Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2021

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. At December 31, 2021, Level 3 investments comprised approximately 5.6% 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
December 31, 2021
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	662.5	$	662.5	$	—	$	662.5	$	—
Other, including U.S. Treasury securities	365.9		365.9		17.7		348.2		—
Municipal bonds	1,703.4		1,703.4		—		1,642.6		60.8
Foreign government bonds	43.6		43.6		—		43.6		—
Corporate bonds	2,388.7		2,388.7		14.9		2,163.5		210.3
Other asset-backed securities	1,075.2		1,075.2		—		976.3		98.9
Total fixed maturity securities	6,239.3		6,239.3		32.6		5,836.7		370.0
Equity securities	147.2		147.2		35.2		110.6		1.4
Short-term investments	157.8		157.8		157.8		—		—
Other investments	43.6		43.6		—		43.6		—
Totals	$	6,587.9	$	6,587.9	$	225.6	$	5,990.9	$	371.4
Separate Account (variable annuity) assets(1)	$	3,441.0	$	3,441.0	$	3,441.0	$	—	$	—
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	2.1	$	2.1	$	—	$	2.1	$	—
Other policyholder funds, embedded derivatives	$	106.6	$	106.6	$	—	$	—	$	106.6

December 31, 2020
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	684.8	$	684.8	$	—	$	673.7	$	11.1
Other, including U.S. Treasury securities	433.2		433.2		18.4		414.8		—
Municipal bonds	1,827.5		1,827.5		—		1,767.9		59.6
Foreign government bonds	45.1		45.1		—		45.1		—
Corporate bonds	2,122.9		2,122.9		14.9		1,952.2		155.8
Other asset-backed securities	1,231.8		1,231.8		—		1,103.5		128.3
Total fixed maturity securities	6,345.3		6,345.3		33.3		5,957.2		354.8
Equity securities	121.6		121.6		39.2		82.1		0.3
Short-term investments	141.8		141.8		137.7		4.1		—
Other investments	36.3		36.3		—		36.3		—
Totals	$	6,645.0	$	6,645.0	$	210.2	$	6,079.7	$	355.1
Separate Account (variable annuity) assets(1)	$	2,891.4	$	2,891.4	$	2,891.4	$	—	$	—
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	2.5	$	2.5	$	—	$	2.5	$	—
Other policyholder funds, embedded derivatives	$	104.5	$	104.5	$	—	$	—	$	104.5

(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 Separate Account (variable annuity) assets.

Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis

The following tables present reconciliations for the periods indicated for all Level 3 financial assets and financial liabilities measured at fair value on a recurring basis.


($ 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, 2021	$	59.6	$	155.8	$	139.4	$	354.8	$	0.3	$	355.1	$	104.5
Transfers into Level 3(3)	18.6		131.7		21.3		171.6		1.0		172.6		—
Transfers out of Level 3(3)	—		(64.4)		(19.2)		(83.6)		—		(83.6)		—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—		—		(8.2)		(8.2)		0.1		(8.1)		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		10.0
Net unrealized investment gains (losses) included in OCI	(2.5)		—		8.8		6.3		—		6.3		—
Purchases	—		—		—		—		—		—		—
Issuances	—		—		—		—		—		—		4.9
Sales	—		—		—		—		—		—		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(14.9)		(12.8)		(43.2)		(70.9)		—		(70.9)		(12.8)
Ending balance, December 31, 2021	$	60.8	$	210.3	$	98.9	$	370.0	$	1.4	$	371.4	$	106.6

