Fair Value of Financial Instruments (Tables)

12 Months Ended

Sep. 30, 2013

Assets and Liabilities Carrying at Fair Value on Recurring Basis

The Company’s consolidated assets and liabilities measured at fair value are summarized according to the hierarchy previously described as follows:



	September 30, 2013
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash and cash equivalents (a)	$	1,899.7	$	—	$	—	$	1,899.7
Contingent purchase price reduction receivable	—		—		41.0		41.0
Derivatives:
Foreign exchange forward agreements	—		1.8		—		1.8
Commodity swap and option agreements	—		4.1		—		4.1
Call options and futures contracts	—		221.8		—		221.8
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		1,518.1		5.0		1,523.1
Commercial mortgage-backed securities	—		448.7		5.7		454.4
Corporates	—		8,957.2		461.1		9,418.3
Hybrids	—		428.8		—		428.8
Municipals	—		1,007.0		—		1,007.0
Agency residential mortgage-backed securities	—		98.6		—		98.6
Non-agency residential mortgage-backed securities	—		1,368.0		—		1,368.0
U.S. Government	790.9		210.9		—		1,001.8
Equity securities:
Available-for-sale	—		271.0		—		271.0
Trading	70.8		—		10.7		81.5
Total financial assets	$	2,761.4	$	14,536.0	$	523.5	$	17,820.9

Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	—	$	—	$	1,544.4	$	1,544.4
Futures contracts	—		1.0		—		1.0
Foreign exchange forward agreements	—		10.0		—		10.0
Commodity swap and option agreements	—		2.4		—		2.4
Equity conversion feature of preferred stock	—		—		330.8		330.8
Total financial liabilities	$	—	$	13.4	$	1,875.2	$	1,888.6



	September 30, 2012
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash and cash equivalents (a)	$	1,468.4	$	2.3	$	—	$	1,470.7
Contingent purchase price reduction receivable	—		—		41.0		41.0
Derivatives:
Foreign exchange forward agreements	—		1.2		—		1.2
Commodity swap and option agreements	—		2.0		—		2.0
Call options	—		200.7		—		200.7
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		1,012.0		15.9		1,027.9
Commercial mortgage-backed securities	—		548.8		5.0		553.8
Corporates	—		10,873.7		135.3		11,009.0
Hybrids	—		519.4		8.8		528.2
Municipals	—		1,224.0		—		1,224.0
Agency residential mortgage-backed securities	—		155.0		—		155.0
Non-agency residential mortgage-backed securities	—		660.6		—		660.6
U.S. Government	930.4		—		—		930.4
Equity securities
Available-for-sale	—		248.1		—		248.1
Trading	146.8		—		—		146.8
Total financial assets	$	2,545.6	$	15,447.8	$	206.0	$	18,199.4

Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	—	$	—	$	1,550.8	$	1,550.8
Futures contracts	—		0.9		—		0.9
Foreign exchange forward agreements	—		10.0		—		10.0
Commodity swap and option agreements	—		—		—		—
Equity conversion feature of preferred stock	—		—		232.0		232.0
Total financial liabilities	$	—	$	10.9	$	1,782.8	$	1,793.7


(a)	The fair values of cash equivalents and equity investments 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 September 30, 2013 and 2012 are as follows:



			Fair Value at				Range (Weighted average)
Assets	Valuation Technique	Unobservable Input(s)	September 30, 2013		September 30, 2012		September 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	5.0		15.9		100% - 107% (101%)	100% - 110% (103%)
Commercial mortgage-backed securities	Broker-quoted	Offered quotes	5.7		5.0		96%	101%
Corporates	Broker-quoted	Offered quotes	404.5		103.3		0% - 113% (90%)	0% - 141% (69%)
Corporates	Market Pricing	Quoted prices	56.6		32.0		90% - 131% (97%)	88% - 158% (98%)
Hybrids	Market Pricing	Quoted prices	—		8.8		—	0% - 103% (25%)
Equity	Option Pricing	Risk-adjusted rate	10.7		—		25.0%	—
		Risk-free discount factor					0.999	—
		Risk-adjusted discount factor					0.995	—
		Upward movement factor (Mu)					1.1	—
		Downward movement factor (Md)					0.9	—
		Probability of upward movement (Pu)					48.6%	—
		Probability of downward movement (Pd)					51.4%	—
Total			$	523.5	$	206.0

Liabilities
FIA embedded derivatives, included in contractholder funds	Discounted cash flow	Market value of option	$	1,544.4	$	1,550.8	0% - 38% (4%)	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	330.8		232.0		42%	41%
		Discount yield					11%	12% - 13% (12%)
		Non-cash accretion rate					0%	0%
		Calibration adjustment					0% - 1.0% (0.3%)	10% - 13% (11%)
Total			$	1,875.2	$	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 years ended September 30, 2013, 2012 and 2011. 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.



