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v3.23.1

Fair Value of Financial Instruments (Tables) | 3 Months Ended
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Mar. 31, 2023
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 financial assets and financial liabilities measured and carried at fair value on a recurring basis. During the three months ended March 31, 2023 and 2022, there were no transfers between Level 1 and Level 2. As of March 31, 2023, Level 3 invested assets comprised 8.0% of the Company’s total investment portfolio at fair value.
($ in millions) |  | Carrying Amount |  | Fair Value |  | Fair Value Measurements at Reporting Date Using
|  |  |  | Level 1 |  | Level 2 |  | Level 3
March 31, 2023 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 584.0 |  |  | $ | 584.0 |  |  | $ | — |  |  | $ | 581.4 |  |  | $ | 2.6 |
Other, including U.S. Treasury securities |  | 364.8 |  |  | 364.8 |  |  | 38.5 |  |  | 326.3 |  |  | — |
Municipal bonds |  | 1,290.9 |  |  | 1,290.9 |  |  | — |  |  | 1,235.5 |  |  | 55.4 |
Foreign government bonds |  | 32.6 |  |  | 32.6 |  |  | — |  |  | 32.6 |  |  | — |
Corporate bonds |  | 1,943.5 |  |  | 1,943.5 |  |  | 13.2 |  |  | 1,646.3 |  |  | 284.0 |
Other asset-backed securities |  | 1,134.2 |  |  | 1,134.2 |  |  | — |  |  | 1,032.2 |  |  | 102.0 |
Total fixed maturity securities |  | 5,350.0 |  |  | 5,350.0 |  |  | 51.7 |  |  | 4,854.3 |  |  | 444.0 |
Equity securities |  | 98.8 |  |  | 98.8 |  |  | 24.3 |  |  | 72.5 |  |  | 2.0 |
Short-term investments |  | 75.0 |  |  | 75.0 |  |  | 75.0 |  |  | — |  |  | — |
Other investments |  | 41.8 |  |  | 41.8 |  |  | — |  |  | 41.8 |  |  | — |
Totals |  | $ | 5,565.6 |  |  | $ | 5,565.6 |  |  | $ | 151.0 |  |  | $ | 4,968.6 |  |  | $ | 446.0 |
Separate Account variable annuity assets(1) |  | $ | 2,954.7 |  |  | $ | 2,954.7 |  |  | $ | 2,954.7 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and future policy benefit reserves, embedded derivatives |  | $ | 1.7 |  |  | $ | 1.7 |  |  | $ | — |  |  | $ | 1.7 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 89.9 |  |  | $ | 89.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 89.9 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 570.4 |  |  | $ | 570.4 |  |  | $ | — |  |  | $ | 567.8 |  |  | $ | 2.6 |
Other, including U.S. Treasury securities |  | 342.6 |  |  | 342.6 |  |  | 24.6 |  |  | 318.0 |  |  | — |
Municipal bonds |  | 1,269.7 |  |  | 1,269.7 |  |  | — |  |  | 1,215.3 |  |  | 54.4 |
Foreign government bonds |  | 33.6 |  |  | 33.6 |  |  | — |  |  | 33.6 |  |  | — |
Corporate bonds |  | 1,901.7 |  |  | 1,901.7 |  |  | 12.2 |  |  | 1,628.2 |  |  | 261.3 |
Other asset-backed securities |  | 1,067.0 |  |  | 1,067.0 |  |  | — |  |  | 962.0 |  |  | 105.0 |
Total fixed maturity securities |  | 5,185.0 |  |  | 5,185.0 |  |  | 36.8 |  |  | 4,724.9 |  |  | 423.3 |
Equity securities |  | 99.6 |  |  | 99.6 |  |  | 23.3 |  |  | 74.3 |  |  | 2.0 |
Short-term investments |  | 109.4 |  |  | 109.4 |  |  | 109.4 |  |  | — |  |  | — |
Other investments |  | 38.6 |  |  | 38.6 |  |  | — |  |  | 38.6 |  |  | — |
Totals |  | $ | 5,432.6 |  |  | $ | 5,432.6 |  |  | $ | 169.5 |  |  | $ | 4,837.8 |  |  | $ | 425.3 |
Separate Account (variable annuity) assets(1) |  | $ | 2,792.3 |  |  | $ | 2,792.3 |  |  | $ | 2,792.3 |  |  | $ | — |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and future policy benefit reserves, embedded derivatives |  | $ | 1.2 |  |  | $ | 1.2 |  |  | $ | — |  |  | $ | 1.2 |  |  | $ | — |
Other policyholder funds, embedded derivatives |  | $ | 91.0 |  |  | $ | 91.0 |  |  | $ | — |  |  | $ | — |  |  | $ | 91.0 |
(1) Separate Account variable annuity assets represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Separate Account variable annuity liabilities are equal to the estimated fair value of the Separate Account variable annuity assets.
