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Fair Value of Financial Instruments (Tables)
9 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]  
Assets and Liabilities Carrying at Fair Value on Recurring Basis
The carrying amounts and estimated fair values of the Company’s consolidated financial instruments for which the disclosure of fair values is required, including (i) financial assets and liabilities measured and carried at fair value on a recurring basis, and (ii) financial assets and liabilities not measured at fair value but for which fair value disclosures are required; are summarized according to the hierarchy previously described as follows:
 
June 30, 2013
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
Carrying Amount
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (a)
$
1,243.7

 
$

 
$

 
$
1,243.7

 
$
1,243.7

Contingent purchase price reduction receivable

 

 
41.0

 
41.0

 
41.0

Derivatives:
 
 
 
 
 
 
 
 
 
Foreign exchange forward agreements

 
5.8

 

 
5.8

 
5.8

Commodity swap and option agreements

 
4.4

 

 
4.4

 
4.4

Call options and futures contracts

 
227.4

 

 
227.4

 
227.4

Fixed maturity securities, available-for-sale:
 
 
 
 
 
 
 
 
 
Asset-backed securities

 
1,432.4

 
5.1

 
1,437.5

 
1,437.5

Commercial mortgage-backed securities

 
518.0

 
5.9

 
523.9

 
523.9

Corporates

 
9,773.8

 
439.0

 
10,212.8

 
10,212.8

Hybrids

 
508.3

 

 
508.3

 
508.3

Municipals

 
1,036.9

 

 
1,036.9

 
1,036.9

Agency residential mortgage-backed securities

 
111.0

 

 
111.0

 
111.0

Non-agency residential mortgage-backed securities

 
1,353.9

 

 
1,353.9

 
1,353.9

U.S. Government
183.6

 
210.4

 

 
394.0

 
394.0

Equity securities:
 
 
 
 
 
 
 
 
 
Available-for-sale

 
258.1

 
11.7

 
269.8

 
269.8

Trading
67.2

 

 

 
67.2

 
67.2

Policy loans and other invested assets

 

 
27.6

 
27.6

 
27.6

Asset-backed loans

 

 
430.2

 
430.2

 
430.2

Total financial assets
$
1,494.5

 
$
15,440.4

 
$
960.5

 
$
17,895.4

 
$
17,895.4

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Total debt (a)
$

 
$
4,574.3

 
$

 
$
4,574.3

 
$
4,554.3

Derivatives:
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds

 

 
1,585.9

 
1,585.9

 
1,585.9

Futures contracts

 
0.4

 

 
0.4

 
0.4

Foreign exchange forward agreements

 
4.5

 

 
4.5

 
4.5

Commodity swap and option agreements

 
2.5

 

 
2.5

 
2.5

Equity conversion feature of preferred stock

 

 
147.3

 
147.3

 
147.3

Redeemable preferred stock, excluding equity conversion feature

 

 
368.9

 
368.9

 
325.4

Investment contracts, included in contractholder funds

 

 
12,354.5

 
12,354.5

 
13,756.7

Total financial liabilities
$

 
$
4,581.7

 
$
14,456.6

 
$
19,038.3

 
$
20,377.0


 
September 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
Carrying Amount
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (a)
$
1,468.4

 
$
2.3

 
$

 
$
1,470.7

 
$
1,470.7

Contingent purchase price reduction receivable

 

 
41.0

 
41.0

 
41.0

Derivatives:
 
 
 
 
 
 
 
 
 
Foreign exchange forward agreements

 
1.2

 

 
1.2

 
1.2

Commodity swap and option agreements

 
2.0

 

 
2.0

 
2.0

Call options

 
200.7

 

 
200.7

 
200.7

Fixed maturity securities, available-for-sale:
 
 
 
 
 
 
 
 
 
Asset-backed securities

 
1,012.0

 
15.9

 
1,027.9

 
1,027.9

Commercial mortgage-backed securities

 
548.8

 
5.0

 
553.8

 
553.8

Corporates

 
10,873.7

 
135.3

 
11,009.0

 
11,009.0

Hybrids

 
519.4

 
8.8

 
528.2

 
528.2

Municipals

 
1,224.0

 

