Fair Value (Tables)

3 Months Ended

Mar. 31, 2018

The estimated fair value of the financial instruments were as follows:

	March 31, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
(in millions)	Value		Value		Value		Value
Financial Assets carried at:
Fair Value through AOCI:
Fixed maturities	$	7,758.3	$	7,758.3	$	7,779.7	$	7,779.7
Equity securities⁽¹⁾		—		—		576.5		576.5
Other investments		—		—		3.6		3.6
Fair Value through Net Income:
Equity securities ⁽¹⁾		550.9		550.9		—		—
Other investments ⁽¹⁾		282.8		282.8	122.8		122.8
Amortized Cost/Cost:
Other investments⁽¹⁾		380.3		374.6		512.8		518.3
Cash and cash equivalents		258.0		258.0		376.4		376.4
	$	9,230.3	$	9,224.6	$	9,371.8	$	9,377.3

Financial Liabilities carried at:
Amortized cost:
Debt	$	787.0	$	839.6	$	786.9	$	865.7

(1)

Due to the adoption of ASU No. 2016-01, certain classifications are not comparable to the prior year. See Note 2 – “New Accounting Pronouncements”.

Fair Value, Assets Measured on Recurring Basis

The following tables provide, for each hierarchy level, the Company’s assets that were measured at fair value on a recurring basis.

	March 31, 2018
(in millions)	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	536.0	$	241.0	$	295.0	$	—
Foreign government		244.8		33.6		211.2		—
Municipal		1,055.1		—		1,029.8		25.3
Corporate		4,250.7		—		4,249.9		0.8
Residential mortgage-backed, U.S. agency backed		977.6		—		977.6		—
Residential mortgage-backed, non-agency		24.8		—		24.8		—
Commercial mortgage-backed		603.3		—		589.8		13.5
Asset-backed		66.0		—		66.0		—
Total fixed maturities		7,758.3		274.6		7,444.1		39.6
Equity securities		550.9		549.8		—		1.1
Other investments		132.0		—		128.4		3.6
Total investment assets at fair value	$	8,441.2	$	824.4	$	7,572.5	$	44.3

	December 31, 2017
(in millions)	Total		Level 1		Level 2		Level 3
Fixed maturities:
U.S. Treasury and government agencies	$	511.4	$	227.6	$	283.8	$	—
Foreign government		242.7		50.1		192.6		—
Municipal		1,076.0		—		1,049.2		26.8
Corporate		4,307.5		—		4,306.6		0.9
Residential mortgage-backed, U.S. agency backed		956.4		—		956.4		—
Residential mortgage-backed, non-agency		29.6		—		29.6		—
Commercial mortgage-backed		596.4		—		582.2		14.2
Asset-backed		59.7		—		59.7		—
Total fixed maturities		7,779.7		277.7		7,460.1		41.9
Equity securities		568.1		567.0		—		1.1
Other investments		126.4		—		122.8		3.6
Total investment assets at fair value	$	8,474.2	$	844.7	$	7,582.9	$	46.6

Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following tables provide, for each hierarchy level, the Company’s estimated fair values of financial instruments that were not carried at fair value:

	March 31, 2018
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	258.0	$	258.0	$	—	$	—
Other investments		374.6		—		9.1		365.5
Liabilities:
Debt	$	839.6	$	—	$	839.6	$	—

	December 31, 2017
(in millions)	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	376.4	$	376.4	$	—	$	—
Equity securities		8.4		—		8.4		—
Other investments		368.9		—		—		368.9
Liabilities:
Debt	$	865.7	$	—	$	865.7	$	—

Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following tables provide a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Fixed Maturities
(in millions)	Municipal			Corporate			Commercial mortgage- backed			Total			Equity and Other		Total Assets
Three Months Ended
March 31, 2018
Balance January 1, 2018	$	26.8		$	0.9		$	14.2		$	41.9		$	4.7	$	46.6
Total gains (losses):
Included in total net realized and unrealized investment gains		0.1			—			—			0.1			—		0.1
Included in other comprehensive income-net depreciation on available-for-sale securities		(0.5	)		—			(0.2	)		(0.7	)		—		(0.7	)
Sales		(1.1	)		(0.1	)		(0.5	)		(1.7	)		—		(1.7	)
Balance March 31, 2018	$	25.3		$	0.8		$	13.5		$	39.6		$	4.7	$	44.3
Three Months Ended
March 31, 2017
Balance January 1, 2017	$	31.0		$	4.2		$	15.0		$	50.2		$	5.6	$	55.8
Total gains:
Included in other comprehensive income-net appreciation on available-for-sale securities		0.2			—			—			0.2			—		0.2
Sales		(0.4	)		(0.3	)		(0.4	)		(1.1	)		—		(1.1	)
Balance March 31, 2017	$	30.8		$	3.9		$	14.6		$	49.3		$	5.6	$	54.9

Schedule of Additional Information About Significant Unobservable Inputs Used in Fair Valuations of Level 3

The following table provides quantitative information about the significant unobservable inputs used by the Company in the fair value measurements of Level 3 assets. Where discounted cash flows were used in the valuation of fixed maturities, the internally-developed discount rate was adjusted by the significant unobservable inputs shown in the table.

March 31, 2018

December 31, 2017

Valuation

Significant

Fair

Range

Fair

Range

(in millions)

Technique

Unobservable Inputs

Value

(Wtd Average)

Value

(Wtd Average)

Fixed maturities:

Municipal

Discounted

Discount for:

25.3

26.8

cash flow

Small issue size

Credit stress

Above-market coupon

0.7 - 6.8% (3.2%)

1.3% (1.3%)

0.3 - 0.5% (0.4%)

0.7 - 6.8% (3.3%)

0.9 - 1.5% (1.2%)

0.3 - 0.5% (0.4%)

Corporate

Discounted

Discount for:

0.8

0.9

cash flow

Small issue size

Above-market coupon

2.5% (2.5%)

0.3% (0.3%)

2.5% (2.5%)

0.3% (0.3%)

Commercial mortgage-backed

Discounted

Discount for:

13.5

14.2

cash flow

Small issue size

Above-market coupon

Lease structure

1.9 - 3.1% (2.7%)

0.5% (0.5%)

0.3% (0.3%)

1.9 - 3.1% (2.6%)

0.5% (0.5%)

0.3% (0.3%)

Equity securities

Market

Net tangible asset

1.1

comparables

market multiples

1.0X (1.0X)

Other

Discounted

Discount rate

3.6

18.0% (18.0%)

3.6

18.0% (18.0%)

cash flow