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Fair Values of Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
Carrying Amount and Fair Value of Financial Instruments
Presented as follows are the carrying amounts and fair values of financial instruments. The carrying values of financial instruments such as short-term investments, cash and bank deposits, accounts and premiums receivable, accrued investment income, and securities lending agreements approximate fair value due to the short-term nature of the instruments. As such, these financial instruments are not included in the following chart.
 
June 30, 2017
 
December 31, 2016
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
(in millions of dollars)
Assets
 
 
 
 
 
 
 
Fixed Maturity Securities
$
45,118.6

 
$
45,118.6

 
$
44,217.3

 
$
44,217.3

Mortgage Loans
2,081.2

 
2,190.0

 
2,038.9

 
2,122.2

Policy Loans
3,409.8

 
3,516.4

 
3,463.2

 
3,564.2

Other Long-term Investments
 
 
 
 
 
 
 
Derivatives
27.0

 
27.0

 
32.7

 
32.7

Equity Securities
1.2

 
1.2

 
1.2

 
1.2

Miscellaneous Long-term Investments
577.7

 
577.7

 
541.9

 
541.9

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Policyholders' Funds
 
 
 
 
 
 
 
Deferred Annuity Products
$
590.9

 
$
590.9

 
$
597.4

 
$
597.4

Supplementary Contracts without Life Contingencies
601.0

 
601.0

 
608.8

 
608.8

Long-term Debt
2,968.4

 
3,288.8

 
2,999.4

 
3,175.8

Payables for Collateral on Investments
 
 
 
 
 
 
 
Federal Home Loan Bank (FHLB) Funding Agreements
350.0

 
350.0

 
350.0

 
350.0

Other Liabilities
 
 
 
 
 
 
 
Derivatives
52.6

 
52.6

 
52.8

 
52.8

Embedded Derivative in Modified Coinsurance Arrangement
31.9

 
31.9

 
46.7

 
46.7

Unfunded Commitments to Investment Partnerships
4.5

 
4.5

 
5.0

 
5.0
Fair Values by Fair Value Heirarchy Input Level
Fair value measurements by input level for financial instruments carried at fair value are as follows:
 
June 30, 2017
 
Quoted Prices
in Active Markets
for Identical Assets
or Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
 
(in millions of dollars)
Assets
 
 
 
 
 
 
 
Fixed Maturity Securities
 
 
 
 
 
 
 
United States Government and Government Agencies and Authorities
$
179.4

 
$
1,256.6

 
$
—

 
$
1,436.0

States, Municipalities, and Political Subdivisions
—

 
2,215.6

 
36.8

 
2,252.4

Foreign Governments
—

 
934.0

 
—

 
934.0

Public Utilities
706.9

 
7,313.0

 
192.5

 
8,212.4

Mortgage/Asset-Backed Securities
—

 
2,102.5

 
—

 
2,102.5

All Other Corporate Bonds
7,987.5

 
21,298.5

 
853.2

 
30,139.2

Redeemable Preferred Stocks
—

 
19.0

 
23.1

 
42.1

Total Fixed Maturity Securities
8,873.8

 
35,139.2

 
1,105.6

 
45,118.6

 
 
 
 
 
 
 
 
Other Long-term Investments
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
Foreign Exchange Contracts
—

 
27.0

 
—

 
27.0

Equity Securities
—

 
—

 
1.2

 
1.2

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Other Liabilities
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
Interest Rate Swaps
$
—

 
$
4.3

 
$
—

 
$
4.3

Foreign Exchange Contracts
—

 
47.8

 
—

 
47.8

Credit Default Swaps
—

 
0.5

 
—

 
0.5

Embedded Derivative in Modified Coinsurance Arrangement
—

 
—

 
31.9

 
31.9

Total Derivatives
—

 
52.6

 
31.9

 
84.5


 
December 31, 2016
 
Quoted Prices
in Active Markets
for Identical Assets
or Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
 
(in millions of dollars)
Assets
 
 
 
 
 
 
 
Fixed Maturity Securities
 
 
 
 
 
 
 
