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Investments (Tables) | 3 Months Ended
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Mar. 31, 2021
Investments, Debt and Equity Securities [Abstract] |
Components of net investment income | The components of net investment income for the following periods were as follows:
($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2021 |  | 2020
Fixed maturity securities |  |  |  |  |  | $ | 58.0 |  |  | $ | 59.4 |
Equity securities |  |  |  |  |  | 1.1 |  |  | 1.2 |
Limited partnership interests |  |  |  |  |  | 11.3 |  |  | (2.7) |
Short-term and other investments |  |  |  |  |  | 2.8 |  |  | 2.9 |
Investment expenses |  |  |  |  |  | (2.1) |  |  | (2.2) |
Net investment income - investment portfolio |  |  |  |  |  | 71.1 |  |  | 58.6 |
Investment income - deposit asset on reinsurance |  |  |  |  |  | 24.4 |  |  | 23.7 |
Total net investment income |  |  |  |  |  | $ | 95.5 |  |  | $ | 82.3 |
Schedule of net investment gains (losses) | Net investment gains (losses) for the following periods were as follows:
($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2021 |  | 2020
Fixed maturity securities |  |  |  |  |  | $ | (5.4) |  |  | $ | 1.1 |
Equity securities |  |  |  |  |  | (2.7) |  |  | (14.7) |
Short-term investments and other |  |  |  |  |  | (0.9) |  |  | (4.9) |
Net investment losses |  |  |  |  |  | $ | (9.0) |  |  | $ | (18.5) |
The following table reconciles net investment gains (losses) by transaction type:
($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2021 |  | 2020
Credit loss impairments(1) |  |  |  |  |  | $ | (1.1) |  |  | $ | — |
Intent-to-sell impairments |  |  |  |  |  | (2.1) |  |  | (3.7) |
Total impairments on investments recognized in net income |  |  |  |  |  | (3.2) |  |  | (3.7) |
Sales and other, net |  |  |  |  |  | (2.1) |  |  | 4.5 |
Change in fair value - equity securities |  |  |  |  |  | (2.8) |  |  | (14.5) |
Change in fair value and gains (losses) realized on settlements - derivatives |  |  |  |  |  | (0.9) |  |  | (4.8) |
Net investment losses |  |  |  |  |  | $ | (9.0) |  |  | $ | (18.5) |
(1) For the three months ended March 31, 2021, the Company recognized a valuation allowance of $1.1 million for credit loss impairments with respect to fixed maturity securities available for sale.
Unrealized gains and losses on fixed maturities and equity securities | Amortized cost, net, gross unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in millions) |  | Amortized Cost, net |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
March 31, 2021 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 627.1 |  |  | $ | 52.9 |  |  | $ | 1.7 |  |  | $ | 678.3 |
Other, including U.S. Treasury securities |  | 444.2 |  |  | 25.4 |  |  | 11.3 |  |  | 458.3 |
Municipal bonds |  | 1,609.9 |  |  | 161.7 |  |  | 3.5 |  |  | 1,768.1 |
Foreign government bonds |  | 40.1 |  |  | 4.4 |  |  | — |  |  | 44.5 |
Corporate bonds |  | 2,063.6 |  |  | 148.6 |  |  | 18.0 |  |  | 2,194.2 |
Other asset-backed securities |  | 1,207.8 |  |  | 19.2 |  |  | 14.1 |  |  | 1,212.9 |
Totals |  | $ | 5,992.7 |  |  | $ | 412.2 |  |  | $ | 48.6 |  |  | $ | 6,356.3 |
December 31, 2020 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 605.5 |  |  | $ | 79.6 |  |  | $ | 0.3 |  |  | $ | 684.8 |
Other, including U.S. Treasury securities |  | 395.0 |  |  | 39.2 |  |  | 1.0 |  |  | 433.2 |
