þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 75-3108137 | |
State of Incorporation | IRS Employer Identification No. | |
11825 N. Pennsylvania Street | ||
Carmel, Indiana 46032 | (317) 817-6100 | |
Address of principal executive offices | Telephone |
PART I - FINANCIAL INFORMATION | Page | |
Item 1. | Financial Statements (unaudited) | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II - OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. |
ITEM 1. | FINANCIAL STATEMENTS. |
June 30, 2013 | December 31, 2012 | ||||||
Investments: | |||||||
Fixed maturities, available for sale, at fair value (amortized cost: June 30, 2013 - $22,023.7; December 31, 2012 - $21,626.8) | $ | 23,623.0 | $ | 24,614.1 | |||
Equity securities at fair value (cost: June 30, 2013 - $230.8; December 31, 2012 - $167.1) | 241.3 | 171.4 | |||||
Mortgage loans | 1,692.2 | 1,573.2 | |||||
Policy loans | 269.1 | 272.0 | |||||
Trading securities | 241.0 | 266.2 | |||||
Investments held by variable interest entities | 1,087.9 | 814.3 | |||||
Other invested assets | 312.6 | 248.1 | |||||
Total investments | 27,467.1 | 27,959.3 | |||||
Cash and cash equivalents - unrestricted | 280.0 | 582.5 | |||||
Cash and cash equivalents held by variable interest entities | 210.7 | 54.2 | |||||
Accrued investment income | 294.8 | 286.2 | |||||
Present value of future profits | 591.6 | 626.0 | |||||
Deferred acquisition costs | 762.1 | 629.7 | |||||
Reinsurance receivables | 2,838.0 | 2,927.7 | |||||
Income tax assets, net | 931.2 | 716.9 | |||||
Assets held in separate accounts | 15.0 | 14.9 | |||||
Other assets | 385.1 | 334.0 | |||||
Total assets | $ | 33,775.6 | $ | 34,131.4 |
June 30, 2013 | December 31, 2012 | ||||||
Liabilities: | |||||||
Liabilities for insurance products: | |||||||
Interest-sensitive products | $ | 12,784.2 | $ | 12,893.2 | |||
Traditional products | 10,834.4 | 11,196.3 | |||||
Claims payable and other policyholder funds | 1,006.4 | 985.1 | |||||
Liabilities related to separate accounts | 15.0 | 14.9 | |||||
Other liabilities | 626.8 | 570.6 | |||||
Investment borrowings | 1,878.0 | 1,650.8 | |||||
Borrowings related to variable interest entities | 1,143.7 | 767.0 | |||||
Notes payable – direct corporate obligations | 905.7 | 1,004.2 | |||||
Total liabilities | 29,194.2 | 29,082.1 | |||||
Commitments and Contingencies | |||||||
Shareholders' equity: | |||||||
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: June 30, 2013 - 219,378,666; December 31, 2012 – 221,502,371) | 2.2 | 2.2 | |||||
Additional paid-in capital | 4,128.2 | 4,174.7 | |||||
Accumulated other comprehensive income | 698.1 | 1,197.4 | |||||
Accumulated deficit | (247.1 | ) | (325.0 | ) | |||
Total shareholders' equity | 4,581.4 | 5,049.3 | |||||
Total liabilities and shareholders' equity | $ | 33,775.6 | $ | 34,131.4 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 691.3 | $ | 694.8 | $ | 1,382.5 | $ | 1,381.1 | |||||||
Net investment income (loss): | |||||||||||||||
General account assets | 348.8 | 351.1 | 700.7 | 696.3 | |||||||||||
Policyholder and reinsurer accounts and other special-purpose portfolios | 31.8 | (17.3 | ) | 109.5 | 48.3 | ||||||||||
Realized investment gains (losses): | |||||||||||||||
Net realized investment gains, excluding impairment losses | 3.8 | 35.4 | 19.1 | 66.2 | |||||||||||
Other-than-temporary impairment losses: | |||||||||||||||
Total other-than-temporary impairment losses | (.6 | ) | (3.5 | ) | (.6 | ) | (11.4 | ) | |||||||
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income | — | — | — | — | |||||||||||
Net impairment losses recognized | (.6 | ) | (3.5 | ) | (.6 | ) | (11.4 | ) | |||||||
Total realized gains | 3.2 | 31.9 | 18.5 | 54.8 | |||||||||||
Fee revenue and other income | 6.4 | 4.5 | 12.9 | 8.4 | |||||||||||
Total revenues | 1,081.5 | 1,065.0 | 2,224.1 | 2,188.9 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 673.2 | 689.7 | 1,427.3 | 1,378.7 | |||||||||||
Interest expense | 26.9 | 28.7 | 54.2 | 57.5 | |||||||||||
Amortization | 79.2 | 68.3 | 158.5 | 154.9 | |||||||||||
Loss on extinguishment of debt | 7.7 | .5 | 65.4 | .7 | |||||||||||
Other operating costs and expenses | 179.8 | 173.3 | 369.4 | 400.3 | |||||||||||
Total benefits and expenses | 966.8 | 960.5 | 2,074.8 | 1,992.1 | |||||||||||
Income before income taxes | 114.7 | 104.5 | 149.3 | 196.8 | |||||||||||
Income tax expense (benefit): | |||||||||||||||
Income tax expense on period income | 42.6 | 38.8 | 75.8 | 72.0 | |||||||||||
Valuation allowance for deferred tax assets | (5.0 | ) | — | (15.5 | ) | — | |||||||||
Net income | $ | 77.1 | $ | 65.7 | $ | 89.0 | $ | 124.8 | |||||||
Earnings per common share: | |||||||||||||||
Basic: | |||||||||||||||
Weighted average shares outstanding | 220,498,000 | 237,289,000 | 221,290,000 | 239,092,000 | |||||||||||
Net income | $ | .35 | $ | .28 | $ | .40 | $ | .52 | |||||||
Diluted: | |||||||||||||||
Weighted average shares outstanding | 230,893,000 | 293,475,000 | 237,180,000 | 295,409,000 | |||||||||||
