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Investments
9 Months Ended
Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
Investments The following tables present the composition of our investment portfolio by major security type, consistent with our classification of how we manage, monitor, and measure the portfolio. Our securities are reported in our consolidated balance sheets at fair value. The changes in fair value for our fixed-maturity securities (other than hybrid securities) are reported as a component of accumulated other comprehensive income, net of deferred income taxes, in our consolidated balance sheets. The net holding period gains (losses) reported below represent the inception-to-date changes in fair value of the securities. The changes in the net holding period gains (losses) between periods for the hybrid securities and equity securities are recorded as a component of net realized gains (losses) on securities in our consolidated statements of comprehensive income.
($ in millions)CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Holding
Period
Gains
(Losses)
Fair
Value
% of
Total
Fair
Value
September 30, 2021
Available-for-sale securities:
Fixed maturities:
U.S. government obligations$21,093.1 $144.9 $(95.9)$$21,142.1 40.3 %
State and local government obligations2,123.8 48.8 (6.7)2,165.9 4.1 
Corporate debt securities10,568.7 314.6 (10.5)1.2 10,874.0 20.8 
Residential mortgage-backed securities624.4 3.4 (0.9)1.0 627.9 1.2 
Commercial mortgage-backed securities5,739.4 70.2 (20.6)5,789.0 11.1 
Other asset-backed securities4,235.6 29.4 (2.8)4,262.2 8.2 
Redeemable preferred stocks171.0 1.3 (0.7)13.0 184.6 0.4 
Total fixed maturities44,556.0 612.6 (138.1)15.2 45,045.7 86.1 
Short-term investments1,088.7 1,088.7 2.1 
       Total available-for-sale securities45,644.7 612.6 (138.1)15.2 46,134.4 88.2 
Equity securities:
Nonredeemable preferred stocks1,479.9 92.9 1,572.8 3.0 
Common equities1,238.4 3,341.8 4,580.2 8.8 
       Total equity securities2,718.3 3,434.7 6,153.0 11.8 
  Total portfolio1
$48,363.0 $612.6 $(138.1)$3,449.9 $52,287.4 100.0 %
($ in millions)CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Holding
Period
Gains
(Losses)
Fair
Value
% of
Total
Fair
Value
September 30, 2020
Available-for-sale securities:
Fixed maturities:
U.S. government obligations$9,835.1 $370.3 $(1.6)$$10,203.8 22.3 %
State and local government obligations4,382.1 148.2 (0.5)4,529.8 9.9 
Corporate debt securities10,038.7 574.7 (3.6)2.2 10,612.0 23.2 
Residential mortgage-backed securities525.4 7.0 (1.4)531.0 1.2 
Commercial mortgage-backed securities5,964.4 117.1 (27.9)6,053.6 13.2 
Other asset-backed securities4,155.8 46.8 (2.3)4,200.3 9.2 
Redeemable preferred stocks181.3 2.5 (3.2)2.4 183.0 0.4 
Total fixed maturities35,082.8 1,266.6 (40.5)4.6 36,313.5 79.4 
Short-term investments4,667.8 4,667.8 10.2 
       Total available-for-sale securities39,750.6 1,266.6 (40.5)4.6 40,981.3 89.6 
Equity securities2:
Nonredeemable preferred stocks1,277.7 20.5 1,298.2 2.8 
Common equities1,155.0 2,329.8 3,484.8 7.6 
       Total equity securities2,432.7 2,350.3 4,783.0 10.4 
  Total portfolio1
$42,183.3 $1,266.6 $(40.5)$2,354.9 $45,764.3 100.0 %
 
($ in millions)CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Holding
Period
Gains
(Losses)
Fair
Value
% of
Total
Fair
Value
December 31, 2020
Available-for-sale securities:
Fixed maturities:
U.S. government obligations$12,437.9 $305.8 $(3.7)$$12,740.0 26.8 %
State and local government obligations3,099.4 123.1 (0.7)3,221.8 6.8 
Corporate debt securities9,579.7 601.7 (0.1)3.9 10,185.2 21.4 
Residential mortgage-backed securities503.3 7.1 (0.9)509.5 1.1 
Commercial mortgage-backed securities6,042.6 142.5 (10.0)6,175.1 13.0 
Other asset-backed securities3,745.0 40.1 (0.5)3,784.6 7.9 
Redeemable preferred stocks181.2 3.6 (1.4)11.3 194.7 0.4 
Total fixed maturities35,589.1 1,223.9 (17.3)15.2 36,810.9 77.4 
Short-term investments5,218.5 5,218.5 11.0 
       Total available-for-sale securities40,807.6 1,223.9 (17.3)15.2 42,029.4 88.4 
Equity securities2:
Nonredeemable preferred stocks1,333.7 89.2 1,422.9 3.0 
Common equities1,212.3 2,865.7 4,078.0 8.6 
       Total equity securities2,546.0 2,954.9 5,500.9 11.6 
  Total portfolio1
$43,353.6 $1,223.9 $(17.3)$2,970.1 $47,530.3 100.0 %
1 Our portfolio reflects the effect of net unsettled security transactions; at September 30, 2021, we had $399.7 million in other liabilities, compared to $469.2 million and $95.5 million at September 30, 2020 and December 31, 2020, respectively.
