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Investments
 6 Months Ended
Jun. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Investments
5. Investments

Fixed Maturity Securities

The following tables provide information relating to investments in fixed maturity securities (in millions):
June 30, 2019
 
Amortized
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair
Value
U.S. Government and government agencies
 
$
17.5

 
$
1.0

 
$
—

 
$
18.5

States, municipalities and political subdivisions
 
411.4

 
31.1

 
—

 
442.5

Residential mortgage-backed securities
 
75.9

 
4.8

 
(0.6
)
 
80.1

Commercial mortgage-backed securities
 
104.0

 
2.4

 
—

 
106.4

Asset-backed securities
 
537.2

 
1.6

 
(12.6
)
 
526.2

Corporate and other
 
2,491.5

 
177.0

 
(29.6
)
 
2,638.9

Total fixed maturity securities
 
$
3,637.5

 
$
217.9

 
$
(42.8
)
 
$
3,812.6

December 31, 2018
 
Amortized
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair
Value
U.S. Government and government agencies
 
$
24.7

 
$
0.7

 
$
—

 
$
25.4

States, municipalities and political subdivisions
 
413.7

 
9.6

 
(1.4
)
 
421.9

Residential mortgage-backed securities
 
92.6

 
3.1

 
(1.3
)
 
94.4

Commercial mortgage-backed securities
 
94.7

 
0.3

 
(1.1
)
 
93.9

Asset-backed securities
 
540.8

 
0.8

 
(30.1
)
 
511.5

Corporate and other
 
2,311.0

 
17.0

 
(83.5
)
 
2,244.5

Total fixed maturity securities
 
$
3,477.5

 
$
31.5

 
$
(117.4
)
 
$
3,391.6



The amortized cost and fair value of fixed maturity securities available-for-sale as of June 30, 2019 are shown by contractual maturity in the table below (in millions). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date:
 
 
Amortized
Cost
 
Fair
 Value
Corporate, Municipal, U.S. Government and Other securities
 
 
 
 
Due in one year or less
 
$
28.9

 
$
29.6

Due after one year through five years
 
233.6

 
238.8

Due after five years through ten years
 
337.8

 
354.5

Due after ten years
 
2,320.1

 
2,477.0

Subtotal
 
2,920.4

 
3,099.9

Mortgage-backed securities
 
179.9

 
186.5

Asset-backed securities
 
537.2

 
526.2

Total
 
$
3,637.5

 
$
3,812.6



The tables below show the major industry types of the Company’s corporate and other fixed maturity securities (in millions):
 
 
June 30, 2019
 
December 31, 2018
 
 
Amortized Cost
 
Fair
Value
 
% of
Total
 
Amortized Cost
 
Fair
Value
 
% of
Total
Finance, insurance, and real estate
 
$
550.1

 
$
569.3

 
21.6
%
 
$
469.0

 
$
452.9

 
20.2
%
Transportation, communication and other services
 
768.7

 
808.4

 
30.6
%
 
758.6

 
734.0

 
32.7
%
Manufacturing
 
731.0

 
788.2

 
29.9
%
 
712.7

 
693.5

 
30.9
%
Other
 
441.7

 
473.0

 
17.9
%
 
370.7

 
364.1

 
16.2
%
Total
 
$
2,491.5

 
$
2,638.9

 
100.0
%
 
$
2,311.0

 
$
2,244.5

 
100.0
%


A portion of certain other-than-temporary impairment ("OTTI") losses on fixed maturity securities is recognized in Accumulated Other Comprehensive Income ("AOCI"). For these securities the net amount represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The Company did not recognize any impairments on corporate and other fixed maturity securities for the three and six months ended June 30, 2019 or 2018.

The following table presents the total unrealized losses for the 159 and 749 fixed maturity securities held by the Company as of June 30, 2019 and December 31, 2018, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (in millions):
 
 
June 30, 2019
 
December 31, 2018
 
 
Unrealized Losses
 
% of
Total
 
Unrealized Losses
 
% of
Total
Less than 20%
 
$
(42.5
)
 
99.3
%
 
$
(116.0
)
 
98.8
%
20% or more for less than six months
 
(0.3
)
 
0.7
%
 
(0.8
)
 
0.7
%
20% or more for six months or greater
 
—

 
—
%
 
(0.6
)
 
0.5
%
Total
 
$
(42.8
)
 
100.0
%
 
$
(117.4
)
 
100.0
%


The determination of whether unrealized losses are "other-than-temporary" requires judgment based on subjective as well as objective factors. Factors considered and resources used by management include (i) whether the unrealized loss is credit-driven or a result of changes in market interest rates, (ii) the extent to which fair value is less than cost basis, (iii) cash flow projections received from independent sources, (iv) historical operating, balance sheet and cash flow data contained in issuer SEC filings and news releases, (v) near-term prospects for improvement in the issuer and/or its industry, (vi) third party research and communications with industry specialists, (vii) financial models and forecasts, (viii) the continuity of dividend payments, maintenance of investment grade ratings and hybrid nature of certain investments, (ix) discussions with issuer management, and (x) ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value.