	Year ended September 30, 2013
	Balance at Beginning of Period		Total Gains (Losses)														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets
Contingent purchase price reduction receivable	$	41.0	$	—		$	—		$	—	$	—		$	—		$	—		$	41.0
Fixed maturity securities available-for-sale:
Asset-backed securities	15.9		—			(0.2		)	—		—			(0.2		)	(10.5		)	5.0
Commercial mortgage-backed securities	5.0		—			(0.3		)	1.0		—			—			—			5.7
Corporates	135.3		(0.3		)	(13.4		)	406.0		(9.6		)	(23.1		)	(33.8		)	461.1
Hybrids	8.8		—			(0.1		)	—		—			—			(8.7		)	—
Equity securities - trading	—		—			—			10.7		—			—			—			10.7
Equity securities - available-for-sale	—		0.2			—			10.5		(10.7		)	—			—			—
Total assets at fair value	$	206.0	$	(0.1	)	$	(14.0	)	$	428.2	$	(20.3	)	$	(23.3	)	$	(53.0	)	$	523.5

	Balance at Beginning of Period		Total (Gains) Losses														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Liabilities
FIA embedded derivatives, included in contractholder funds	$	1,550.8	$	(6.4	)	$	—		$	—	$	—		$	—		$	—		$	1,544.4
Equity conversion feature of preferred stock	232.0		101.6			—			—		—			(2.8		)	—			330.8
Total liabilities at fair value	$	1,782.8	$	95.2		$	—		$	—	$	—		$	(2.8	)	$	—		$	1,875.2


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



	Year ended September 30, 2012
	Balance at Beginning of Period		Total Gains (Losses)														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets
Contingent purchase price reduction receivable	$	—	$	41.0		$	—		$	—	$	—		$	—		$	—		$	41.0
Fixed maturity securities available-for-sale:
Asset-backed securities	374.5		—			7.4			410.7		—			(38.8		)	(737.9		)	15.9
Commercial mortgage-backed securities	—		—			—			5.0		—			—			—			5.0
Corporates	159.7		—			(3.6		)	1.3		(26.8		)	(14.2		)	18.9			135.3
Hybrids	5.2		—			(0.1		)	—		—			—			3.7			8.8
Municipals	—		—			0.1			10.2		—			—			(10.3		)	—
Agency residential mortgage-backed securities	3.3		—			—			—		—			—			(3.3		)	—
Non-agency residential mortgage-backed securities	3.8		(0.1		)	—			—		(0.5		)	(0.3		)	(2.9		)	—
Total assets at fair value	$	546.5	$	40.9		$	3.8		$	427.2	$	(27.3	)	$	(53.3	)	$	(731.8	)	$	206.0

	Balance at Beginning of Period		Total (Gains) Losses														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Liabilities
FIA embedded derivatives, included in contractholder funds	$	1,396.3	$	154.5		$	—		$	—	$	—		$	—		$	—		$	1,550.8
Equity conversion feature of preferred stock	75.4		156.6			—			—		—			—			—			232.0
Available-for-sale embedded derivatives	0.4		(0.4		)	—			—		—			—			—			—
Total liabilities at fair value	$	1,472.1	$	310.7		$	—		$	—	$	—		$	—		$	—		$	1,782.8


(a)	The net transfers in and out of Level 3 during the year ended September 30, 2012 was exclusively to or from Level 2.



	Year ended September 30, 2011
	Balance at FGL Acquisition Date		Total Gains (Losses)														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at FGL Acquisition Date		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	400.0	$	—		$	0.8		$	2.0	$	—		$	(13.7	)	$	(14.6	)	$	374.5
Corporates	197.6		2.0			5.4			10.4		(48.9		)	(6.7		)	(0.1		)	159.7
Hybrids	8.3		—			(0.1		)	—		—			—			(3.0		)	5.2
Agency residential mortgage-backed securities	3.3		—			—			—		—			—			—			3.3
Non-agency residential mortgage-backed securities	18.5		2.4			0.4			—		(15.7		)	(1.8		)	—			3.8
Total assets at fair value	$	627.7	$	4.4		$	6.5		$	12.4	$	(64.6	)	$	(22.2	)	$	(17.7	)	$	546.5

	Balance at FGL Acquisition Date		Total (Gains) Losses														Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at FGL Acquisition Date		Included in Earnings			Included in AOCI			Purchases		Sales			Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Liabilities
FIA embedded derivatives, included in contractholder funds	$	1,466.3	$	(70.0	)	$	—		$	—	$	—		$	—		$	—		$	1,396.3
Equity conversion feature of preferred stock	—		(27.9		)	—			—		103.3			—			—			75.4
Available-for-sale embedded derivatives	0.4		—			—			—		—			—			—			0.4
Total liabilities at fair value	$	1,466.7	$	(97.9	)	$	—		$	—	$	103.3		$	—		$	—		$	1,472.1


(a)	The net transfers in and out of Level 3 during the year ended September 30, 2011 was exclusively to or from Level 2.

Schedule of Assets and Liabilities not Measured at Fair Value

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial instrument assets and liabilities which are not measured at fair value on the Consolidated Balance Sheets are summarized as follows:



	September 30, 2013
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Policy loans and other invested assets	$	—	$	—	$	31.2	$	31.2	$	31.2
Asset-based loans	—		—		560.4		560.4		560.4
Total financial assets	$	—	$	—	$	591.6	$	591.6	$	591.6

Liabilities
Total debt (a)	$	—	$	4,773.2	$	—	$	4,773.2	$	4,896.1
Redeemable preferred stock, excluding equity conversion feature	—		—		377.1		377.1		329.4
Investment contracts, included in contractholder funds	—		—		12,378.6		12,378.6		13,703.8
Total financial liabilities	$	—	$	4,773.2	$	12,755.7	$	17,528.9	$	18,929.3



	September 30, 2012
	Level 1		Level 2		Level 3		Estimated Fair Value		Carrying Amount
Assets
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-based loans	—		—		180.1		180.1		180.1
Total financial assets	$	—	$	35.0	$	198.9	$	233.9	$	233.9

Liabilities
Total debt (a)	$	524.0	$	1,804.8	$	—	$	2,328.8	$	2,167.0
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	$	1,804.8	$	12,640.8	$	14,969.6	$	16,225.8


(a)	The fair values of 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.