The total fair value of the portfolio at September 30, 2021 and 2020, and December 31, 2020, included $2.9 billion, $2.8 billion, and $6.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions. During the first nine months of 2021, we used a portion of these investments to pay our common share dividends, repurchase common shares, and pay off debt.
2 Includes a $25.0 million reclassification from nonredeemable preferred stocks to common equities to reflect the prior year conversion of a security and to conform to the current year classification.
At September 30, 2021, bonds and certificates of deposit in the principal amount of $407.8 million were on deposit to meet state insurance regulatory requirements. We did not hold any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at September 30, 2021 or 2020, or December 31, 2020. At September 30, 2021, we did not hold any debt securities that were non-income producing during the preceding 12 months and held $12.3 million of foreign government obligations at September 30, 2021, which we classified in our corporate debt portfolio.
Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature or are redeemable within one year.
We invested in repurchase and reverse repurchase transactions during 2021 and 2020, but did not have any open positions at September 30, 2021 and 2020, or December 31, 2020. To the extent we enter into repurchase or reverse repurchase transactions, consistent with past practice, we would elect not to offset these transactions and would report them on a gross basis on our consolidated balance sheets, despite the option to elect to offset these transactions as long as they were with the same counterparty and subject to an enforceable master netting arrangement.
Hybrid Securities Certain securities in our fixed-maturity portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments. These securities are reported at fair value:
 September 30,
(millions)20212020December 31, 2020
Fixed Maturities:
Corporate debt securities$363.3 $101.0 $188.4 
Residential mortgage-backed securities217.0 
Other asset-backed securities104.5 18.7 34.8 
Redeemable preferred stocks133.2 122.5 131.4 
Total hybrid securities$818.0 $242.2 $354.6 
Since the embedded derivatives (e.g., change-in-control put option, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows) do not have observable intrinsic values, we have elected to record the changes in fair value of these securities through income as a component of net realized gains or losses.
Fixed Maturities The composition of fixed maturities by maturity at September 30, 2021, was:
(millions)CostFair Value
Less than one year$6,124.5 $6,153.2 
One to five years27,606.8 27,968.5 
Five to ten years10,761.3 10,861.0 
Ten years or greater63.4 63.0 
Total$44,556.0 $45,045.7 
 Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities, which do not have a single maturity date, are reported based upon expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.
Gross Unrealized Losses The following tables show the composition of gross unrealized losses, for which no credit related impairment has been recognized, by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:
 Total No. of Sec.Total
Fair
Value
Gross
Unrealized
Losses
Less than 12 Months12 Months or Greater
($ in millions)No. of Sec.Fair
Value
Unrealized
Losses
No. of Sec.Fair
 Value
Unrealized
Losses
September 30, 2021
U.S. government obligations73 $13,352.8 $(95.9)65 $12,152.6 $(70.1)$1,200.2 $(25.8)
State and local government obligations96 710.3 (6.7)81 635.9 (4.9)15 74.4 (1.8)
Corporate debt securities227 1,581.3 (10.5)225 1,551.5 (10.0)29.8 (0.5)
Residential mortgage-backed securities63 149.3 (0.9)53 135.1 (0.6)10 14.2 (0.3)
Commercial mortgage-backed securities70 1,758.8 (20.6)65 1,543.6 (19.9)215.2 (0.7)
Other asset-backed securities114 1,625.9 (2.8)109 1,614.2 (2.7)11.7 (0.1)
Redeemable preferred stocks11.8 (0.7)11.8 (0.7)
Total fixed maturities644 $19,190.2 $(138.1)598 $17,632.9 $(108.2)46 $1,557.3 $(29.9)
 Total No. of Sec.Total
Fair
Value
Gross
Unrealized
Losses
Less than 12 Months12 Months or Greater
($ in millions)No. of Sec.Fair
Value
Unrealized
Losses
No. of Sec.Fair
 Value
Unrealized
Losses
September 30, 2020
U.S. government obligations13 $1,993.8 $(1.6)13 $1,993.8 $(1.6)$$
State and local government obligations45 320.1 (0.5)45 320.1 (0.5)
Corporate debt securities28 537.8 (3.6)28 537.8 (3.6)
