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Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2020
Fair Value of Financial Instruments [Abstract]  
Fair Value of Financial Instruments Valuation of Financial Instruments
Financial Instruments Carried at Fair Value
The carrying value and the estimated fair value of the Company's financial instruments at fair value were as follows as of December 31:
20202019
Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
Financial assets(in millions)
Total investments at fair value (Note 5)$2,714.3 $2,714.3 $2,742.6 $2,742.6 
Cash and cash equivalents160.4 160.4 154.9 154.9 
Restricted cash and cash equivalents0.2 0.2 0.3 0.3 
Assets and liabilities recorded at fair value on the Company's Consolidated Balance Sheets are categorized based upon the levels of judgment associated with the inputs used to measure their fair value. Level inputs are defined as follows:
Level 1 - Inputs are unadjusted quoted market prices for identical assets or liabilities in active markets at the measurement date.
Level 2 - Inputs other than Level 1 prices that are observable for similar assets or liabilities through corroboration with market data at the measurement date.
Level 3 - Inputs that are unobservable that reflect management's best estimate of what willing market participants would use in pricing the assets or liabilities at the measurement date.
The Company uses third party pricing services to assist with its investment accounting function. The ultimate pricing source varies depending on the investment security and pricing service used, but investment securities valued on the basis of observable inputs (Levels 1 and 2) are generally assigned values on the basis of actual transactions. Securities valued on the basis of pricing models with significant unobservable inputs or nonbinding broker quotes are classified as Level 3. The Company performs quarterly analyses on the prices it receives from third parties to determine whether the prices are reasonable estimates of fair value, including confirming the fair values of these securities through observable market prices using an alternative pricing source, as it is ultimately management's responsibility to ensure that the fair values reflected in the Company's consolidated financial statements are appropriate. If differences are noted in these analyses, the Company may obtain additional information from other pricing services to validate the quoted price.
The Company bases all of its estimates of fair value for assets on the bid price, when available, as it represents what a third-party market participant would be willing to pay in an arm's length transaction.
For securities not actively traded, third party pricing services may use quoted market prices of similar instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates, and prepayment speeds. There were no material adjustments to the valuation methodology utilized by third party pricing services as of December 31, 2020 and 2019.
These methods of valuation will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If objectively verifiable information is not available, the Company would be required to produce an estimate of fair value using some of the same methodologies, making assumptions for market-based inputs that are unavailable.
The following table presents the Company's investments at fair value and the corresponding fair value measurements.
December 31, 2020December 31, 2019
Level 1Level 2Level 3Level 1Level 2Level 3
(in millions)
Fixed maturity securities
U.S. Treasuries$— $78.3 $— $— $85.6 $— 
U.S. Agencies— 3.1 — — 2.9 — 
States and municipalities— 482.7 — — 484.5 — 
Corporate securities— 1,046.4 — — 1,079.0 — 
Residential mortgage-backed securities— 461.0 — — 480.4 — 
Commercial mortgage-backed securities— 102.4 — — 110.6 — 
Asset-backed securities— 42.6 — — 61.2 — 
Collateralized loan obligations— 83.6 — — — — 
Foreign government securities— 8.2 — — — — 
Other securities— 170.9 — — 181.7 — 
Total fixed maturity securities$— $2,479.2 $— $— $2,485.9 $— 
Equity securities at fair value
Industrial and miscellaneous$179.1 $— $— $216.4 $— $— 
Other29.4 — — 40.3 — — 
Total equity securities at fair value$208.5 $— $— $256.7 $— $— 
Short-term investments$4.0 $22.6 $— $— $— $— 
Total investments at fair value$212.5 $2,501.8 $— $256.7 $2,485.9 $— 
Financial Instruments Carried at Cost
EICN, ECIC, EPIC, and EAC are members of the Federal Home Loan Bank of San Francisco (FHLB). Members are required to purchase stock in the FHLB in addition to maintaining collateral deposits that back any funds advanced. The Company's investment in FHLB stock is recorded at cost, which approximates fair value, as purchases and sales of these securities are at par value with the issuer. FHLB stock is considered a restricted security and is periodically evaluated by the Company for impairment based on the ultimate recovery of par value.
The Company also has investments in convertible preferred shares of real estate investment trusts which are carried at cost and approximate fair value.
Financial Instruments Carried at Net Asset Value (NAV)
The Company has investments in private equity limited partnership interests that are included in Other invested assets on the Company's Consolidated Balance Sheets. These investments do not have readily determinable fair values and are carried at NAV and therefore are excluded from the fair value hierarchy. The Company initially estimates the value of these investments using the transaction price. In subsequent periods, the Company measures these investments using NAV per share provided quarterly by the general partner, based on financial statements that are audited annually. The Company performs certain control procedures to validate the appropriateness of using NAV as a measurement. These investments are generally not redeemable by the investees and cannot be sold without approval of the general partner. These investments have a fund term of 10 to 12 years, subject to two or three one year extensions at the general partner's discretion. The Company will receive distributions of proceeds from dividends and interest from fund investments, as well as from the disposition of a fund investment, or a portion thereof. The Company expects these distributions from time-to-time during the full course of the fund term. As of December 31, 2020 and 2019, the Company had unfunded commitments to these private equity limited partnerships totaling $63.8 million and $41.6 million, respectively.
Additionally, certain cash equivalents, principally money market securities, are measured using NAV, which approximates fair value.
The following table presents cash and investments carried at NAV on the Company's Consolidated Balance Sheets.
December 31, 2020December 31, 2019
Cash equivalents measured at NAV58.7 14.4 
Other invested assets carried at NAV16.2 9.1