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v3.22.2.2

Investments (Tables) | 9 Months Ended
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Sep. 30, 2022
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 September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Fixed maturity securities |  | $ | 63.9 |  |  | $ | 59.8 |  |  | $ | 184.5 |  |  | $ | 177.2 |
Equity securities |  | 1.8 |  |  | 1.4 |  |  | 7.1 |  |  | 3.8 |
Limited partnership interests |  | 5.1 |  |  | 16.8 |  |  | 31.3 |  |  | 51.1 |
Short-term and other investments |  | 2.8 |  |  | 2.8 |  |  | 8.2 |  |  | 8.5 |
Investment expenses |  | (2.7) |  |  | (2.7) |  |  | (7.8) |  |  | (7.3) |
Net investment income - investment portfolio |  | 70.9 |  |  | 78.1 |  |  | 223.3 |  |  | 233.3 |
Investment income - deposit asset on reinsurance |  | 26.7 |  |  | 25.6 |  |  | 77.4 |  |  | 75.1 |
Total net investment income |  | $ | 97.6 |  |  | $ | 103.7 |  |  | $ | 300.7 |  |  | $ | 308.4 |
Schedule of net investment losses | Net investment losses for the following periods were as follows:
($ in millions) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Fixed maturity securities |  | $ | (10.7) |  |  | $ | (4.0) |  |  | $ | (15.9) |  |  | $ | (7.9) |
Equity securities |  | (4.4) |  |  | (1.0) |  |  | (32.5) |  |  | 0.7 |
Short-term investments and other |  | 2.3 |  |  | (1.5) |  |  | 4.6 |  |  | (3.4) |
Net investment losses |  | $ | (12.8) |  |  | $ | (6.5) |  |  | $ | (43.8) |  |  | $ | (10.6) |
The following table reconciles net investment losses by transaction type:
($ in millions) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Credit loss impairments |  | $ | (0.6) |  |  | $ | (6.6) |  |  | $ | (2.8) |  |  | $ | (7.7) |
Intent-to-sell impairments |  | (6.2) |  |  | — |  |  | (7.6) |  |  | (2.1) |
Total impairments |  | (6.8) |  |  | (6.6) |  |  | (10.4) |  |  | (9.8) |
Sales and other, net |  | (3.9) |  |  | 2.7 |  |  | (3.9) |  |  | 2.2 |
Change in fair value - equity securities |  | (4.4) |  |  | (1.1) |  |  | (34.1) |  |  | 0.4 |
Change in fair value and gains (losses) realized on settlements - derivatives |  | 2.3 |  |  | (1.5) |  |  | 4.6 |  |  | (3.4) |
Net investment losses |  | $ | (12.8) |  |  | $ | (6.5) |  |  | $ | (43.8) |  |  | $ | (10.6) |
Schedule of allowance for credit loss impairments on fixed maturity securities | The following table presents changes in the allowance for credit loss impairments on fixed maturity securities classified as available for sale for the category of other asset-backed securities (no other categories of fixed maturity securities have an allowance for credit loss impairments):
($ in millions) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Beginning balance |  | $ | 9.5 |  |  | $ | 1.1 |  |  | $ | 7.7 |  |  | $ | — |
Credit losses on fixed maturity securities for which credit losses were not previously reported |  | — |  |  | 6.6 |  |  | — |  |  | 7.7 |
Net increase related to credit losses previously reported |  | 0.6 |  |  | — |  |  | 2.8 |  |  | — |
Reduction of credit allowances related to sales |  | — |  |  | — |  |  | — |  |  | — |
Write-offs |  | — |  |  | — |  |  | (0.4) |  |  | — |
Ending balance |  | $ | 10.1 |  |  | $ | 7.7 |  |  | $ | 10.1 |  |  | $ | 7.7 |
Schedule of available-for-sale securities reconciliation | 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
September 30, 2022 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 643.7 |  |  | $ | 1.5 |  |  | $ | 66.1 |  |  | $ | 579.1 |