Net income | $ | .34 | $ | .24 | $ | .38 | $ | .45 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 77.1 | $ | 65.7 | $ | 89.0 | $ | 124.8 | |||||||
Other comprehensive income, before tax: | |||||||||||||||
Unrealized gains (losses) for the period | (1,179.7 | ) | 511.5 | (1,363.0 | ) | 563.4 | |||||||||
Amortization of present value of future profits and deferred acquisition costs | 113.4 | (56.2 | ) | 134.1 | (76.2 | ) | |||||||||
Amount related to premium deficiencies assuming the net unrealized gains had been realized | 342.7 | (143.4 | ) | 478.0 | (113.1 | ) | |||||||||
Reclassification adjustments: | |||||||||||||||
For net realized investment gains included in net income | (8.9 | ) | (31.0 | ) | (23.7 | ) | (52.6 | ) | |||||||
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains included in net income | .4 | 3.1 | 1.2 | 4.2 | |||||||||||
Unrealized gains (losses) on investments | (732.1 | ) | 284.0 | (773.4 | ) | 325.7 | |||||||||
Change related to deferred compensation plan | 1.4 | .8 | 2.4 | 1.6 | |||||||||||
Other comprehensive income (loss) before tax | (730.7 | ) | 284.8 | (771.0 | ) | 327.3 | |||||||||
Income tax (expense) benefit related to items of accumulated other comprehensive income | 258.1 | (102.0 | ) | 271.7 | (118.1 | ) | |||||||||
Other comprehensive income (loss), net of tax | (472.6 | ) | 182.8 | (499.3 | ) | 209.2 | |||||||||
Comprehensive income (loss) | $ | (395.5 | ) | $ | 248.5 | $ | (410.3 | ) | $ | 334.0 |
Common stock and additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total | ||||||||||||
Balance, December 31, 2011 | $ | 4,364.3 | $ | 781.6 | $ | (532.1 | ) | $ | 4,613.8 | ||||||
Net income | — | — | 124.8 | 124.8 | |||||||||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense of $115.9) | — | 205.2 | — | 205.2 | |||||||||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense of $2.2) | — | 4.0 | — | 4.0 | |||||||||||
Cost of shares acquired | (58.2 | ) | — | — | (58.2 | ) | |||||||||
Dividends on common stock | — | — | (4.7 | ) | (4.7 | ) | |||||||||
Stock options, restricted stock and performance units | 8.2 | — | — | 8.2 | |||||||||||
Balance, June 30, 2012 | $ | 4,314.3 | $ | 990.8 | $ | (412.0 | ) | $ | 4,893.1 | ||||||
Balance, December 31, 2012 | $ | 4,176.9 | $ | 1,197.4 | $ | (325.0 | ) | $ | 5,049.3 | ||||||
Net income | — | — | 89.0 | 89.0 | |||||||||||
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax benefit of $270.9) | — | (497.9 | ) | — | (497.9 | ) | |||||||||
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax benefit of $.8) | — | (1.4 | ) | — | (1.4 | ) | |||||||||
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures | (12.6 | ) | — | — | (12.6 | ) | |||||||||
Cost of shares acquired | (50.0 | ) | — | — | (50.0 | ) | |||||||||
Dividends on common stock | — | — | (11.1 | ) | (11.1 | ) | |||||||||
Stock options, restricted stock and performance units | 16.1 | — | — | 16.1 | |||||||||||
Balance, June 30, 2013 | $ | 4,130.4 | $ | 698.1 | $ | (247.1 | ) | $ | 4,581.4 |
Six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Insurance policy income | $ | 1,230.1 | $ | 1,216.6 | |||
Net investment income | 685.1 | 660.0 | |||||
Fee revenue and other income | 12.9 | 8.4 | |||||
Insurance policy benefits | (1,070.1 | ) | (1,108.8 | ) | |||
Interest expense | (48.9 | ) | (52.6 | ) | |||
Deferrable policy acquisition costs | (107.2 | ) | (94.7 | ) | |||
Other operating costs | (409.1 | ) | (385.6 | ) | |||
Taxes | (2.9 | ) | (4.3 | ) | |||
Net cash provided by operating activities | 289.9 | 239.0 | |||||
Cash flows from investing activities: | |||||||
Sales of investments | 943.5 | 1,332.2 | |||||
Maturities and redemptions of investments | 1,335.3 | 824.5 | |||||
Purchases of investments | (2,992.8 | ) | (2,614.5 | ) | |||
Net sales of trading securities | 25.3 | 29.2 | |||||
Change in cash and cash equivalents held by variable interest entities | (156.5 | ) | (14.2 | ) | |||
Other | (10.6 | ) | (16.7 | ) | |||
Net cash used by investing activities | (855.8 | ) | (459.5 | ) | |||
Cash flows from financing activities: | |||||||
Payments on notes payable | (101.9 | ) | (81.4 | ) | |||
Expenses related to extinguishment of debt | (61.3 | ) | — | ||||
Amount paid to extinguish the beneficial conversion feature associated with repurchase of convertible debentures | (12.6 | ) | — | ||||
Issuance of common stock | 12.7 | 1.0 | |||||
Payments to repurchase common stock | (50.0 | ) | (58.2 | ) | |||
Common stock dividends paid | (11.1 | ) | (4.7 | ) | |||
Amounts received for deposit products | 634.0 | 674.4 | |||||
Withdrawals from deposit products | (749.9 | ) | (814.6 | ) | |||
Issuance of investment borrowings: | |||||||
Federal Home Loan Bank | 400.0 | — | |||||
Related to variable interest entities | 376.3 | 246.8 | |||||
Payments on investment borrowings: | |||||||
Federal Home Loan Bank | (200.2 | ) | — | ||||