United States Government and Government Agencies and Authorities
$
454.2

 
$
928.2

 
$
—

 
$
1,382.4

States, Municipalities, and Political Subdivisions
—

 
2,068.5

 
89.5

 
2,158.0

Foreign Governments
—

 
914.7

 
—

 
914.7

Public Utilities
108.5

 
7,648.9

 
265.3

 
8,022.7

Mortgage/Asset-Backed Securities
—

 
2,230.4

 
—

 
2,230.4

All Other Corporate Bonds
3,507.1

 
24,500.4

 
1,459.7

 
29,467.2

Redeemable Preferred Stocks
—

 
18.7

 
23.2

 
41.9

Total Fixed Maturity Securities
4,069.8

 
38,309.8

 
1,837.7

 
44,217.3

 
 
 
 
 
 
 
 
Other Long-term Investments
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
 Foreign Exchange Contracts
—

 
32.7

 
—

 
32.7

Equity Securities
—

 
—

 
1.2

 
1.2

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Other Liabilities
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
Interest Rate Swaps
$
—

 
$
7.6

 
$
—

 
$
7.6

Foreign Exchange Contracts
—

 
44.8

 
—

 
44.8

Credit Default Swaps
—

 
0.4

 
—

 
0.4

Embedded Derivative in Modified Coinsurance Arrangement
—

 
—

 
46.7

 
46.7

Total Derivatives
—

 
52.8

 
46.7

 
99.5
Transfers of Assets between Level 1 and Level 2
Transfers of assets between Level 1 and Level 2 are as follows:
 
Three Months Ended June 30
 
2017
 
2016
 
Transfers into
 
Level 1 from
Level 2
 
Level 2 from
Level 1
 
Level 1 from
Level 2
 
Level 2 from
Level 1
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
United States Government and Government Agencies and Authorities
$
—

 
$
152.4

 
$
—

 
$
—

States, Municipalities, and Political Subdivisions
—

 
—

 
73.4

 
—

Public Utilities
360.3

 
891.5

 
527.2

 
397.7

All Other Corporate Bonds
1,931.2

 
3,630.4

 
2,873.8

 
3,047.7

Total Fixed Maturity Securities
$
2,291.5

 
$
4,674.3

 
$
3,474.4

 
$
3,445.4


 
Six Months Ended June 30
 
2017
 
2016
 
Transfers into
 
Level 1 from
Level 2
 
Level 2 from
Level 1
 
Level 1 from
Level 2
 
Level 2 from
Level 1
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
United States Government and Government Agencies and Authorities
$
—

 
$
276.6

 
$
423.8

 
$
—

States, Municipalities, and Political Subdivisions
—

 
—

 
73.3

 
—

Public Utilities
596.8

 
98.3

 
630.1

 
34.1

All Other Corporate Bonds
4,843.3

 
1,295.0

 
5,213.5

 
786.6

Total Fixed Maturity Securities
$
5,440.1

 
$
1,669.9

 
$
6,340.7

 
$
820.7
Changes in Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs
Changes in assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows:
 
Three Months Ended June 30, 2017
 
 
 
Total Realized and
Unrealized Investment
Gains (Losses) Included in
 
 
 
 
 
 
 
 
 
 
 
Beginning
of Period
 
Earnings
 
Other
Comprehensive
Income or Loss
 
Purchases
 
Sales
 
Level 3 Transfers
 
End of
Period
 
Into
 
Out of
 
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
States, Municipalities, and Political Subdivisions
$
0.4

 
$
—

 
$
0.3

 
$
—

 
$
(0.1
)
 
$
36.6

 
$
(0.4
)
 
$
36.8

Public Utilities
312.5

 
—

 
0.3

 
—

 
—

 
48.0

 
(168.3
)
 
192.5

All Other Corporate Bonds
923.0

 
(0.6
)
 
5.6

 
—

 
(29.1
)
 
237.6

 
(283.3
)
 
853.2

Redeemable Preferred Stocks
22.9

 
—

 
0.2

 
—

 
—

 
—

 
—

 
23.1

Total Fixed Maturity Securities
1,258.8

 
(0.6
)
 
6.4

 
—

 
(29.2
)
 