Other, including U.S. Treasury securities |  | 408.3 |  |  | 0.4 |  |  | 66.0 |  |  | 342.7 |
Municipal bonds |  | 1,440.9 |  |  | 14.5 |  |  | 147.5 |  |  | 1,307.9 |
Foreign government bonds |  | 37.2 |  |  | — |  |  | 1.7 |  |  | 35.5 |
Corporate bonds |  | 2,228.8 |  |  | 10.0 |  |  | 311.0 |  |  | 1,927.8 |
Other asset-backed securities |  | 1,145.2 |  |  | 2.9 |  |  | 69.0 |  |  | 1,079.1 |
Totals |  | $ | 5,904.1 |  |  | $ | 29.3 |  |  | $ | 661.3 |  |  | $ | 5,272.1 |
December 31, 2021 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations:(1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 612.1 |  |  | $ | 51.9 |  |  | $ | 1.5 |  |  | $ | 662.5 |
Other, including U.S. Treasury securities |  | 342.5 |  |  | 27.7 |  |  | 4.3 |  |  | 365.9 |
Municipal bonds |  | 1,519.7 |  |  | 184.4 |  |  | 0.7 |  |  | 1,703.4 |
Foreign government bonds |  | 40.2 |  |  | 3.4 |  |  | — |  |  | 43.6 |
Corporate bonds |  | 2,217.7 |  |  | 176.2 |  |  | 5.2 |  |  | 2,388.7 |
Other asset-backed securities |  | 1,065.5 |  |  | 16.6 |  |  | 6.9 |  |  | 1,075.2 |
Totals |  | $ | 5,797.7 |  |  | $ | 460.2 |  |  | $ | 18.6 |  |  | $ | 6,239.3 |
(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $337.5 million and $376.7 million; Federal Home Loan Mortgage Corporation (FHLMC) of $271.1 million and $326.5 million; and Government National Mortgage Association (GNMA) of $90.2 million and $112.1 million as of September 30, 2022 and December 31, 2021, respectively.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position | Therefore, it was determined that the unrealized losses on the fixed maturity securities presented in the table below were not indicative of any impairments as of September 30, 2022.
($ 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
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 472.2 |  |  | $ | 51.5 |  |  | $ | 51.3 |  |  | $ | 14.6 |  |  | $ | 523.5 |  |  | $ | 66.1 |
Other |  | 266.6 |  |  | 36.6 |  |  | 58.0 |  |  | 29.4 |  |  | 324.6 |  |  | 66.0 |
Municipal bonds |  | 1,035.5 |  |  | 143.5 |  |  | 9.7 |  |  | 4.0 |  |  | 1,045.2 |  |  | 147.5 |
Foreign government bonds |  | 35.4 |  |  | 1.7 |  |  | — |  |  | — |  |  | 35.4 |  |  | 1.7 |
Corporate bonds |  | 1,496.6 |  |  | 280.0 |  |  | 80.3 |  |  | 31.0 |  |  | 1,576.9 |  |  | 311.0 |
Other asset-backed securities |  | 776.2 |  |  | 52.4 |  |  | 213.9 |  |  | 16.6 |  |  | 990.1 |  |  | 69.0 |
Total |  | $ | 4,082.5 |  |  | $ | 565.7 |  |  | $ | 413.2 |  |  | $ | 95.6 |  |  | $ | 4,495.7 |  |  | $ | 661.3 |
Number of positions with a gross unrealized loss |  | 3,002 |  |  |  |  | 303 |  |  |  |  | 3,305 |  |  |
Fair value as a percentage of total fixed maturity securities at fair value |  | 77.4 | % |  |  |  | 7.8 | % |  |  |  | 85.2 | % |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 67.4 |  |  | $ | 1.3 |  |  | $ | 3.9 |  |  | $ | 0.2 |  |  | $ | 71.3 |  |  | $ | 1.5 |
Other |  | 59.5 |  |  | 1.7 |  |  | 35.1 |  |  | 2.6 |  |  | 94.6 |  |  | 4.3 |
Municipal bonds |  | 56.8 |  |  | 0.7 |  |  | 0.6 |  |  | — |  |  | 57.4 |  |  | 0.7 |
Foreign government bonds |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | 220.7 |  |  | 3.8 |  |  | 44.1 |  |  | 1.4 |  |  | 264.8 |  |  | 5.2 |
Other asset-backed securities |  | 379.0 |  |  | 3.8 |  |  | 128.2 |  |  | 3.1 |  |  | 507.2 |  |  | 6.9 |
Total |  | $ | 783.4 |  |  | $ | 11.3 |  |  | $ | 211.9 |  |  | $ | 7.3 |  |  | $ | 995.3 |  |  | $ | 18.6 |