 
1,224.0

 
1,224.0

Agency residential mortgage-backed securities

 
155.0

 

 
155.0

 
155.0

Non-agency residential mortgage-backed securities

 
660.6

 

 
660.6

 
660.6

U.S. Government
930.4

 

 

 
930.4

 
930.4

Equity securities
 
 
 
 
 
 
 
 
 
Available-for-sale

 
248.1

 

 
248.1

 
248.1

Trading
146.8

 

 

 
146.8

 
146.8

U.S. Treasuries and certificate of deposit, held-to-maturity

 
35.0

 

 
35.0

 
35.0

Policy loans and other invested assets

 

 
18.8

 
18.8

 
18.8

Asset-backed loans

 

 
180.1

 
180.1

 
180.1

Total financial assets
$
2,545.6

 
$
15,482.8

 
$
404.9

 
$
18,433.3

 
$
18,433.3

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Total debt (a)
$
524.0

 
$
1,804.8

 
$

 
$
2,328.8

 
$
2,167.0

Derivatives:
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds

 

 
1,550.8

 
1,550.8

 
1,550.8

Futures contracts

 
0.9

 

 
0.9

 
0.9

Foreign exchange forward agreements

 
10.0

 

 
10.0

 
10.0

Commodity swap and option agreements

 

 

 

 

Equity conversion feature of preferred stock

 

 
232.0

 
232.0

 
232.0

Redeemable preferred stock, excluding equity conversion feature

 

 
368.9

 
368.9

 
319.2

Investment contracts, included in contractholder funds

 

 
12,271.9

 
12,271.9

 
13,739.6

Total financial liabilities
$
524.0

 
$
1,815.7

 
$
14,423.6

 
$
16,763.3

 
$
18,019.5

(a)
The fair values of cash equivalents, short-term investments and debt set forth above are generally based on quoted or observed market prices.
(b)
The carrying amounts of trade receivables, accounts payable, accrued investment income and portions of other insurance liabilities approximate fair value due to their short duration and, accordingly, they are not presented in the tables above.
Schedule of Unobservable Inputs Used for Level Three Fair Value Measurements of Financial Instruments on Recurring Basis
Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of June 30, 2013 is as follows: 
 
 
 
 
 
 
Fair Value at
 
Range (Weighted average)
Assets
 
Valuation Technique
 
Unobservable Input(s)
 
June 30, 2013
 
September 30,
2012
 
June 30,
2013
 
September 30, 2012
Contingent purchase price reduction receivable
 
Discounted cash flow
 
Probability of collection
 
$
41.0

 
$
41.0

 
88% - 96% (92%)
 
88% - 96% (92%)
 
 
 
 
Expected term
 
 
 
 
 
9 months
 
9 months
 
 
 
 
Discount rate
 
 
 
 
 
1%
 
0.72%
 
 
 
 
Credit insurance risk premium
 
 
 
 
 
11%
 
12%
Asset-backed securities
 
Broker-quoted
 
Offered quotes
 
5.1

 
15.9

 
106%
 
100% - 110% (103%)
Commercial mortgage-backed securities
 
Broker-quoted
 
Offered quotes
 
5.9

 
5.0

 
100%
 
101%
Corporates
 
Broker-quoted
 
Offered quotes
 
400.2

 
103.3

 
0% - 108% (93%)
 
0% - 141% (69%)
Corporates
 
Market Pricing
 
Quoted prices
 
38.8

 
32.0

 
88% - 126% (96%)
 
88% - 158% (98%)
Hybrids
 
Market Pricing
 
Quoted prices
 

 
8.8

 
 
0% - 103% (25%)
Equity
 
Market Pricing
 
Quoted prices
 
11.7

 

 
0.4% - 98% (58%)
 
Total
 
 
 
 
 
$
502.7

 
$
206.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds
 
Discounted cash flow
 
Market value of option
 
$
1,585.9

 
$
1,550.8

 
0% - 37%
 
0% - 31% (4%)
 