322.2

 
(452.0
)
 
1,105.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Securities
1.2

 
—

 
—

 
—

 
—

 
—

 
—

 
1.2

Embedded Derivative in Modified Coinsurance Arrangement
(38.1
)
 
6.2

 
—

 
—

 
—

 
—

 
—

 
(31.9
)
 
 
Three Months Ended June 30, 2016
 
 
 
Total Realized and
Unrealized Investment
Gains (Losses) Included in
 
 
 
 
 
 
 
 
 
 
 
Beginning
of Period
 
Earnings
 
Other
Comprehensive
Income or Loss
 
Purchases
 
Sales
 
Level 3 Transfers
 
End of
Period
 
Into
 
Out of
 
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
States, Municipalities, and Political Subdivisions
$
88.7

 
$
—

 
$
2.4

 
$
—

 
$
—

 
$
—

 
$
(29.5
)
 
$
61.6

Foreign Governments
53.9

 
—

 
—

 
—

 
—

 
—

 
(53.9
)
 
—

Public Utilities
270.2

 
—

 
1.2

 
—

 
(0.2
)
 
232.2

 
(49.9
)
 
453.5

All Other Corporate Bonds
1,074.7

 
3.4

 
19.8

 
58.0

 
(57.9
)
 
641.2

 
(379.6
)
 
1,359.6

Redeemable Preferred Stocks
23.4

 
—

 
0.2

 
—

 
—

 
—

 
—

 
23.6

Total Fixed Maturity Securities
1,510.9

 
3.4

 
23.6

 
58.0

 
(58.1
)
 
873.4

 
(512.9
)
 
1,898.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Equity Securities
1.2

 
—

 
—

 
—

 
—

 
—

 
—

 
1.2

Embedded Derivative in Modified Coinsurance Arrangement
(93.2
)
 
10.2

 
—

 
—

 
—

 
—

 
—

 
(83.0
)
 
Six Months Ended June 30, 2017
 
 
 
Total Realized and
Unrealized Investment
Gains (Losses) Included in
 
 
 
 
 
 
 
 
 
 
 
Beginning
of Year
 
Earnings
 
Other
Comprehensive
Income or Loss
 
Purchases
 
Sales
 
Level 3 Transfers
 
End of
Period
 
Into
 
Out of
 
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
States, Municipalities, and Political Subdivisions
$
89.5

 
$
—

 
$
0.3

 
$
—

 
$
—

 
$
—

 
$
(53.0
)
 
$
36.8

Public Utilities
265.3

 
—

 
1.2

 
8.0

 
(4.8
)
 
72.0

 
(149.2
)
 
192.5

All Other Corporate Bonds
1,459.7

 
(0.6
)
 
10.9

 
—

 
(81.2
)
 
313.0

 
(848.6
)
 
853.2

Redeemable Preferred Stocks
23.2

 
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
23.1

Total Fixed Maturity Securities
1,837.7

 
(0.6
)
 
12.3

 
8.0

 
(86.0
)
 
385.0

 
(1,050.8
)
 
1,105.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Securities
1.2

 
—

 
—

 
—

 
—

 
—

 
—

 
1.2

Embedded Derivative in Modified Coinsurance Arrangement
(46.7
)
 
14.8

 
—

 
—

 
—

 
—

 
—

 
(31.9
)
 
 
Six Months Ended June 30, 2016
 
 
 
Total Realized and
Unrealized Investment
Gains (Losses) Included in
 
 
 
 
 
 
 
 
 
 
 
Beginning
of Year
 
Earnings
 
Other
Comprehensive
Income or Loss
 
Purchases
 
Sales
 
Level 3 Transfers
 
End of
Period
 
Into
 
Out of
 
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
States, Municipalities, and Political Subdivisions
$
122.2

 
$
—

 
$
1.7

 
$
—

 
$
(0.1
)
 
$
—

 
$
(62.2
)
 
$
61.6

Foreign Governments
52.9

 
—

 
—

 
—

 
—

 
—

 
(52.9
)
 
—

Public Utilities
274.1

 
—

 
10.9

 
—

 
(0.5
)
 