Related to variable interest entities and other | (.2 | ) | (.6 | ) | |||
Investment borrowings - repurchase agreements, net | 27.6 | 12.0 | |||||
Net cash provided (used) by financing activities | 263.4 | (25.3 | ) | ||||
Net decrease in cash and cash equivalents | (302.5 | ) | (245.8 | ) | |||
Cash and cash equivalents, beginning of period | 582.5 | 436.0 | |||||
Cash and cash equivalents, end of period | $ | 280.0 | $ | 190.2 |
June 30, 2013 | December 31, 2012 | ||||||
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized | $ | 7.5 | $ | 9.8 | |||
Net unrealized gains on all other investments | 1,602.1 | 2,986.5 | |||||
Adjustment to present value of future profits (a) | (176.5 | ) | (193.0 | ) | |||
Adjustment to deferred acquisition costs | (320.1 | ) | (452.9 | ) | |||
Adjustment to insurance liabilities | (25.8 | ) | (489.8 | ) | |||
Unrecognized net loss related to deferred compensation plan | (5.5 | ) | (7.9 | ) | |||
Deferred income tax liabilities | (383.6 | ) | (655.3 | ) | |||
Accumulated other comprehensive income | $ | 698.1 | $ | 1,197.4 |
(a) | The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003 (the date our Predecessor emerged from bankruptcy). |
Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | Other-than- temporary impairments included in accumulated other comprehensive income | |||||||||||||||
Corporate securities | $ | 14,952.8 | $ | 1,294.4 | $ | (143.4 | ) | $ | 16,103.8 | $ | — | ||||||||
United States Treasury securities and obligations of United States government corporations and agencies | 127.9 | 3.6 | (.4 | ) | 131.1 | — | |||||||||||||
States and political subdivisions | 1,945.0 | 162.8 | (20.6 | ) | 2,087.2 | — | |||||||||||||
Asset-backed securities | 1,389.0 | 79.1 | (12.7 | ) | 1,455.4 | — | |||||||||||||
Collateralized debt obligations | 319.4 | 9.2 | (.8 | ) | 327.8 | — | |||||||||||||
Commercial mortgage-backed securities | 1,302.6 | 101.8 | (6.7 | ) | 1,397.7 | — | |||||||||||||
Mortgage pass-through securities | 14.8 | .8 | — | 15.6 | — | ||||||||||||||
Collateralized mortgage obligations | 1,972.2 | 135.0 | (2.8 | ) | 2,104.4 | (4.8 | ) | ||||||||||||
Total fixed maturities, available for sale | $ | 22,023.7 | $ | 1,786.7 | $ | (187.4 | ) | $ | 23,623.0 | $ | (4.8 | ) |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 246.1 | $ | 250.1 | |||
Due after one year through five years | 1,823.0 | 1,974.9 | |||||
Due after five years through ten years | 4,131.4 | 4,468.3 | |||||
Due after ten years | 10,825.2 | 11,628.8 | |||||
Subtotal | 17,025.7 | 18,322.1 | |||||
Structured securities | 4,998.0 | 5,300.9 | |||||
Total fixed maturities, available for sale | $ | 22,023.7 | $ | 23,623.0 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Credit losses on fixed maturity securities, available for sale, beginning of period | $ | (1.5 | ) | $ | (1.9 | ) | $ | (1.6 | ) | $ | (2.0 | ) | |||
Add: credit losses on other-than-temporary impairments not previously recognized | — | — | — | — | |||||||||||
Less: credit losses on securities sold | — | .2 | .1 | .3 | |||||||||||
Less: credit losses on securities impaired due to intent to sell (a) | — | — | — | — | |||||||||||
Add: credit losses on previously impaired securities | — | — | — | — | |||||||||||
Less: increases in cash flows expected on previously impaired securities | — | — | — | — | |||||||||||
Credit losses on fixed maturity securities, available for sale, end of period | $ | (1.5 | ) | $ | (1.7 | ) | $ | (1.5 | ) | $ | (1.7 | ) |
(a) | Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis. |
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Description of securities | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | $ | 24.0 | $ | (.4 | ) | $ | — | $ | — | $ | 24.0 | $ | (.4 | ) | ||||||||||
States and political subdivisions | 276.8 | $ | (14.0 | ) | 63.4 | (6.6 | ) | 340.2 | (20.6 | ) | ||||||||||||||
Corporate securities | 2,388.2 | (135.5 | ) | 71.7 | (7.9 | ) | 2,459.9 | (143.4 | ) | |||||||||||||||
Asset-backed securities | 297.3 | (10.6 | ) | 42.5 | (2.1 | ) | 339.8 | (12.7 | ) | |||||||||||||||
Collateralized debt obligations | 46.5 | (.8 | ) | — | — | 46.5 | (.8 | ) | ||||||||||||||||
Commercial mortgage-backed securities | 107.0 | (6.4 | ) | 3.3 | (.3 | ) | 110.3 | (6.7 | ) | |||||||||||||||
Mortgage pass-through securities | 1.8 | — | 1.8 | — | 3.6 | — | ||||||||||||||||||
Collateralized mortgage obligations | 151.2 | (2.8 | ) | 2.8 | — | 154.0 | (2.8 | ) | ||||||||||||||||
Total fixed maturities, available for sale | $ | 3,292.8 | $ | (170.5 | ) | $ | 185.5 | $ | (16.9 | ) | $ | 3,478.3 | $ | (187.4 | ) | |||||||||
Equity securities | $ | 31.7 | $ | (1.3 | ) | $ | — | $ | — | $ | 31.7 | $ | (1.3 | ) |
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Description of securities | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
States and political subdivisions | $ | 48.3 | $ | (1.8 | ) | 68.7 | $ | (3.4 | ) | $ | 117.0 | $ | (5.2 | ) | ||||||||||