Residential mortgage-backed securities28 86.7 (1.4)38.7 (1.0)19 48.0 (0.4)
Commercial mortgage-backed securities77 1,794.8 (27.9)46 1,170.4 (17.3)31 624.4 (10.6)
Other asset-backed securities22 191.5 (2.3)11 146.5 (2.1)11 45.0 (0.2)
Redeemable preferred stocks9.3 (3.2)9.3 (3.2)
Total fixed maturities214 $4,934.0 $(40.5)152 $4,207.3 $(26.1)62 $726.7 $(14.4)

 Total No. of Sec.Total
Fair
Value
Gross
Unrealized
Losses
Less than 12 Months12 Months or Greater
($ in millions)No. of Sec.Fair
Value
Unrealized
Losses
No. of Sec.Fair
 Value
Unrealized
Losses
December 31, 2020
U.S. government obligations$1,511.0 $(3.7)$1,511.0 $(3.7)$$
State and local government obligations30 208.7 (0.7)30 208.7 (0.7)
Corporate debt securities129.4 (0.1)129.4 (0.1)
Residential mortgage-backed securities21 44.4 (0.9)21 44.4 (0.9)
Commercial mortgage-backed securities43 893.3 (10.0)93.6 (0.3)34 799.7 (9.7)
Other asset-backed securities22 183.7 (0.5)74.4 (0.1)13 109.3 (0.4)
Redeemable preferred stocks11.0 (1.4)11.0 (1.4)
Total fixed maturities133 $2,981.5 $(17.3)64 $2,017.1 $(4.9)69 $964.4 $(12.4)
The increase in the number of securities in an unrealized loss position since both September 30, 2020 and December 31, 2020, was primarily the result of an increase in interest rates. As of September 30, 2021, we had two securities in the table above, all in our corporate debt securities, that had their credit ratings downgraded during the quarter, with a combined fair value of $10.5 million and an unrealized loss of $0.4 million.
A review of the securities in an unrealized loss position indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity.
Allowance For Credit and Uncollectible Losses We are required to measure the amount of potential credit losses for all fixed-maturity securities in an unrealized loss position. We did not record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible for the first nine months of 2021 and did not have a material credit loss allowance balance as of September 30, 2021 and 2020, or December 31, 2020. We considered several factors and inputs related to the individual securities as part of this analysis, including:
current performance indicators on the business model or underlying assets (e.g., delinquency rates, foreclosure rates, and default rates);
credit support (via current levels of subordination);
historical credit ratings; and
updated cash flow expectations based upon these performance indicators.
In order to determine the amount of credit loss, if any, we initially reviewed securities in a loss position to determine whether it was likely that we would be required, or whether we intended, to sell any of the securities prior to the recovery of their respective cost bases (which could be maturity). If we were likely to, or intended to, sell prior to a potential recovery, we would write off the unrealized loss. For those securities that we determined we were not likely to, or did not intend to, sell prior to a potential recovery, we calculated the net present value (NPV) of the cash flows expected (i.e., expected recovery value) using the current book yield for each security. The NPV was then compared to the security’s current amortized value to determine if a credit loss existed. In the event that the NPV was below the amortized value, and the amount was determined to be material individually, or in aggregate, a credit loss would be deemed to exist, and either an allowance for credit losses would be created, or if an allowance already existed, either a recovery of the previous allowance, or an incremental loss, would be recorded to net realized gains (losses) on securities.
As of September 30, 2021, we believe none of the unrealized losses relate to material credit losses on any specific securities, or in the aggregate, based on our review. We continue to expect all the securities in our portfolio to pay their principal and interest obligations.
We reviewed our accrued investment income outstanding on those securities in an unrealized loss position at September 30, 2021, to determine if the accrued interest amounts were deemed to be uncollectible. Based on our analysis, we believe the issuers have sufficient liquidity and capital reserves to meet their current interest and future principal, obligations and, therefore, did not write off any accrued income as uncollectible at September 30, 2021.