Table for reconciliations for all Level 3 assets 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) were 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, 2023 |  | $ | 54.4 |  |  | $ | 261.3 |  |  | $ | 107.6 |  |  | $ | 423.3 |  |  | $ | 2.0 |  |  | $ | 425.3 |  |  | $ | 91.0 |
Transfers into Level 3(3) |  | — |  |  | 5.9 |  |  | 0.4 |  |  | 6.3 |  |  | — |  |  | 6.3 |  |  | — |
Transfers out of Level 3(3) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
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 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.2 |
Net unrealized investment gains (losses) included in OCI |  | 1.2 |  |  | 0.9 |  |  | (0.4) |  |  | 1.7 |  |  | — |  |  | 1.7 |  |  | — |
Purchases |  | — |  |  | 19.0 |  |  | 0.2 |  |  | 19.2 |  |  | — |  |  | 19.2 |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2.1 |
Sales |  | — |  |  | (2.6) |  |  | — |  |  | (2.6) |  |  | — |  |  | (2.6) |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.2) |  |  | (0.5) |  |  | (3.2) |  |  | (3.9) |  |  | — |  |  | (3.9) |  |  | (3.4) |
Ending balance, March 31, 2023 |  | $ | 55.4 |  |  | $ | 284.0 |  |  | $ | 104.6 |  |  | $ | 444.0 |  |  | $ | 2.0 |  |  | $ | 446.0 |  |  | $ | 89.9 |
Beginning balance, January 1, 2022 |  | $ | 60.8 |  |  | $ | 210.3 |  |  | $ | 98.9 |  |  | $ | 370.0 |  |  | $ | 1.4 |  |  | $ | 371.4 |  |  | $ | 106.6 |
Transfers into Level 3(3) |  | — |  |  | 67.5 |  |  | 4.7 |  |  | 72.2 |  |  | — |  |  | 72.2 |  |  | — |
Transfers out of Level 3(3) |  | (3.2) |  |  | — |  |  | (4.8) |  |  | (8.0) |  |  | — |  |  | (8.0) |  |  | — |
Total gains or losses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment gains (losses) included in net income related to financial assets |  | — |  |  | — |  |  | (0.9) |  |  | (0.9) |  |  | (0.1) |  |  | (1.0) |  |  | — |
Net investment (gains) losses included in net income related to financial liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5.2) |
Net unrealized investment gains (losses) included in OCI |  | (3.4) |  |  | (6.4) |  |  | (4.1) |  |  | (13.9) |  |  | — |  |  | (13.9) |  |  | — |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0.9 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Paydowns, maturities and distributions |  | (0.1) |  |  | (45.4) |  |  | (4.0) |  |  | (49.5) |  |  | — |  |  | (49.5) |  |  | (3.2) |
Ending balance, March 31, 2022 |  | $ | 54.1 |  |  | $ | 226.0 |  |  | $ | 89.8 |  |  | $ | 369.9 |  |  | $ | 1.3 |  |  | $ | 371.2 |  |  | $ | 99.1 |
(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, 2023 and 2022 were related to changes in the primary pricing source and changes in observability of external information used in determining fair value. 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.
