 |  |  | 56.1 |
Short-term debt |  | 135.0 |  |  | 135.0 |  |  | — |  |  | — |  |  | 135.0 |
Long-term debt |  | 302.3 |  |  | 331.1 |  |  | — |  |  | 331.1 |  |  | — |

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- Definition Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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