Municipal bonds |  | 1,612.3 |  |  | 215.7 |  |  | 0.5 |  |  | 1,827.5 |
Foreign government bonds |  | 40.2 |  |  | 4.9 |  |  | — |  |  | 45.1 |
Corporate bonds |  | 1,905.2 |  |  | 221.6 |  |  | 3.9 |  |  | 2,122.9 |
Other asset-backed securities |  | 1,230.4 |  |  | 24.1 |  |  | 22.7 |  |  | 1,231.8 |
Totals |  | $ | 5,788.6 |  |  | $ | 585.1 |  |  | $ | 28.4 |  |  | $ | 6,345.3 |
(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $373.3 million and $387.1 million; Federal Home Loan Mortgage Corporation (FHLMC) of $333.6 million and $344.3 million; and Government National Mortgage Association (GNMA) of $125.7 million and $132.3 million as of March 31, 2021 and December 31, 2020, respectively.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position | The following table presents the fair value and gross unrealized losses for fixed maturity securities in an unrealized loss position at March 31, 2021 and December 31, 2020, respectively. The Company views the decrease in fair value of all of the fixed maturity securities with unrealized losses at March 31, 2021 — which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition — as temporary. As of March 31, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell the fixed maturity securities with unrealized losses before an anticipated recovery in value. Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any impairments as of March 31, 2021.
($ in millions) |  | 12 Months or Less |  | More than 12 Months |  | Total
|  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 24.0 |  |  | $ | 1.5 |  |  | $ | 3.1 |  |  | $ | 0.2 |  |  | $ | 27.1 |  |  | $ | 1.7 |
Other |  | 172.4 |  |  | 11.3 |  |  | — |  |  | — |  |  | 172.4 |  |  | 11.3 |
Municipal bonds |  | 126.5 |  |  | 3.4 |  |  | 5.4 |  |  | 0.1 |  |  | 131.9 |  |  | 3.5 |
Foreign government bonds |  | 0.5 |  |  | — |  |  | — |  |  | — |  |  | 0.5 |  |  | — |
Corporate bonds |  | 382.1 |  |  | 16.4 |  |  | 47.1 |  |  | 1.6 |  |  | 429.2 |  |  | 18.0 |
Other asset-backed securities |  | 137.1 |  |  | 1.3 |  |  | 359.4 |  |  | 12.8 |  |  | 496.5 |  |  | 14.1 |
Total |  | $ | 842.6 |  |  | $ | 33.9 |  |  | $ | 415.0 |  |  | $ | 14.7 |  |  | $ | 1,257.6 |  |  | $ | 48.6 |
Number of positions with a gross unrealized loss |  | 548 |  |  |  |  | 200 |  |  |  |  | 748 |  |  |
Fair value as a percentage of total fixed maturity securities at fair value |  | 13.3 | % |  |  |  | 6.5 | % |  |  |  | 19.8 | % |  |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 4.9 |  |  | $ | 0.1 |  |  | $ | 2.6 |  |  | $ | 0.2 |  |  | $ | 7.5 |  |  | $ | 0.3 |
Other |  | 95.9 |  |  | 1.0 |  |  | — |  |  | — |  |  | 95.9 |  |  | 1.0 |
Municipal bonds |  | 18.1 |  |  | 0.5 |  |  | — |  |  | — |  |  | 18.1 |  |  | 0.5 |
Foreign government bonds |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | 126.6 |  |  | 3.7 |  |  | 10.9 |  |  | 0.2 |  |  | 137.5 |  |  | 3.9 |
Other asset-backed securities |  | 316.9 |  |  | 17.2 |  |  | 409.3 |  |  | 5.5 |  |  | 726.2 |  |  | 22.7 |
Total |  | $ | 562.4 |  |  | $ | 22.5 |  |  | $ | 422.8 |  |  | $ | 5.9 |  |  | $ | 985.2 |  |  | $ | 28.4 |
Number of positions with a gross unrealized loss |  | 308 |  |  |  |  | 123 |  |  |  |  | 431 |  |  |
Fair value as a percentage of total fixed maturity securities at fair value |  | 8.9 | % |  |  |  | 6.7 | % |  |  |  | 15.6 | % |  |