Corporate securities | 338.1 | (11.2 | ) | 174.5 | (9.0 | ) | 512.6 | (20.2 | ) | |||||||||||||||
Asset-backed securities | 41.7 | (.3 | ) | 111.6 | (4.9 | ) | 153.3 | (5.2 | ) | |||||||||||||||
Collateralized debt obligations | 19.4 | (.4 | ) | 32.5 | (.6 | ) | 51.9 | (1.0 | ) | |||||||||||||||
Commercial mortgage-backed securities | 4.9 | (.1 | ) | 6.2 | (.5 | ) | 11.1 | (.6 | ) | |||||||||||||||
Mortgage pass-through securities | — | — | 1.9 | — | 1.9 | — | ||||||||||||||||||
Collateralized mortgage obligations | 27.0 | (.4 | ) | 33.8 | (.3 | ) | 60.8 | (.7 | ) | |||||||||||||||
Total fixed maturities, available for sale | $ | 479.4 | $ | (14.2 | ) | $ | 429.2 | $ | (18.7 | ) | $ | 908.6 | $ | (32.9 | ) | |||||||||
Equity securities | $ | 17.8 | $ | (1.6 | ) | $ | — | $ | — | $ | 17.8 | $ | (1.6 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income for basic earnings per share | $ | 77.1 | $ | 65.7 | $ | 89.0 | $ | 124.8 | |||||||
Add: interest expense on 7.0% Convertible Senior Debentures due 2016 (the "7.0% Debentures"), net of income taxes | .4 | 3.7 | 1.6 | 7.4 | |||||||||||
Net income for diluted earnings per share | $ | 77.5 | $ | 69.4 | $ | 90.6 | $ | 132.2 | |||||||
Shares: | |||||||||||||||
Weighted average shares outstanding for basic earnings per share | 220,498 | 237,289 | 221,290 | 239,092 | |||||||||||
Effect of dilutive securities on weighted average shares: | |||||||||||||||
7% Debentures | 5,692 | 53,377 | 11,141 | 53,372 | |||||||||||
Stock options, restricted stock and performance units | 2,412 | 2,367 | 2,620 | 2,475 | |||||||||||
Warrants | 2,291 | 442 | 2,129 | 470 | |||||||||||
Dilutive potential common shares | 10,395 | 56,186 | 15,890 | 56,317 | |||||||||||
Weighted average shares outstanding for diluted earnings per share | 230,893 | 293,475 | 237,180 | 295,409 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | $ | 8.6 | $ | 7.9 | $ | 16.5 | $ | 15.1 | |||||||
Health | 334.1 | 341.4 | 666.7 | 675.5 | |||||||||||
Life | 76.4 | 69.7 | 153.9 | 134.9 | |||||||||||
Net investment income (a) | 226.6 | 185.6 | 488.3 | 420.5 | |||||||||||
Fee revenue and other income (a) | 4.0 | 3.3 | 7.7 | 6.2 | |||||||||||
Total Bankers Life revenues | 649.7 | 607.9 | 1,333.1 | 1,252.2 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Health | 145.6 | 143.9 | 290.9 | 287.0 | |||||||||||
Life | 3.6 | 3.7 | 7.4 | 8.0 | |||||||||||
Net investment income (a) | 51.3 | 51.0 | 103.3 | 101.0 | |||||||||||
Fee revenue and other income (a) | .2 | .3 | .4 | .5 | |||||||||||
Total Washington National revenues | 200.7 | 198.9 | 402.0 | 396.5 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Health | 1.1 | 1.3 | 2.2 | 2.7 | |||||||||||
Life | 56.9 | 53.3 | 112.7 | 105.3 | |||||||||||
Net investment income (a) | 9.9 | 10.2 | 19.8 | 20.2 | |||||||||||
Fee revenue and other income (a) | .2 | .2 | .4 | .4 | |||||||||||
Total Colonial Penn revenues | 68.1 | 65.0 | 135.1 | 128.6 | |||||||||||
Other CNO Business: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | 1.8 | 3.5 | 3.7 | 6.2 | |||||||||||
Health | 6.1 | 6.4 | 12.3 | 13.1 | |||||||||||
Life | 57.1 | 63.7 | 116.2 | 133.3 | |||||||||||
Net investment income (a) | 80.6 | 79.8 | 170.3 | 172.5 | |||||||||||
Total Other CNO Business revenues | 145.6 | 153.4 | 302.5 | 325.1 | |||||||||||
Corporate operations: | |||||||||||||||
Net investment income | 4.5 | 7.2 | 14.6 | 30.4 | |||||||||||
Fee and other income | 1.5 | .7 | 3.2 | 1.3 | |||||||||||
Total corporate revenues | 6.0 | 7.9 | 17.8 | 31.7 | |||||||||||
Total revenues | 1,070.1 | 1,033.1 | 2,190.5 | 2,134.1 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Expenses: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy benefits | $ | 434.1 | $ | 396.7 | $ | 904.6 | $ | 817.6 | |||||||
Amortization | 45.7 | 50.5 | 100.2 | 107.4 | |||||||||||
Interest expense on investment borrowings | 1.7 | 1.4 | 3.1 | 2.8 | |||||||||||
Other operating costs and expenses | 89.1 | 83.2 | 184.0 | 177.8 | |||||||||||
Total Bankers Life expenses | 570.6 | 531.8 | 1,191.9 | 1,105.6 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy benefits | 117.3 | 113.7 | 235.6 | 229.4 | |||||||||||
Amortization | 13.0 | 10.8 | 26.7 | 23.5 | |||||||||||
Interest expense on investment borrowings | .5 | .8 | 1.0 | 1.5 | |||||||||||
Other operating costs and expenses | 38.1 | 39.7 | 77.5 | 83.5 | |||||||||||
Total Washington National expenses | 168.9 | 165.0 | 340.8 | 337.9 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy benefits | 41.2 | 39.6 | 84.2 | 81.7 | |||||||||||
Amortization | 3.7 | 3.9 | 7.4 | 7.6 | |||||||||||
Other operating costs and expenses | 22.0 | 20.9 | 47.7 | 48.5 | |||||||||||
Total Colonial Penn expenses | 66.9 | 64.4 | 139.3 | 137.8 | |||||||||||
Other CNO Business: | |||||||||||||||
Insurance policy benefits | 109.6 | 122.0 | 235.0 | 243.9 | |||||||||||
Amortization | 5.9 | 7.1 | 11.5 | 14.6 | |||||||||||
Interest expense on investment borrowings | 4.8 | 5.0 | 9.6 | 10.1 | |||||||||||