Beginning balance, January 1, 2020	$	44.3	$	104.0	$	146.8	$	295.1	$	0.1	$	295.2	$	93.7
Transfers into Level 3(3)	80.7		83.6		104.3		268.6		0.2		268.8		—
Transfers out of Level 3(3)	(69.1)		(36.6)		(84.6)		(190.3)		—		(190.3)		—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—		—		(0.3)		(0.3)		—		(0.3)		—
Net investment (gains) losses included in net income related to financial liabilities	—		—		—		—		—		—		11.5
Net unrealized investment gains (losses) included in OCI	4.3		1.4		(10.5)		(4.8)		—		(4.8)		—
Purchases	—		6.9		1.9		8.8		—		8.8		—
Issuances	—		—		—		—		—		—		8.4
Sales	—		—		1.2		1.2		—		1.2		—
Settlements	—		—		—		—		—		—		—
Paydowns, maturities and distributions	(0.6)		(3.5)		(19.4)		(23.5)		—		(23.5)		(9.1)
Ending balance, December 31, 2020	$	59.6	$	155.8	$	139.4	$	354.8	$	0.3	$	355.1	$	104.5

(1) Represents embedded derivatives, all related to the Company's FIA 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 years ended December 31, 2021 and 2020 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. 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 at
December 31, 2021

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Municipal bonds

60.8

discounted cash flow

I spread(2)

374 - 425 bps

Corporate bonds

210.3

discounted cash flow

N spread(3)

211 - 531 bps

discounted cash flow

I spread(2)

333 - 365 bps

discounted cash flow

T spread(4)

130 - 540 bps

discounted cash flow

yield

3.4% - 8.8%

discounted cash flow

discount rate

11.3% - 12.0%

market comparable

option adjusted spread

12.5%

Other asset-backed securities

98.9

vendor price

haircut

3.0% - 5.0%

discounted cash flow

discount margin

14.6%

discounted cash flow

discount rate

8.5% - 20.0%

discounted cash flow

median comparable yield

7.3% - 16.1%

market comparable

median price

$54.79 - $97.95

discounted cash flow

N spread(3)

341 bps

discounted cash flow

T spread(4)

196 bps

Equity securities

1.4

Black-Scholes

volatility

low 29.0% - high 34.0%

discounted cash flow

variable

$100.00 - $121.95

($ in millions)

Financial
Liabilities

Fair Value at
December 31, 2021

Valuation Technique(s)

Unobservable Inputs

Range

(Weighted Average)

and Single Point Best Estimate(1)

Derivatives
embedded in
fixed indexed annuity products

106.6

discounted cash flow

lapse rate

5.3%

mortality multiplier(5)

66.8%

option budget

0.9% - 2.5%

non-performance adjustment(6)

5.0%

(1) When a range of unobservable inputs is not readily available, the Company uses a single point best estimate.

(2) "I spread" is the interpolated weighted average life point on the "on the run" (OTR) point of the curve.

(3) "N spread" is the interpolated weighted average life point on the swap curve.

(4) "T spread" is a specific point on the OTR curve.

(5) Mortality multiplier is applied to the Annuity 2000 table.

(6) Determined as a percentage of the risk-free rate.

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
December 31, 2021
Financial Assets
Other investments	$	148.8	$	152.4	$	—	$	—	$	152.4
Deposit asset on reinsurance	2,481.5		2,935.1		—		—		2,935.1
Financial Liabilities
Investment contract and policy reserves, fixed annuity contracts	4,941.3		5,004.9		—		—		5,004.9
Investment contract and life policy reserves, account values on life contracts	105.4		115.4		—		—		115.4
Other policyholder funds	839.3		839.3		—		782.8		56.5
Short-term debt	249.0		249.0		—		—		249.0
Long-term debt	253.6		277.4		—		277.4		—

December 31, 2020
Financial Assets
Other investments	$	168.3	$	172.1	$	—	$	—	$	172.1
Deposit asset on reinsurance	2,420.9		3,030.6		—		—		3,030.6
Financial Liabilities
Investment contract and policy reserves, fixed annuity contracts	4,847.6		4,963.3		—		—		4,963.3
Investment contract and life policy reserves, account values on life contracts	98.7		108.4		—		—		108.4
Other policyholder funds	646.8		646.8		—		590.7		56.1
Short-term debt	135.0		135.0		—		—		135.0
Long-term debt	302.3		331.1		—		331.1		—