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Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Fair and Notional Values of Derivative Financial Instruments
The following table presents fair values and notional values of derivative financial instruments:
Fair and Notional Values of Derivative Financial Instruments(1) (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
December 31, 2016
Qualifying Hedges
Notional
Amount
 
Asset
Fair Value
 
Liability
Fair Value
 
Notional
Amount
 
Asset
Fair Value
 
Liability
Fair Value
Foreign currency forward contracts — net investment hedges
$
976.6

 
$
1.1

 
$
(7.2
)
 
$
817.9

 
$
16.9

 
$
—

Total Qualifying Hedges
976.6

 
1.1

 
(7.2
)
 
817.9

 
16.9

 
—

Non-Qualifying Hedges
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps(2)
6,623.3

 
62.8

 
(32.9
)
 
5,309.2

 
63.0

 
(50.1
)
Written options
2,736.3

 
—

 
(0.6
)
 
2,626.5

 
0.1

 
(1.0
)
Purchased options
2,545.1

 
0.6

 
—

 
2,129.6

 
1.0

 
(0.1
)
Foreign currency forward contracts
1,337.0

 
6.9

 
(25.5
)
 
1,329.8

 
30.2

 
(6.0
)
Total Return Swap (TRS)
174.3

 
—

 
(13.7
)
 
587.5

 
—

 
(11.3
)
Equity Warrants
1.0

 
—

 
—

 
1.0

 
0.2

 
—

Interest Rate Lock Commitments
12.5

 
0.1

 
—

 
20.7

 
0.1

 
(0.1
)
Forward Sale Commitments on Agency MBS
7.5

 
—

 
—

 
39.0

 
0.1

 
—

Credit derivatives
267.5

 
—

 
(0.1
)
 
267.6

 
—

 
(0.2
)
Total Non-qualifying Hedges
13,704.5

 
70.4

 
(72.8
)
 
12,310.9

 
94.7

 
(68.8
)
Total Hedges
$
14,681.1

 
$
71.5

 
$
(80.0
)
 
$
13,128.8

 
$
111.6

 
$
(68.8
)
(1) 
Presented on a gross basis.
(2) 
Fair value balances include accrued interest.
Offsetting Assets
The following tables present a summary of our derivative portfolio, which includes the gross amounts of recognized financial assets and liabilities; the amounts offset in the consolidated balance sheet; the net amounts presented in the consolidated balance sheet; the amounts subject to an enforceable master netting arrangement or similar agreement that were not included in the offset amount above, and the amount of cash collateral received or pledged. Derivative transactions are documented under an International Swaps and Derivatives Association (“ISDA”) agreement.

Offsetting of Derivative Assets and Liabilities (dollars in millions)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts not offset in the
Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Assets
(Liabilities)
 
Gross
Amount
Offset in the
Consolidated
Balance Sheet
 
Net Amount
Presented
in the
Consolidated
Balance Sheet
 
Derivative
Financial
Instruments(2)
 
Cash
Collateral
Pledged /
(Received)(2)(3)
 
Net
Amount
September 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Derivative assets
$
71.5

 
$
—

 
$
71.5

 
$
(20.0
)
 
$
(5.3
)
 
$
46.2

Derivative liabilities
(80.0
)
 
—

 
(80.0
)
 
20.0

 
21.6

 
(38.4
)
December 31, 2016
 

 
   
 
   
 
   
 
   
 
   
Derivative assets
$
111.6

 
$
—

 
$
111.6

 
$
(30.9
)
 
$
(48.7
)
 
$
32.0

Derivative liabilities
(68.8
)
 
—

 
(68.8
)
 
30.9

 
5.0

 
(32.9
)
(1) 
Due to a change in clearinghouse rules, the Company accounts for swap contracts cleared by the Chicago Mercantile Exchange (“CME”) as “settled-to-market” effective January 2017. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. The Company’s swap contracts cleared by LCH Clearnet (“LCH”) continue to be accounted for as “collateralized-to-market” and variation margin balances are characterized as collateral against derivative exposures. At September 30, 2017, gross amount of recognized assets and liabilities were lower by $4.1 million and $19.7 million, respectively.
(2) 
The Company’s derivative transactions are governed by ISDA agreements that allow for net settlements of certain payments as well as offsetting of all contracts (“Derivative Financial Instruments”) with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. We believe our ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure. In conjunction with the ISDA agreements, the Company has entered into collateral arrangements with its counterparties which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties.
(3) 
Collateral pledged or received is included in Other assets or Other liabilities, respectively.
Offsetting Liabilities
The following tables present a summary of our derivative portfolio, which includes the gross amounts of recognized financial assets and liabilities; the amounts offset in the consolidated balance sheet; the net amounts presented in the consolidated balance sheet; the amounts subject to an enforceable master netting arrangement or similar agreement that were not included in the offset amount above, and the amount of cash collateral received or pledged. Derivative transactions are documented under an International Swaps and Derivatives Association (“ISDA”) agreement.