Other operating costs and expenses | 22.7 | 17.4 | 40.2 | 56.9 | |||||||||||
Total Other CNO Business expenses | 143.0 | 151.5 | 296.3 | 325.5 | |||||||||||
Corporate operations: | |||||||||||||||
Interest expense on corporate debt | 13.1 | 16.6 | 28.2 | 34.1 | |||||||||||
Interest expense on borrowings of variable interest entities | — | 4.7 | — | 8.7 | |||||||||||
Interest expense on investment borrowings | — | .2 | .1 | .3 | |||||||||||
Other operating costs and expenses | 3.6 | 12.1 | 12.3 | 33.6 | |||||||||||
Total corporate expenses | 16.7 | 33.6 | 40.6 | 76.7 | |||||||||||
Total expenses | 966.1 | 946.3 | 2,008.9 | 1,983.5 | |||||||||||
Income (loss) before net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes: | |||||||||||||||
Bankers Life | 79.1 | 76.1 | 141.2 | 146.6 | |||||||||||
Washington National | 31.8 | 33.9 | 61.2 | 58.6 | |||||||||||
Colonial Penn | 1.2 | .6 | (4.2 | ) | (9.2 | ) | |||||||||
Other CNO Business | 2.6 | 1.9 | 6.2 | (.4 | ) | ||||||||||
Corporate operations | (10.7 | ) | (25.7 | ) | (22.8 | ) | (45.0 | ) | |||||||
Income before net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes | $ | 104.0 | $ | 86.8 | $ | 181.6 | $ | 150.6 |
(a) | It is not practicable to provide additional components of revenue by product or services. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Total segment revenues | $ | 1,070.1 | $ | 1,033.1 | $ | 2,190.5 | $ | 2,134.1 | |||||||
Net realized investment gains | 3.2 | 31.9 | 18.5 | 54.8 | |||||||||||
Revenues related to certain non-strategic investments and earnings attributable to non-controlling interests | 8.2 | — | 15.1 | — | |||||||||||
Consolidated revenues | $ | 1,081.5 | $ | 1,065.0 | $ | 2,224.1 | $ | 2,188.9 | |||||||
Total segment expenses | $ | 966.1 | $ | 946.3 | $ | 2,008.9 | $ | 1,983.5 | |||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | (29.0 | ) | 17.7 | (32.1 | ) | 6.1 | |||||||||
Amortization related to fair value changes in embedded derivative liabilities | 10.5 | (7.1 | ) | 11.5 | (2.4 | ) | |||||||||
Amortization related to net realized investment gains | .4 | 3.1 | 1.2 | 4.2 | |||||||||||
Expenses related to certain non-strategic investments and earnings attributable to non-controlling interests | 11.1 | — | 19.9 | — | |||||||||||
Loss on extinguishment of debt | 7.7 | .5 | 65.4 | .7 | |||||||||||
Consolidated expenses | $ | 966.8 | $ | 960.5 | $ | 2,074.8 | $ | 1,992.1 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Current tax expense | $ | 2.7 | $ | 3.4 | $ | 5.4 | $ | 6.7 | |||||||
Deferred tax expense | 40.8 | 35.4 | 71.8 | 65.3 | |||||||||||
Income tax expense calculated based on estimated annual effective tax rate | 43.5 | 38.8 | 77.2 | 72.0 | |||||||||||
Income tax benefit on discrete items: | |||||||||||||||
Valuation allowance reduction applicable to utilization of capital loss carryforwards | (5.0 | ) | — | (15.5 | ) | — | |||||||||
Deferred tax benefit related to loss on extinguishment of debt | (.9 | ) | — | (1.4 | ) | — | |||||||||
Total income tax expense | $ | 37.6 | $ | 38.8 | $ | 60.3 | $ | 72.0 |
Six months ended | |||||
June 30, | |||||
2013 | 2012 | ||||
U.S. statutory corporate rate | 35.0 | % | 35.0 | % | |
Non-taxable income and nondeductible expenses, net | (.5 | ) | .7 | ||
State taxes | 1.4 | .9 | |||
Estimated annual effective tax rate | 35.9 | % | 36.6 | % |
June 30, 2013 | December 31, 2012 | ||||||
Deferred tax assets: | |||||||
Net federal operating loss carryforwards | $ | 1,270.3 | $ | 1,330.2 | |||
Net state operating loss carryforwards | 16.1 | 16.2 | |||||
Tax credits | 43.6 | 39.2 | |||||
Capital loss carryforwards | 280.7 | 296.2 | |||||
Deductible temporary differences: | |||||||
Insurance liabilities | 746.8 | 746.3 | |||||
Other | 61.0 | 86.0 | |||||
Gross deferred tax assets | 2,418.5 | 2,514.1 | |||||
Deferred tax liabilities: | |||||||
Investments | (21.5 | ) | (24.1 | ) | |||
Present value of future profits and deferred acquisition costs | (302.5 | ) | (325.2 | ) | |||
Accumulated other comprehensive income | (383.6 | ) | (655.3 | ) | |||
Gross deferred tax liabilities | (707.6 | ) | (1,004.6 | ) | |||
Net deferred tax assets before valuation allowance | 1,710.9 | 1,509.5 | |||||
Valuation allowance | (751.4 | ) | (766.9 | ) | |||
Net deferred tax assets | 959.5 | 742.6 | |||||
Current income taxes accrued | (28.3 | ) | (25.7 | ) | |||
Income tax assets, net | $ | 931.2 | $ | 716.9 |
Year of expiration | Net operating loss carryforwards (a) | Capital loss | Total loss | |||||||||||||||||||
Life | Non-life | carryforwards | carryforwards | |||||||||||||||||||
2013 | $ | — | $ | — | $ | 764.2 | (b) | $ | 764.2 | |||||||||||||
2014 | — | — | 28.7 | 28.7 | ||||||||||||||||||
2016 | — | — | 9.1 | 9.1 | ||||||||||||||||||
2018 | 314.5 | (a) | — | — | 314.5 | |||||||||||||||||
2021 | 29.5 | — | — | 29.5 | ||||||||||||||||||
2022 | 204.1 | — | — | 204.1 | ||||||||||||||||||
2023 | — | (b) | 2,592.4 | (a) | — | 2,592.4 | ||||||||||||||||