The Company analyzes its MBS for OTTI each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan-to-collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

The Company believes it will recover its cost basis in the non-impaired securities with unrealized losses and that the Company has the ability to hold the securities until they recover in value. The Company neither intends to sell nor does it expect to be required to sell the securities with unrealized losses as of June 30, 2019. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

The following tables present the estimated fair values and gross unrealized losses for the 159 and 749 fixed maturity securities held by the Company that have estimated fair values below amortized cost as of each of June 30, 2019 and December 31, 2018, respectively. The Company does not have any OTTI losses reported in AOCI. These investments are presented by investment category and the length of time the related fair value has remained below amortized cost (in millions):
June 30, 2019
 
Less than 12 months
 
12 months or greater
 
Total
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
U.S. Government and government agencies
 
$
0.1

 
$
—

 
$
—

 
$
—

 
$
0.1

 
$
—

States, municipalities and political subdivisions
 
5.7

 
—

 
—

 
—

 
5.7

 
—

Residential mortgage-backed securities
 
11.6

 
(0.5
)
 
2.6

 
(0.1
)
 
14.2

 
(0.6
)
Commercial mortgage-backed securities
 
0.9

 
—

 
—

 
—

 
0.9

 
—

Asset-backed securities
 
362.3

 
(7.6
)
 
61.0

 
(5.0
)
 
423.3

 
(12.6
)
Corporate and other
 
275.7

 
(25.8
)
 
39.6

 
(3.8
)
 
315.3

 
(29.6
)
Total fixed maturity securities
 
$
656.3

 
$
(33.9
)
 
$
103.2

 
$
(8.9
)
 
$
759.5

 
$
(42.8
)
December 31, 2018
 
Less than 12 months
 
12 months of greater
 
Total
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
U.S. Government and government agencies
 
$
5.0

 
$
—

 
$
3.3

 
$
—

 
$
8.3

 
$
—

States, municipalities and political subdivisions
 
117.2

 
(1.3
)
 
1.9

 
(0.1
)
 
119.1

 
(1.4
)
Residential mortgage-backed securities
 
22.4

 
(1.2
)
 
5.7

 
(0.1
)
 
28.1

 
(1.3
)
Commercial mortgage-backed securities
 
57.8

 
(1.1
)
 
—

 
—

 
57.8

 
(1.1
)
Asset-backed securities
 
466.0

 
(29.6
)
 
5.9

 
(0.5
)
 
471.9

 
(30.1
)
Corporate and other
 
1,418.2

 
(71.9
)
 
254.6

 
(11.6
)
 
1,672.8

 
(83.5
)
Total fixed maturity securities
 
$
2,086.6

 
$
(105.1
)
 
$
271.4

 
$
(12.3
)
 
$
2,358.0

 
$
(117.4
)


As of June 30, 2019, investment grade fixed maturity securities (as determined by nationally recognized rating agencies) represented approximately 81.7% of the gross unrealized loss and 86.5% of the fair value. As of December 31, 2018, investment grade fixed maturity securities represented approximately 87.9% of the gross unrealized loss and 93.1% of the fair value. Certain risks are inherent in connection with fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.
Equity Securities

The following tables provide information relating to investments in equity securities measured at fair value (in millions):
 
 
June 30, 2019
 
December 31, 2018
Common stocks
 
$
22.8

 
$
15.0

Perpetual preferred stocks
 
120.4

 
185.5

Total equity securities
 
$
143.2

 
$
200.5



Other Invested Assets

Carrying values of other invested assets were as follows (in millions):
 
 
June 30, 2019
 
December 31, 2018
 
 
Measurement Alternative
 
Equity
Method
 
Measurement Alternative
 
Equity
Method
Common Equity
 
$
—

 
$
2.3

 
$
—

 
$
2.1

Preferred Equity
 
—

 
8.0

 
1.6

 
9.6

Other
 
—

 
60.8

 
—

 
59.2

Total
 
$
—

 
$
71.1

 
$
1.6

 
$
70.9



Net Investment Income

The major sources of net investment income were as follows (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Fixed maturity securities, available-for-sale at fair value
 
$
43.7

 
$
16.2

 
$
87.3

 
$
31.9

Equity securities
 
2.1

 
0.7

 
4.6

 
1.3

Mortgage loans
 
3.1

 
1.6

 
6.8

 
2.8

Policy loans
 
0.2

 
0.3

 
0.6

 
0.6

Other invested assets
 
1.4

 
0.6

 
2.6

 
0.6

Gross investment income
 
50.5

 
19.4

 
101.9

 
37.2

External investment expense
 
(0.2
)
 
—

 
(0.5
)
 
(0.1
)
Net investment income
 
$
50.3

 
$
19.4

 
$
101.4

 
$
37.1



Net Realized and Unrealized Gains (Losses) on Investments

The major sources of net realized and unrealized gains and losses on investments were as follows (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Realized gains on fixed maturity securities
 
$
4.2

 
$
2.4

 
$
5.1

 
$
3.7

Realized losses on fixed maturity securities
 
(3.3
)
 
(0.6
)
 
(5.1
)
 
(1.3
)
Realized gains on equity securities
 
0.3

 
—

 
0.4

 
—

Realized losses on equity securities
 
(0.2
)
 
—

 
(1.1
)
 
—

Net unrealized gains (losses) on equity securities
 
(1.6
)
 
0.5

 
5.8

 
(0.2
)
Net unrealized gains (losses) on derivative instruments
 
(0.9
)
 
0.2

 
(1.1
)
 
0.8

Net realized and unrealized gains (losses)
 
$
(1.5
)
 
$
2.5

 
$
4.0

 
$
3.0