Realized Gains (Losses) The components of net realized gains (losses) for the three and nine months ended September 30, were:
 Three MonthsNine Months
(millions)2021202020212020
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations$19.6 $90.2 $97.5 $565.8 
State and local government obligations6.0 43.9 50.3 58.9 
Corporate and other debt securities23.6 58.8 84.4 125.5 
Residential mortgage-backed securities0.3 
Commercial mortgage-backed securities1.4 5.0 40.7 15.4 
Other asset-backed securities0.3 0.2 1.0 0.2 
Redeemable preferred stocks1.5 
Total available-for-sale securities50.9 198.1 275.7 765.8 
Equity securities:
Nonredeemable preferred stocks2.3 0.3 26.0 20.0 
Common equities6.2 2.0 352.3 77.1 
Total equity securities8.5 2.3 378.3 97.1 
   Subtotal gross realized gains on security sales59.4 200.4 654.0 862.9 
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations(2.0)(1.5)(28.5)(4.8)
State and local government obligations(3.0)
Corporate and other debt securities(0.7)(6.1)(6.5)
Residential mortgage-backed securities(0.3)(0.3)
Commercial mortgage-backed securities(0.5)(2.9)(1.6)(12.7)
Other asset-backed securities(0.4)
Total available-for-sale securities(3.5)(4.4)(39.9)(24.0)
Equity securities:
Nonredeemable preferred stocks(0.3)(0.1)(0.7)(7.5)
Common equities(1.7)(5.6)(60.3)
Total equity securities(2.0)(0.1)(6.3)(67.8)
   Subtotal gross realized losses on security sales(5.5)(4.5)(46.2)(91.8)
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations17.6 88.7 69.0 561.0 
State and local government obligations6.0 43.9 47.3 58.9 
Corporate and other debt securities22.9 58.8 78.3 119.0 
Residential mortgage-backed securities(0.3)
Commercial mortgage-backed securities0.9 2.1 39.1 2.7 
Other asset-backed securities0.3 0.2 0.6 0.2 
Redeemable preferred stocks1.5 
Total available-for-sale securities47.4 193.7 235.8 741.8 
Equity securities:
Nonredeemable preferred stocks2.0 0.2 25.3 12.5 
Common equities4.5 2.0 346.7 16.8 
Total equity securities6.5 2.2 372.0 29.3 
  Subtotal net realized gains (losses) on security sales53.9 195.9 607.8 771.1 
Net holding period gains (losses)
Hybrid securities1.0 3.2 (3.2)
Equity securities(16.9)333.5 479.8 101.9 
  Subtotal net holding period gains (losses)(15.9)336.7 479.8 98.7 
Other asset impairment(1.2)(3.7)
     Total net realized gains (losses) on securities$36.8 $532.6 $1,083.9 $869.8 
Realized gains (losses) on securities sold are computed using the first-in-first-out method. The significant gains recognized in 2020 on our fixed-income portfolio were the result of selling Treasury securities for opportunistic investments. In 2020, the gains in our common stock portfolio resulted from rebalancing the indexed equity portfolio. For the nine months ended 2021, the realized gain in common equities reflected the sale of a common stock held outside our indexed portfolio. The other asset impairment loss was recorded as a result of our investment in a federal new markets tax credit fund, which was entered into during the second quarter 2021, and reported in other assets in the consolidated balance sheet.
The following table reflects our holding period realized gains (losses) on equity securities recognized for the three and nine months ended September 30, 2021 and 2020, for equity securities held at the respective quarter end:
Three MonthsNine Months
(millions)2021202020212020
Total net gains (losses) recognized during the period on equity securities$(10.4)$335.7 $851.8 $131.2 
Less: Net gains (losses) recognized on equity securities sold during the period6.5 2.2 372.0 29.3 
Net holding period gains (losses) recognized during the period on equity securities held at period end$(16.9)$333.5 $479.8 $101.9 
Net Investment Income The components of net investment income for the three and nine months ended September 30, were: 
Three MonthsNine Months
(millions)2021202020212020
Available-for-sale securities:
   Fixed maturities:
U.S. government obligations$39.0 $36.7 $106.8 $135.0 
State and local government obligations9.7 18.5 34.6 44.2 
Corporate debt securities70.2 76.6 228.6 211.2 
Residential mortgage-backed securities3.2 0.8 9.4 8.8 
Commercial mortgage-backed securities35.0 37.3 105.2 114.2 
Other asset-backed securities16.1 22.6 47.1 76.6 
Redeemable preferred stocks2.3 2.5 7.1 12.5 
Total fixed maturities175.5 195.0 538.8 602.5 
   Short-term investments0.4 6.2 2.6 26.9 
    Total available-for-sale securities175.9 201.2 541.4 629.4 
Equity securities:
Nonredeemable preferred stocks17.3 15.8 52.5 44.3 
Common equities15.7 13.5 45.9 41.8 
    Total equity securities33.0 29.3 98.4 86.1 
           Investment income208.9 230.5 639.8 715.5 
           Investment expenses(6.6)(4.7)(18.5)(14.5)
         Net investment income$202.3 $225.8 $621.3 $701.0 
On a year-over-year basis, investment income (interest and dividends) decreased 9% for the three months ended September 30, 2021 and 11% for the first nine months of 2021, compared to the same periods last year, due to a decrease in the portfolio yield, which was partially offset by an increase in average assets. The recurring investment book yield decreased about 21% for the three months ended September 30, 2021 and 23% for the first nine months of 2021, compared to the same periods in 2020 as a result of reinvesting cash from sales, maturities, paydowns, and other redemptions at market yields that were significantly lower than the portfolio’s overall yield.