Fair value measurement inputs and valuation techniques | 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 as of March 31, 2023 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Municipal bonds |  | $ | 55.4 |  |  | discounted cash flow |  | option adjusted spread |  | 308 bps
Corporate bonds |  | 284.0 |  |  | discounted cash flow |  | yield |  | 6.1%
|  |  |  | vendor priced |  | vendor priced |  | 79.64
|  |  |  | discounted cash flow |  | yield |  | 11.0%
|  |  |  | market comparable |  | EV / Fwd EBITDA (x) |  | 5.92x
|  |  |  | discounted cash flow |  | discount rate |  | 6.2% - 10.7%
|  |  |  | discounted cash flow |  | exit cap |  | 6.2%
|  |  |  | discounted cash flow |  | option adjusted spread |  | 241 bps
Mortgage-backed and other asset-backed securities |  | 104.6 |  |  | vendor price |  | haircut |  | 0.01% -0.3%
|  |  |  | discounted cash flow |  | discount margin |  | 39.5%
|  |  |  | discounted cash flow |  | discount rate |  | 16.0% - 21.0%
|  |  |  | discounted cash flow |  | median comparable yield |  | 20.7% - 43.2%
|  |  |  | discounted cash flow |  | yield |  | 6.4% - 6.5%
|  |  |  | discounted cash flow |  | LIBOR |  | 2.3%
|  |  |  | discounted cash flow |  | PDI spread |  | 5.5%
|  |  |  | discounted cash flow |  | SBL spread |  | 4.5%
|  |  |  | discounted cash flow |  | weighting |  | 17.0% - 83.0%
|  |  |  | discounted cash flow |  | CPR |  | 20.0%
|  |  |  | discounted cash flow |  | default rate annual |  | 4.0%
|  |  |  | discounted cash flow |  | recovery |  | 65.0%
|  |  |  | discounted cash flow |  | I spread |  | 175 bps
|  |  |  | discounted cash flow |  | N spread |  | 463 bps
|  |  |  | discounted cash flow |  | T Spread |  | 226 bps
|  |  |  | market comparable |  | median price |  | 81.34
Equity securities |  | 2.0 |  | black-scholes |  | volatility |  | low 28.0% - high 44.0%
|  |  |  | black-scholes |  | time to exit |  | 2.67 bps
|  |  |  | market comparable |  | price/book ExAOCI |  | 1.06x
($ in millions)
Financial Liabilities |  | Fair Value as of March 31, 2023 |  | Valuation Technique(s) |  | Unobservable Inputs |  | Range (Weighted Average) and Single Point Best Estimate(1)
Derivatives embedded in fixed indexed annuity products |  | $ | 89.9 |  |  | discounted cash flow |  | lapse rate |  | 5.4%
|  |  |  |  |  | mortality multiplier(4) |  | 67.8%
|  |  |  |  |  | option budget |  | 0.9% - 3.5%
|  |  |  |  |  | non-performance adjustment(5) |  | 5.0%
(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate. (2) "N spread" is the interpolated weighted average life point on the swap curve. (3) "T spread" is a specific point on the OTR curve. (4) Mortality multiplier is applied to the Annuity 2000 table. (5) Determined as a percentage of the risk-free rate. The following table summarizes the ranges of actual experience and expected experience for mortality and lapses of LFPB:
|  | March 31, 2023
|  | Whole Life |  | Term Life |  | Experience Life |  | Limited-Pay Whole Life |  | SPIA (life contingent)
Mortality |  |  |  |  |  |  |  |  |  |
Actual experience |  | 0.7 | % |  | 0.1% - 0.3% |  | 1.9 | % |  | — | % |  | N.M.