2024 | — | 3.2 | — | 3.2 | ||||||||||||||||||
2025 | — | 118.8 | — | 118.8 | ||||||||||||||||||
2027 | — | 216.8 | — | 216.8 | ||||||||||||||||||
2028 | — | .5 | — | .5 | ||||||||||||||||||
2029 | — | 148.9 | — | 148.9 | ||||||||||||||||||
2032 | — | .7 | — | .7 | ||||||||||||||||||
Total | $ | 548.1 | $ | 3,081.3 | $ | 802.0 | $ | 4,431.4 |
(a) | The life/non-life allocation summarized above does not reflect the agreement on the terms of a settlement we reached with the IRS in July 2013 with respect to the allocation of CODI. Approximately $315 million of the non-life NOLs expiring in 2023 will be characterized as life NOLs expiring in 2018. The impact of the agreement is expected to be reflected in our financial statements for the three month period ended September 30, 2013, pending receipt of the final settlement agreement. |
(b) | The allocation of the capital loss carryforwards summarized above assumes the IRS does not ultimately agree with the tax position we have taken with respect to our investment in Senior Health, which was worthless when it was transferred to the Independent Trust in 2008. If the IRS ultimately agrees with our tax position of classifying this loss as ordinary, capital loss carryforwards expiring in 2013 would decrease and life NOLs expiring in 2023 would increase by $742 million. |
June 30, 2013 | December 31, 2012 | ||||||
Senior Secured Credit Agreement (as defined below) | $ | 606.5 | $ | 644.6 | |||
6.375% Senior Secured Notes due October 2020 (the "6.375% Notes") | 275.0 | 275.0 | |||||
7.0% Debentures | 29.2 | 93.0 | |||||
Unamortized discount on Senior Secured Credit Agreement | (4.2 | ) | (5.0 | ) | |||
Unamortized discount on 7.0% Debentures | (.8 | ) | (3.4 | ) | |||
Direct corporate obligations | $ | 905.7 | $ | 1,004.2 |
(i) | modifications of mandatory prepayments resulting from certain restricted payments made (including any common stock dividends and share repurchases) as defined in the Senior Secured Credit Agreement. Pursuant to the amended terms, the amount of the mandatory prepayment is: (a) 100% of the amount of certain restricted payments provided that if, as of the end of the fiscal quarter immediately preceding such restricted payment, the debt to total |
(ii) | that there will be a 1.00% fee in connection with any repricing of the six-year term loan facility that reduces the interest rate prior to the date that is six months after the closing of the amendment of the Senior Secured Credit Agreement. |
Year ending June 30, | |||
2014 | $ | 51.1 | |
2015 | 73.0 | ||
2016 | 79.2 | ||
2017 | 52.2 | ||
2018 | 4.2 | ||
Thereafter | 651.0 | ||
$ | 910.7 |
Amount | Maturity | Interest rate at | ||||
borrowed | date | June 30, 2013 | ||||
$ | 67.0 | February 2014 | Fixed rate – 1.830% | |||
50.0 | August 2014 | Variable rate – 0.405% | ||||
50.0 | September 2015 | Variable rate – 0.576% | ||||
150.0 | October 2015 | Variable rate – 0.543% | ||||
100.0 | November 2015 | Variable rate – 0.354% | ||||
146.0 | November 2015 | Fixed rate – 5.300% | ||||
100.0 | December 2015 | Fixed rate – 4.710% | ||||
100.0 | June 2016 | Variable rate – 0.633% | ||||
75.0 | June 2016 | Variable rate – 0.434% | ||||
100.0 | October 2016 | Variable rate – 0.463% | ||||
50.0 | November 2016 | Variable rate – 0.543% | ||||
50.0 | November 2016 | Variable rate – 0.665% | ||||
57.7 | June 2017 | Variable rate – 0.624% | ||||
100.0 | July 2017 | Fixed rate – 3.900% | ||||
50.0 | August 2017 | Variable rate – 0.475% | ||||
75.0 | August 2017 | Variable rate – 0.423% | ||||
100.0 | October 2017 | Variable rate – 0.707% | ||||
37.0 | November 2017 | Fixed rate – 3.750% | ||||
50.0 | January 2018 | Variable rate – 0.628% | ||||
50.0 | January 2018 | Variable rate – 0.616% | ||||
50.0 | February 2018 | Variable rate – 0.583% | ||||
22.0 | February 2018 | Variable rate – 0.603% | ||||
100.0 | May 2018 | Variable rate – 0.645% | ||||
50.0 | July 2018 | Variable rate – 0.746% | ||||
21.8 | June 2020 | Fixed rate – 1.960% | ||||
27.8 | March 2023 | Fixed rate – 2.160% | ||||
20.5 | June 2025 | Fixed rate – 2.940% | ||||
$ | 1,849.8 |
Balance, December 31, 2012 | 221,502 | |||
Treasury stock purchased and retired | (4,421 | ) | ||
Stock options exercised | 1,516 | |||
Restricted and performance stock vested | 782 | (a) | ||
Balance, June 30, 2013 | 219,379 |
(a) | Such amount was reduced by 346 thousand shares which were tendered to the Company for the payment of federal and state taxes owed on the vesting of restricted and performance stock. |
Gross amounts not offset in the balance sheet | |||||||||||||||||||||||||
Gross amounts of recognized assets | Gross amounts offset in the balance sheet | Net amounts of assets presented in the balance sheet | Financial instruments | Cash collateral received | Net amount | ||||||||||||||||||||
June 30, 2013: | |||||||||||||||||||||||||
Call Options | $ | 114.1 | $ | — | $ | 114.1 | $ | (114.1 | ) | $ | — | $ | — | ||||||||||||