272.1

 
(103.1
)
 
453.5

All Other Corporate Bonds
1,408.2

 
0.6

 
45.3

 
58.0

 
(45.1
)
 
592.9

 
(700.3
)
 
1,359.6

Redeemable Preferred Stocks
23.8

 
—

 
(0.2
)
 
—

 
—

 
—

 
—

 
23.6

Total Fixed Maturity Securities
1,881.2

 
0.6

 
57.7

 
58.0

 
(45.7
)
 
865.0

 
(918.5
)
 
1,898.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Securities
1.4

 
—

 
—

 
—

 
—

 
—

 
(0.2
)
 
1.2

Embedded Derivative in Modified Coinsurance Arrangement
(87.6
)
 
4.6

 
—

 
—

 
—

 
—

 
—

 
(83.0
)

Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses only for the time during which the applicable financial instruments were classified as Level 3. The transfers between levels resulted primarily from a change in observability of three inputs used to determine fair values of the securities transferred: (1) transactional data for new issuance and secondary trades, (2) broker/dealer quotes and pricing, primarily related to changes in the level of activity in the market and whether the market was considered orderly, and (3) comparable bond metrics from which to perform an analysis. For fair value measurements of financial instruments that were transferred either into or out of Level 3, we reflect the transfers using the fair value at the beginning of the period. We believe this allows for greater transparency, as all changes in fair value that arise during the reporting period of the transfer are disclosed as a component of our Level 3 reconciliation. Gains which are included in earnings and are attributable to the change in fair value of assets or liabilities valued using significant unobservable inputs and still held at period end were $6.2 million and $14.8 million for the three and six months ended June 30, 2017, respectively, and $10.2 million and $4.6 million for the three and six months ended June 30, 2016, respectively. These amounts relate entirely to the change in fair value of an embedded derivative in a modified coinsurance arrangement and are reported as a component of realized investment gains and losses.
Quantitative Information Regarding Significant Unobservable Inputs
The table below provides quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements derived from internal models. Certain securities classified as Level 3 are excluded from the table below due to limitations in our ability to obtain the underlying inputs used by external pricing sources.
 
June 30, 2017
 
Fair Value
 
Unobservable Input
 
Range/Weighted Average
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
All Other Corporate Bonds - Private
$
248.3

 
Lack of Marketability
Volatility of Credit
Market Convention
(c)
(d)
(e)
0.25% - 0.25% / 0.25%
0.20% - 6.34% / 0.72%
Priced at Par
Equity Securities - Private
1.1

 
Market Convention
(e)
Priced at Cost or Owner's Equity
Embedded Derivative in Modified Coinsurance Arrangement
(31.9
)
 
Projected Liability Cash Flows
(f)
Actuarial Assumptions
 
December 31, 2016
 
Fair Value
 
Unobservable Input
 
Range/Weighted Average
 
(in millions of dollars)
Fixed Maturity Securities
 
 
 
 
 
All Other Corporate Bonds - Private
$
310.4

 
Comparability Adjustment
Discount for Size
Lack of Marketability
Volatility of Credit
Market Convention
(a)
(b)
(c)
(d)
(e)
0.50% - 0.50% / 0.50%
0.50% - 0.50% / 0.50%
0.20% - 0.25% / 0.23%
0.20% - 6.04% / 0.70%
Priced at Par
Equity Securities - Private
1.1

 
Market Convention
(e)
Priced at Cost or Owner's Equity
Embedded Derivative in Modified Coinsurance Arrangement
(46.7
)
 
Projected Liability Cash Flows
(f)
Actuarial Assumptions


(a)
Represents basis point adjustments for changes in benchmark spreads associated with various industry sectors
(b)
Represents basis point adjustments based on issue/issuer size relative to the benchmark
(c)
Represents basis point adjustments to apply a discount due to the illiquidity of an investment
(d)
Represents basis point adjustments for credit-specific factors
(e)
Represents a decision to price based on par value, cost, or owner's equity when limited data is available
(f)
Represents various actuarial assumptions required to derive the liability cash flows including incidence, termination, and lapse rates