Distribution of the company's fixed maturity portfolio by estimated expected maturity | The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in millions) |  | Percent of Total Fair Value |  | March 31, 2021
|  | March 31, 2021 |  | December 31, 2020 |  | Fair Value |  | Amortized Cost, net
Estimated expected maturity: |  |  |  |  |  |  |  |
Due in 1 year or less |  | 4.1 | % |  | 4.0 | % |  | $ | 261.3 |  |  | $ | 255.5 |
Due after 1 year through 5 years |  | 28.2 | % |  | 28.3 | % |  | 1,789.8 |  |  | 1,713.5 |
Due after 5 years through 10 years |  | 28.3 | % |  | 28.0 | % |  | 1,799.7 |  |  | 1,669.5 |
Due after 10 years through 20 years |  | 24.0 | % |  | 24.6 | % |  | 1,523.5 |  |  | 1,412.2 |
Due after 20 years |  | 15.4 | % |  | 15.1 | % |  | 982.0 |  |  | 942.0 |
Total |  | 100.0 | % |  | 100.0 | % |  | $ | 6,356.3 |  |  | $ | 5,992.7 |
Average option-adjusted duration, in years |  | 6.6 |  | 6.4 |  |  |  |
Proceeds received from sales of fixed maturities and equity securities | Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were as follows:
($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2021 |  | 2020
Fixed maturity securities |  |  |  |  |  |  |  |
Proceeds received |  |  |  |  |  | $ | 95.5 |  |  | $ | 98.2 |
Gross gains realized |  |  |  |  |  | 1.2 |  |  | 4.8 |
Gross losses realized |  |  |  |  |  | (3.4) |  |  | (0.3) |
Equity securities |  |  |  |  |  |  |  |
Proceeds received |  |  |  |  |  | $ | 0.4 |  |  | $ | 1.5 |
Gross gains realized |  |  |  |  |  | 0.1 |  |  | 0.3 |
Gross losses realized |  |  |  |  |  | — |  |  | (0.6) |
Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities | The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in accumulated other comprehensive income (AOCI), before the impact of DAC:
($ in millions) |  |  |  | Three Months Ended March 31,
|  |  |  |  |  | 2021 |  | 2020
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |  |  |
Beginning of period |  |  |  |  |  | $ | 439.8 |  |  | $ | 264.4 |
Change in net unrealized investment gains (losses) on fixed maturity securities |  |  |  |  |  | (159.0) |  |  | (103.8) |
Reclassification of net investment (gains) losses on securities to net income |  |  |  |  |  | 6.4 |  |  | (10.7) |
End of period |  |  |  |  |  | $ | 287.2 |  |  | $ | 149.9 |
Schedule of carrying amounts of equity method limited partnership interests | The carrying amounts of equity method limited partnership interests were as follows:
($ in millions) |  | March 31, |  | December 31,
|  | 2021 |  | 2020
Senior commercial mortgage loan funds |  | $ | 197.3 |  |  | $ | 149.6 |
Hedge funds |  | 62.6 |  |  | 63.2 |
Infrastructure debt funds |  | 58.4 |  |  | 58.3 |
Infrastructure equity funds |  | 56.2 |  |  | 52.1 |
Other(1) |  | 130.7 |  |  | 125.8 |
Total |  | $ | 505.2 |  |  | $ | 449.0 |
(1)Other consists primarily of limited partnership interests in real estate equity funds, private equity funds and corporate mezzanine funds.
Offsetting assets and liability | The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in millions) |  |  |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |
|  | Gross Amounts |  |  |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 17.5 |  |  | $ | — |  |  | $ | 17.5 |  |  | $ | 14.2 |  |  | $ | 3.3 |  |  | $ | — |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 16.8 |  |  | $ | — |  |  | $ | 16.8 |  |  | $ | 13.7 |  |  | $ | 2.6 |  |  | $ | 0.5 |

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