Offsetting of Derivative Assets and Liabilities (dollars in millions)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts not offset in the
Consolidated Balance Sheet
 
Gross
Amount of
Recognized
Assets
(Liabilities)
 
Gross
Amount
Offset in the
Consolidated
Balance Sheet
 
Net Amount
Presented
in the
Consolidated
Balance Sheet
 
Derivative
Financial
Instruments(2)
 
Cash
Collateral
Pledged /
(Received)(2)(3)
 
Net
Amount
September 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Derivative assets
$
71.5

 
$
—

 
$
71.5

 
$
(20.0
)
 
$
(5.3
)
 
$
46.2

Derivative liabilities
(80.0
)
 
—

 
(80.0
)
 
20.0

 
21.6

 
(38.4
)
December 31, 2016
 

 
   
 
   
 
   
 
   
 
   
Derivative assets
$
111.6

 
$
—

 
$
111.6

 
$
(30.9
)
 
$
(48.7
)
 
$
32.0

Derivative liabilities
(68.8
)
 
—

 
(68.8
)
 
30.9

 
5.0

 
(32.9
)
(1) 
Due to a change in clearinghouse rules, the Company accounts for swap contracts cleared by the Chicago Mercantile Exchange (“CME”) as “settled-to-market” effective January 2017. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. The Company’s swap contracts cleared by LCH Clearnet (“LCH”) continue to be accounted for as “collateralized-to-market” and variation margin balances are characterized as collateral against derivative exposures. At September 30, 2017, gross amount of recognized assets and liabilities were lower by $4.1 million and $19.7 million, respectively.
(2) 
The Company’s derivative transactions are governed by ISDA agreements that allow for net settlements of certain payments as well as offsetting of all contracts (“Derivative Financial Instruments”) with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. We believe our ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure. In conjunction with the ISDA agreements, the Company has entered into collateral arrangements with its counterparties which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties.
(3) 
Collateral pledged or received is included in Other assets or Other liabilities, respectively.
Derivative Instrument Gains And Losses
The following table presents the impact of derivatives on the statements of income.
Derivative Instrument Gains and Losses (dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended September 30,
 
Nine Months Ended September 30,
Derivative Instruments
Gain / (Loss)
Recognized
 
2017
 
2016
 
2017
 
2016
Non Qualifying Hedges
    
 
 

 
 

 
 
 
 
Interest rate swaps
Other income
 
$
1.2

 
$
2.3

 
$
3.9

 
$
(0.3
)
Interest rate options
Other income
 
0.1

 
0.1

 
0.3

 
0.5

Foreign currency forward contracts
Other income
 
5.8

 
1.4

 
(22.0
)
 
(10.9
)
Equity warrants
Other income
 
(0.3
)
 
0.1

 
(0.2
)
 
(0.2
)
Total Return Swap (TRS)
Other income
 
(1.1
)
 
(19.7
)
 
(2.4
)
 
7.1

Interest Rate Lock Commitments
Other income
 
—

 
0.2

 
0.1

 
0.3

Forward Sale Commitments on Agency MBS
Other income
 
(0.1
)
 
(0.1
)
 
(0.4
)
 
(0.1
)
Credit Derivatives
Other income
 
—

 
0.2

 
—

 
1.4

Total Non-qualifying Hedges
 
 
$
5.6

 
$
(15.5
)
 
$
(20.7
)
 
$
(2.2
)
Total derivatives-income statement impact
 
 
$
5.6

 
$
(15.5
)
 
$
(20.7
)
 
$
(2.2
)
Changes In AOCI Relating To Derivatives
The following table presents the changes in AOCI relating to derivatives:
Changes in AOCI Relating to Derivatives (dollars in millions)
 
 
 
 
 
 
 
 
 
 
Contract Type
Derivatives -
effective
portion
reclassified
from AOCI
to income
 
Hedge
ineffectiveness
recorded
directly in
income
 
Total
income
statement
impact
 
Derivatives -
effective
portion
recorded
in OCI
 
Total
change
in OCI
for period
Quarter Ended September 30, 2017
 

 
 

 
 

 
 

 
 

Foreign currency forward contracts — net investment hedges
$
—

 
$
—

 
$
—

 
$
(33.0
)
 
$
(33.0
)
Total
$
—

 
$
—

 
$
—

 
$
(33.0
)
 
$
(33.0
)
Quarter Ended September 30, 2016
 

 
   
 
   
 
   
 
   
Foreign currency forward contracts — net investment hedges
$
—

 
$
—

 
$
—

 
$
4.2

 
$
4.2

Total
$
—

 
$
—

 
$
—

 
$
4.2

 
$
4.2

Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts — net investment hedges
$
13.4

 
$
—

 
$
13.4

 
$
(74.7
)
 
$
(88.1
)
Total
$
13.4

 
$
—

 
$
13.4

 
$
(74.7
)
 
$
(88.1
)
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts — net investment hedges
$
1.8

 
$
—

 
$
1.8

 
$
(28.1
)
 
$
(29.9
)
Total
$
1.8

 
$
—

 
$
1.8

 
$
(28.1
)
 
$
(29.9
)