December 31, 2012: | |||||||||||||||||||||||||
Call Options | 54.4 | — | 54.4 | (54.4 | ) | — | — |
Gross amounts not offset in the balance sheet | |||||||||||||||||||||||||
Gross amounts of recognized liabilities | Gross amounts offset in the balance sheet | Net amounts of liabilities presented in the balance sheet | Financial instruments | Cash collateral pledged | Net amount | ||||||||||||||||||||
June 30, 2013: | |||||||||||||||||||||||||
Repurchase agreements (a) | $ | 27.6 | $ | — | $ | 27.6 | $ | (27.6 | ) | $ | — | $ | — |
(a) | As of June 30, 2013, these agreements were collateralized by investment securities with a fair value of $32.2 million. There were no repurchase agreements outstanding at December 31, 2012. |
Six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 89.0 | $ | 124.8 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Amortization and depreciation | 172.6 | 167.7 | |||||
Income taxes | 57.4 | 67.7 | |||||
Insurance liabilities | 205.3 | 105.4 | |||||
Accrual and amortization of investment income | (125.0 | ) | (84.6 | ) | |||
Deferral of policy acquisition costs | (107.2 | ) | (94.7 | ) | |||
Net realized investment gains | (18.5 | ) | (54.8 | ) | |||
Loss on extinguishment of debt | 65.4 | .7 | |||||
Other | (49.1 | ) | 6.8 | ||||
Net cash provided by operating activities | $ | 289.9 | $ | 239.0 |
Six months ended | |||||||
June 30, | |||||||
2013 | 2012 | ||||||
Stock options, restricted stock and performance units | $ | 7.2 | $ | 7.2 |
June 30, 2013 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 1,087.9 | $ | — | $ | 1,087.9 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (108.4 | ) | (108.4 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 210.7 | — | 210.7 | ||||||||
Accrued investment income | 2.0 | — | 2.0 | ||||||||
Income tax assets, net | 5.0 | (2.0 | ) | 3.0 | |||||||
Other assets | 21.6 | (1.0 | ) | 20.6 | |||||||
Total assets | $ | 1,327.2 | $ | (111.4 | ) | $ | 1,215.8 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 80.4 | $ | (2.8 | ) | $ | 77.6 | ||||
Borrowings related to variable interest entities | 1,143.7 | — | 1,143.7 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 112.4 | (112.4 | ) | — | |||||||
Total liabilities | $ | 1,336.5 | $ | (115.2 | ) | $ | 1,221.3 |
December 31, 2012 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 814.3 | $ | — | $ | 814.3 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (78.5 | ) | (78.5 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 54.2 | — | 54.2 | ||||||||
Accrued investment income | 1.8 | — | 1.8 | ||||||||
Income tax assets, net | 3.3 | (2.6 | ) | .7 | |||||||
Other assets | 9.6 | — | 9.6 | ||||||||
Total assets | $ | 883.2 | $ | (81.1 | ) | $ | 802.1 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 39.9 | $ | (3.3 | ) | $ | 36.6 | ||||
Borrowings related to variable interest entities | 767.0 | — | 767.0 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 82.5 | (82.5 | ) | — | |||||||
Total liabilities | $ | 889.4 | $ | (85.8 | ) | $ | 803.6 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 3.1 | $ | 3.1 | |||
Due after one year through five years | 401.4 | 403.5 | |||||
Due after five years through ten years | 683.4 | 681.3 | |||||
Total | $ | 1,087.9 | $ | 1,087.9 |
• | Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and exchange traded securities. |
• | Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models are primarily industry-standard models that consider various inputs such as interest rate, credit or issuer spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial assets in this category primarily include: certain public and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund and hedge fund investments; and most short-term investments; and non-exchange-traded derivatives such as call options to hedge liabilities related to our fixed index annuity products. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs. |
• | Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions. Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on broker/dealer quotes, pricing services or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. Financial assets in this category include certain corporate securities (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage loans, and other less liquid securities. Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed index annuity products and to a modified coinsurance arrangement) since their values include significant unobservable inputs including actuarial assumptions. |
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 15,710.7 | $ | 393.1 | $ | 16,103.8 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 131.1 | — | 131.1 | |||||||||||
States and political subdivisions | — | 2,087.2 | — | 2,087.2 | |||||||||||
Asset-backed securities | — | 1,410.0 | 45.4 | 1,455.4 | |||||||||||
Collateralized debt obligations | — | 40.2 | 287.6 | 327.8 | |||||||||||