Number of positions with a gross unrealized loss |  | 516 |  |  |  |  | 122 |  |  |  |  | 638 |  |  |
Fair value as a percentage of total fixed maturity securities at fair value |  | 12.6 | % |  |  |  | 3.4 | % |  |  |  | 16.0 | % |  |
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 |  | September 30, 2022
|  | September 30, 2022 |  | December 31, 2021 |  | Fair Value |  | Amortized Cost, net
Estimated expected maturity: |  |  |  |  |  |  |  |
Due in 1 year or less |  | 3.9 | % |  | 4.0 | % |  | $ | 204.0 |  |  | $ | 204.6 |
Due after 1 year through 5 years |  | 26.0 |  |  | 27.0 |  |  | 1,369.3 |  |  | 1,439.0 |
Due after 5 years through 10 years |  | 28.3 |  |  | 27.7 |  |  | 1,492.6 |  |  | 1,621.7 |
Due after 10 years through 20 years |  | 25.5 |  |  | 23.9 |  |  | 1,348.3 |  |  | 1,551.8 |
Due after 20 years |  | 16.3 |  |  | 17.4 |  |  | 857.9 |  |  | 1,087.0 |
Total |  | 100.0 | % |  | 100.0 | % |  | $ | 5,272.1 |  |  | $ | 5,904.1 |
Average option-adjusted duration, in years |  | 6.5 |  | 6.7 |  |  |  |
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 September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Fixed maturity securities |  |  |  |  |  |  |  |
Proceeds received |  | $ | 164.6 |  |  | $ | 155.4 |  |  | $ | 529.9 |  |  | $ | 319.2 |
Gross gains realized |  | 1.1 |  |  | 3.2 |  |  | 4.7 |  |  | 6.2 |
Gross losses realized |  | (5.0) |  |  | (0.7) |  |  | (10.2) |  |  | (4.3) |
Equity securities |  |  |  |  |  |  |  |
Proceeds received |  | $ | 0.2 |  |  | $ | 0.3 |  |  | $ | 6.0 |  |  | $ | 1.0 |
Gross gains realized |  | — |  |  | 0.1 |  |  | 1.7 |  |  | 0.3 |
Gross losses realized |  | — |  |  | — |  |  | (0.1) |  |  | — |
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 September 30, |  | Nine Months Ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |  |  |
Beginning of period |  | $ | (283.2) |  |  | $ | 399.4 |  |  | $ | 348.9 |  |  | $ | 439.8 |
Change in net unrealized investment gains (losses) on fixed maturity securities |  | (228.0) |  |  | (34.9) |  |  | (886.5) |  |  | (77.0) |
Reclassification of net investment losses on fixed maturity securities to net income |  | 11.9 |  |  | 3.9 |  |  | 38.3 |  |  | 5.6 |
End of period |  | $ | (499.3) |  |  | $ | 368.4 |  |  | $ | (499.3) |  |  | $ | 368.4 |
Schedule of carrying amounts of equity method limited partnership interests | The carrying amounts of EMA limited partnership interests were as follows:
($ in millions) |  |  |  |
|  | September 30, 2022 |  | December 31, 2021
Commercial mortgage loan funds |  | $ | 601.5 |  |  | $ | 346.8 |
Private equity funds |  | 73.4 |  |  | 74.0 |
Infrastructure equity funds |  | 70.2 |  |  | 58.3 |
Infrastructure debt funds |  | 67.4 |  |  | 62.4 |
Other funds(1) |  | 185.0 |  |  | 171.3 |
Total |  | $ | 997.5 |  |  | $ | 712.8 |
(1)Other funds consist primarily of limited partnership interests in corporate mezzanine, venture capital and other fund strategies.
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
September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 2.0 |  |  | $ | — |  |  | $ | 2.0 |  |  | $ | — |  |  | $ | 1.8 |  |  | $ | 0.2 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives: |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 10.7 |  |  | $ | — |  |  | $ | 10.7 |  |  | $ | 4.5 |  |  | $ | 6.4 |  |  | $ | (0.2) |

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