Expected experience |  | 0.7 | % |  | 0.1% - 0.6% |  | 1.6 | % |  | 0.2 | % |  | N.M.
Lapses |  |  |  |  |  |  |  |  |  |
Actual experience |  | 3.6 | % |  | 5.6% - 8.3% |  | 3.4 | % |  | 3.6 | % |  | N.M.
Expected experience |  | 4.6 | % |  | 2.8% - 5.6% |  | 3.0 | % |  | 5.1 | % |  | N.M.
|  | March 31, 2022
|  | Whole Life |  | Term Life |  | Experience Life |  | Limited-Pay Whole Life |  | SPIA (life contingent)
Mortality |  |  |  |  |  |  |  |  |  |
Actual experience |  | 0.8 | % |  | 0.1% - 0.1% |  | 1.8 | % |  | 0.4 | % |  | N.M.
Expected experience |  | 0.7 | % |  | 0.1% - 0.3% |  | 1.4 | % |  | 0.2 | % |  | N.M.
Lapses |  |  |  |  |  |  |  |  |  |
Actual experience |  | 3.0 | % |  | 5.2% - 76.1% |  | 3.1 | % |  | 2.9 | % |  | N.M.
Expected experience |  | 5.7 | % |  | 2.8% - 6.6% |  | 3.1 | % |  | 7.2 | % |  | N.M.
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) |  | Carrying Amount |  | Fair Value |  | Fair Value Measurements at Reporting Date Using
|  |  |  | Level 1 |  | Level 2 |  | Level 3
March 31, 2023 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 174.3 |  |  | $ | 177.8 |  |  | $ | — |  |  | $ | — |  |  | $ | 177.8 |
Deposit asset on reinsurance |  | 2,517.9 |  |  | 2,270.6 |  |  | — |  |  | — |  |  | 2,270.6 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and future policy benefit reserves, fixed annuity contracts |  | 4,954.6 |  |  | 4,854.3 |  |  | — |  |  | — |  |  | 4,854.3 |
Investment contract and future policy benefit reserves, account values on life contracts |  | 113.3 |  |  | 109.3 |  |  | — |  |  | — |  |  | 109.3 |
Other policyholder funds |  | 938.4 |  |  | 938.4 |  |  | — |  |  | 888.1 |  |  | 50.3 |
Reverse repurchase agreements |  | 70.2 |  |  | 74.7 |  |  | — |  |  | 74.7 |  |  | — |
Short-term debt |  | 249.0 |  |  | 249.0 |  |  | — |  |  | — |  |  | 249.0 |
Long-term debt |  | 249.0 |  |  | 239.7 |  |  | — |  |  | 239.7 |  |  | — |
December 31, 2022 |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |
Other investments |  | $ | 167.4 |  |  | $ | 170.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 170.9 |
Deposit asset on reinsurance |  | 2,516.6 |  |  | 2,207.2 |  |  | — |  |  | — |  |  | 2,207.2 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |
Investment contract and future policy benefit reserves, fixed annuity contracts |  | 4,988.5 |  |  | 4,901.3 |  |  | — |  |  | — |  |  | 4,901.3 |
Investment contract and future policy benefit reserves, account values on life contracts |  | 111.9 |  |  | 107.7 |  |  | — |  |  | — |  |  | 107.7 |
Other policyholder funds |  | 863.0 |  |  | 863.0 |  |  | — |  |  | 810.7 |  |  | 52.3 |
Reverse repurchase agreements |  | 70.2 |  |  | 73.3 |  |  | — |  |  | 73.3 |  |  | — |
Short-term debt |  | 249.0 |  |  | 249.0 |  |  | — |  |  | — |  |  | 249.0 |
Long-term debt |  | 249.0 |  |  | 240.5 |  |  | — |  |  | 240.5 |  |  | — |

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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c) -SubTopic 10 -Topic 820 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-3 + Details
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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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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