Derivative Financial Instruments Derivative Financial Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

We primarily invest in the following types of derivative financial instruments: interest rate swaps, futures, forward contracts, put and call options, swaptions, embedded derivatives and warrants. We also enter into master netting agreements which reduce credit risk by permitting net settlement of transactions. At March 31, 2017, we had posted collateral of $115.6 and received collateral of $63.3 related to our derivative financial instruments. In addition to collateral posted for derivative transactions, from time to time, we may have cash on deposit to meet certain regulatory requirements, which are included in Cash and cash equivalents on the consolidated balance sheets. At March 31, 2017 and December 31, 2016, we had cash on deposit of $310.5 and $405.3, respectively.

A summary of the aggregate contractual or notional amounts and estimated fair values related to derivative financial instruments at March 31, 2017 and December 31, 2016 is as follows:

	Contractual/ Notional Amount		Balance Sheet Location	Estimated Fair Value
				Asset			(Liability)
March 31, 2017
Hedging instruments
Interest rate swaps - fixed to floating	$	1,235.0	Other assets/other liabilities	$	1.0		$	(4.8	)
Interest rate swaps - forward starting pay fixed	4,775.0		Other assets/other liabilities	—			(12.6		)
Subtotal hedging	6,010.0		Subtotal hedging	1.0			(17.4		)
Non-hedging instruments
Interest rate swaps	126.8		Equity securities	4.4			—
Options	13,234.5		Other assets/other liabilities	315.2			(315.0		)
Futures	192.7		Equity securities	0.6			(0.5		)
Subtotal non-hedging	13,554.0		Subtotal non-hedging	320.2			(315.5		)
Total derivatives	$	19,564.0	Total derivatives	321.2			(332.9		)
			Amounts netted	(162.9		)	162.9
			Net derivatives	$	158.3		$	(170.0	)
December 31, 2016
Hedging instruments
Interest rate swaps - fixed to floating	$	1,385.0	Other assets/other liabilities	$	4.0		$	(0.7	)
Interest rate swaps - forward starting pay fixed	4,775.0		Other assets/other liabilities	528.8			(6.0		)
Subtotal hedging	6,160.0		Subtotal hedging	532.8			(6.7		)
Non-hedging instruments
Interest rate swaps	209.4		Equity securities	4.7			(0.2		)
Options	10,280.2		Other assets/other liabilities	220.7			(233.9		)
Futures	185.3		Equity securities	0.5			(1.1		)
Subtotal non-hedging	10,674.9		Subtotal non-hedging	225.9			(235.2		)
Total derivatives	$	16,834.9	Total derivatives	758.7			(241.9		)
			Amounts netted	(92.8		)	92.8
			Net derivatives	$	665.9		$	(149.1	)

Fair Value Hedges

We have entered into various interest rate swap contracts to convert a portion of our interest rate exposure on our long-term debt from fixed rates to floating rates. The floating rates payable on all of our fair value hedges are benchmarked to LIBOR. A summary of our outstanding fair value hedges at March 31, 2017 and December 31, 2016 is as follows:

Type of Fair Value Hedges	Year Entered Into	Outstanding Notional Amount				Interest Rate Received		Expiration Date
		March 31,   2017		December 31, 2016
Interest rate swap	2017	$	50.0	$	—	4.350	%	August 15, 2020
Interest rate swap	2015	200.0		200.0		4.350		August 15, 2020
Interest rate swap	2014	150.0		150.0		4.350		August 15, 2020
Interest rate swap	2013	10.0		10.0		4.350		August 15, 2020
Interest rate swap	2012	200.0		200.0		4.350		August 15, 2020
Interest rate swap	2012	625.0		625.0		1.875		January 15, 2018
Interest rate swap	2012	—		200.0		2.375		February 15, 2017
Total notional amount outstanding		$	1,235.0	$	1,385.0

A summary of the effect of fair value hedges on our income statement for the three months ended March 31, 2017 and 2016 is as follows:

Type of Fair Value Hedges	Income Statement Location of Hedge Gain	Hedge Gain Recognized		Hedged Item	Income Statement Location of Hedged Item Loss	Hedged  Item Loss Recognized
Three months ended March 31, 2017
Interest rate swaps	Interest expense	$	0.2	Fixed rate debt	Interest expense	$	(0.2	)
Three months ended March 31, 2016
Interest rate swaps	Interest expense	$	2.4	Fixed rate debt	Interest expense	$	(2.4	)

Cash Flow Hedges

We have entered into a series of forward starting pay fixed interest rate swaps with the objective of eliminating the variability of cash flows in the interest payments on anticipated future financings. During the three months ended March 31, 2017, swaps in the notional amount of $450.0 were terminated. We received an aggregate of $74.6 from the swap counter parties upon termination. Following the termination of these swaps, we entered into a new series of forward starting pay fixed interest rate swaps to replace the terminated swaps. We had $4,775.0 in notional amount outstanding under these swaps at March 31, 2017 and December 31, 2016, respectively.

For the three months ended March 31, 2017, following a final effectiveness test upon the terminated swaps, we recorded a net realized loss on financial instruments of $12.0 related to ineffectiveness and missed forecasted transactions. The unrecognized loss for all outstanding, expired and terminated cash flow hedges included in accumulated other comprehensive loss, net of tax, was $151.4 and $168.4 at March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017, the total amount of amortization over the next twelve months for all cash flow hedges is estimated to increase interest expense by approximately $8.6.

A summary of the effect of cash flow hedges on our financial statements for the three months ended March 31, 2017 and 2016 is as follows:

	Effective Portion
	Pretax Hedge Gain (Loss) Recognized in Other Comprehensive Income (Loss)			Income Statement Location of Loss Reclassification from Accumulated Other Comprehensive Loss	Hedge Loss Reclassified from Accumulated Other Comprehensive Loss			Ineffective Portion
Type of Cash Flow Hedge								Income Statement Location of Loss Recognized	Hedge Loss Recognized
Three months ended March 31, 2017
Forward starting pay fixed swaps	$	18.3		Interest expense	$	(1.5	)	Net realized gains (losses) on financial instruments	$	(12.0	)
Three months ended March 31, 2016
Forward starting pay fixed swaps	$	(409.8	)	Interest expense	$	(1.4	)	None	$	—

We test for cash flow hedge effectiveness at hedge inception and re-assess at the end of each reporting period. No amounts were excluded from the assessment of hedge effectiveness, and no ineffectiveness was recognized, except for the amounts described above related to the expired interest rate swaps.

Non-Hedging Derivatives

A summary of the effect of non-hedging derivatives on our income statement for the three months ended March 31, 2017 and 2016 is as follows:

Type of Non-hedging Derivatives	Income Statement Location of Gain (Loss) Recognized	Derivative Gain (Loss) Recognized
Three months ended March 31, 2017
Interest rate swaps	Net realized gains (losses) on financial instruments	$	0.6
Options	Net realized gains (losses) on financial instruments	(10.5		)
Futures	Net realized gains (losses) on financial instruments	(0.4		)
Total		$	(10.3	)
Three months ended March 31, 2016
Interest rate swaps	Net realized gains (losses) on financial instruments	$	(16.9	)
Options	Net realized gains (losses) on financial instruments	(136.4		)
Futures	Net realized gains (losses) on financial instruments	(0.5		)
Total		$	(153.8	)