 
 
 
SWAP rates
 
 
 
 
 
2% - 3% (2%)
 
0.76% - 2% (1%)
 
 
 
 
Mortality multiplier
 
 
 
 
 
80%
 
70%
 
 
 
 
Surrender rates
 
 
 
 
 
0.50% - 75% (7%)
 
2% - 50% (7%)
 
 
 
 
Non-performance spread
 
 
 
 
 
0.25% - 0.25% (0.25%)
 
0.25% - 0.25% (0.25%)
Equity conversion feature of preferred stock
 
Monte Carlo simulation / Option model
 
Annualized volatility of equity
 
147.3

 
232.0

 
42%
 
41%
 
 
 
 
Discount yield
 
 
 
 
 
12%
 
12% - 13% (12%)
 
 
 
 
Non-cash accretion rate
 
 
 
 
 
0%
 
0%
 
 
 
 
Calibration adjustment
 
 
 
 
 
17% - 19% (18%)
 
10% - 13% (11%)
Total
 
 
 
 
 
$
1,733.2

 
$
1,782.8

 
 
 
 
Changes in Fair Value of Financial Instruments
The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three and nine months ended June 30, 2013 and July 1, 2012. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
 
Three months ended June 30, 2013
 
Balance at Beginning
of Period
 
Total Gains (Losses)
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent purchase price reduction receivable
$
41.0

 
$

 
$

 
$

 
$

 
$

 
$

 
$
41.0

Fixed maturity securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
5.3

 

 
(0.1
)
 

 

 
(0.1
)
 

 
5.1

Commercial mortgage-backed securities
6.2

 

 
(0.3
)
 

 

 

 

 
5.9

Corporates
356.5

 

 
(12.0
)
 
106.2

 

 
(11.7
)
 

 
439.0

Equity securities available-for-sale
10.0

 

 
1.6

 
0.1

 

 

 

 
11.7

Total assets at fair value
$
419.0

 
$

 
$
(10.8
)
 
$
106.3

 
$

 
$
(11.8
)
 
$

 
$
502.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Beginning
of Period
 
Total (Gains) Losses
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds
$
1,639.6

 
$
(53.7
)
 
$

 
$

 
$

 
$

 
$

 
$
1,585.9

Equity conversion feature of preferred stock
202.7

 
(52.6
)
 

 

 

 
(2.8
)
 

 
147.3

Total liabilities at fair value
$
1,842.3

 
$
(106.3
)
 
$

 
$

 
$

 
$
(2.8
)
 
$

 
$
1,733.2


 
Nine months ended June 30, 2013
 
Balance at Beginning
of Period
 
Total Gains (Losses)
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent purchase price reduction receivable
$
41.0

 
$

 
$

 
$

 
$

 
$

 
$

 
$
41.0

Fixed maturity securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
15.9

 

 
(0.2
)
 

 

 
(0.1
)
 
(10.5
)
 
5.1

Commercial mortgage-backed securities
5.0

 

 
(0.1
)
 
1.0

 

 

 

 
5.9

Corporates
135.3

 
(0.3
)
 
(10.8
)
 
383.6

 
(9.6
)
 
(25.4
)
 
(33.8
)
 
439.0

Hybrids
8.8

 

 
(0.1
)
 

 

 

 
(8.7
)
 

Equity securities available-for-sale

 

 
1.6

 
10.1

 

 

 

 
11.7

Total assets at fair value
$
206.0

 
$
(0.3
)
 
$
(9.6
)
 
$
394.7

 
$
(9.6
)
 
$
(25.5
)
 
$
(53.0
)
 
$
502.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Beginning
of Period
 
Total (Gains) Losses
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds
$
1,550.8

 
$
35.1

 
$

 
$

 
$

 
$

 
$

 
$
1,585.9

Equity conversion feature of preferred stock
232.0

 
(81.9
)
 

 

 

 
(2.8
)
 

 
147.3

Total liabilities at fair value
$
1,782.8

 
$
(46.8
)
 
$

 
$

 
$

 
$
(2.8
)
 
$

 
$
1,733.2

(a)
The net transfers in and out of Level 3 during the three and nine months ended June 30, 2013 were exclusively to or from Level 2.

 
Three months ended July 1, 2012
 
Balance at Beginning
of Period
 
Total Gains (Losses)
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent purchase price reduction receivable
$
41.0

 
$

 
$

 
$

 
$

 
$

 
$

 
$
41.0

Fixed maturity securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
503.0

 

 
0.9

 
262.5

 

 
(11.0
)
 
3.7

 
759.1

Corporates
120.1

 
0.2

 
(3.6
)
 
90.3

 
(7.7
)
 
(33.7
)
 
40.2

 
205.8

Hybrids
5.1

 

 
0.1

 

 

 

 

 
5.2

Municipals
10.4

 

 

 

 

 

 
(10.3
)
 
0.1

Agency residential mortgage-backed securities
3.3

 

 

 

 

 

 
(3.3
)
 

Non-agency residential mortgage-backed securities
1.2

 
(0.1
)
 
0.1

 

 
(0.5
)
 
(0.1
)
 

 
0.6

Total assets at fair value
$
684.1

 
$
0.1

 
$
(2.5
)
 
$
352.8

 
$
(8.2
)
 
$
(44.8
)
 
$
30.3

 
$
1,011.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Beginning
of Period
 
Total (Gains) Losses
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds
$
1,496.7

 
$
(10.3
)
 
$

 
$

 
$

 
$

 
$

 
$
1,486.4

Equity conversion feature of preferred stock
73.9

 
125.5

 

 

 

 

 

 
199.4

Available-for-sale embedded derivatives
0.4

 
(0.4
)
 

 

 

 

 

 

Total liabilities at fair value
$
1,571.0

 
$
114.8

 
$

 
$

 
$

 
$

 
$

 
$
1,685.8


 
Nine months ended July 1, 2012
 
Balance at Beginning
of Period
 
Total Gains (Losses)
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent purchase price reduction receivable
$

 
$
41.0

 
$

 
$

 
$

 
$

 
$

 
41.0

Fixed maturity securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
374.5

 

 
7.0

 
394.9

 

 
(31.8
)
 
14.5

 
759.1

Corporates
159.7

 
0.2

 
(5.9
)
 
91.6

 
(24.4
)
 
(45.3
)
 
29.9

 
205.8

Hybrids
5.2

 

 

 

 

 

 

 
5.2

Municipals

 

 
0.1

 
10.2

 

 

 
(10.2
)
 
0.1

Agency residential mortgage-backed securities
3.3

 

 

 

 

 

 
(3.3
)
 

Non-agency residential mortgage-backed securities
3.8

 
(0.1
)
 


 

 
(0.5
)
 
(0.3
)
 
(2.3
)
 
0.6

Total assets at fair value
$
546.5

 
$
41.1

 
$
1.2

 
$
496.7

 
$
(24.9
)
 
$
(77.4
)
 
$
28.6

 
$
1,011.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Beginning
of Period
 
Total (Gains) Losses
 
 
 
 
 
 
 
Net transfer In (Out) of
Level 3 (a)
 
Balance at End of
Period
 
 
Included in
Earnings
 
Included in
AOCI
 
Purchases
 
Sales
 
Settlements
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIA embedded derivatives, included in contractholder funds
$
1,396.3

 
$
90.1

 
$

 
$

 
$

 
$

 
$

 
$
1,486.4

Equity conversion feature of preferred stock
75.4

 
124.0

 

 

 

 

 

 
199.4

Available-for-sale embedded derivatives
0.4

 
(0.4
)
 

 

 

 

 

 

Total liabilities at fair value
$
1,472.1

 
$
213.7

 
$

 
$

 
$

 
$

 
$

 
$
1,685.8


(a)
The net transfers in and out of Level 3 during the three and nine months ended July 1, 2012 was exclusively to or from Level 2.