Commercial mortgage-backed securities | — | 1,394.4 | 3.3 | 1,397.7 | |||||||||||
Mortgage pass-through securities | — | 13.8 | 1.8 | 15.6 | |||||||||||
Collateralized mortgage obligations | — | 2,104.3 | .1 | 2,104.4 | |||||||||||
Total fixed maturities, available for sale | — | 22,891.7 | 731.3 | 23,623.0 | |||||||||||
Equity securities: | |||||||||||||||
Corporate securities | 66.7 | 171.4 | .1 | 238.2 | |||||||||||
Venture capital investments | — | — | 3.1 | 3.1 | |||||||||||
Total equity securities | 66.7 | 171.4 | 3.2 | 241.3 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 43.8 | — | 43.8 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 4.7 | — | 4.7 | |||||||||||
States and political subdivisions | — | 13.7 | — | 13.7 | |||||||||||
Asset-backed securities | — | 39.8 | — | 39.8 | |||||||||||
Commercial mortgage-backed securities | — | 105.1 | — | 105.1 | |||||||||||
Mortgage pass-through securities | — | .1 | — | .1 | |||||||||||
Collateralized mortgage obligations | — | 22.0 | 10.4 | 32.4 | |||||||||||
Equity securities | 1.4 | — | — | 1.4 | |||||||||||
Total trading securities | 1.4 | 229.2 | 10.4 | 241.0 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 1,087.9 | — | 1,087.9 | |||||||||||
Other invested assets - derivatives | .3 | 114.1 | — | 114.4 | |||||||||||
Assets held in separate accounts | — | 15.0 | — | 15.0 | |||||||||||
Total assets carried at fair value by category | $ | 68.4 | $ | 24,509.3 | $ | 744.9 | $ | 25,322.6 | |||||||
Liabilities: | |||||||||||||||
Liabilities for insurance products: | |||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 796.3 | $ | 796.3 | |||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | — | 2.6 | 2.6 | |||||||||||
Total liabilities for insurance products | — | — | 798.9 | 798.9 | |||||||||||
Total liabilities carried at fair value by category | $ | — | $ | — | $ | 798.9 | $ | 798.9 |
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 16,498.6 | $ | 355.5 | $ | 16,854.1 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 99.5 | — | 99.5 | |||||||||||
States and political subdivisions | — | 2,115.0 | 13.1 | 2,128.1 | |||||||||||
Debt securities issued by foreign governments | — | .8 | — | .8 | |||||||||||
Asset-backed securities | — | 1,416.9 | 44.0 | 1,460.9 | |||||||||||
Collateralized debt obligations | — | — | 324.0 | 324.0 | |||||||||||
Commercial mortgage-backed securities | — | 1,471.2 | 6.2 | 1,477.4 | |||||||||||
Mortgage pass-through securities | — | 19.9 | 1.9 | 21.8 | |||||||||||
Collateralized mortgage obligations | — | 2,230.6 | 16.9 | 2,247.5 | |||||||||||
Total fixed maturities, available for sale | — | 23,852.5 | 761.6 | 24,614.1 | |||||||||||
Equity securities: | |||||||||||||||
Corporate securities | 49.7 | 118.8 | .1 | 168.6 | |||||||||||
Venture capital investments | — | — | 2.8 | 2.8 | |||||||||||
Total equity securities | 49.7 | 118.8 | 2.9 | 171.4 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 46.6 | — | 46.6 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 4.8 | — | 4.8 | |||||||||||
States and political subdivisions | — | 14.0 | .6 | 14.6 | |||||||||||
Asset-backed securities | — | 50.1 | — | 50.1 | |||||||||||
Collateralized debt obligations | — | — | 7.3 | 7.3 | |||||||||||
Commercial mortgage-backed securities | — | 93.3 | — | 93.3 | |||||||||||
Mortgage pass-through securities | — | .1 | — | .1 | |||||||||||
Collateralized mortgage obligations | — | 41.2 | 5.8 | 47.0 | |||||||||||
Equity securities | .9 | 1.5 | — | 2.4 | |||||||||||
Total trading securities | .9 | 251.6 | 13.7 | 266.2 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 814.3 | — | 814.3 | |||||||||||
Other invested assets - derivatives | — | 54.4 | — | 54.4 | |||||||||||
Assets held in separate accounts | — | 14.9 | — | 14.9 | |||||||||||
Total assets carried at fair value by category | $ | 50.6 | $ | 25,106.5 | $ | 778.2 | $ | 25,935.3 | |||||||
Liabilities: | |||||||||||||||
Liabilities for insurance products: | |||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 734.0 | $ | 734.0 | |||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | — | 5.5 | 5.5 | |||||||||||
Total liabilities for insurance products | — | — | 739.5 | 739.5 | |||||||||||
Total liabilities carried at fair value by category | $ | — | $ | — | $ | 739.5 | $ | 739.5 |
June 30, 2013 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,746.3 | $ | 1,746.3 | $ | 1,692.2 | |||||||||
Policy loans | — | — | 269.1 | 269.1 | 269.1 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 126.8 | — | 126.8 | 126.8 | ||||||||||||||
Hedge funds | — | 16.1 | — | 16.1 | 16.1 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 79.5 | 200.5 | — | 280.0 | 280.0 | ||||||||||||||
Held by variable interest entities | 210.7 | — | — | 210.7 | 210.7 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Insurance liabilities for interest-sensitive products excluding embedded derivatives (a) | — | — | 11,985.3 | 11,985.3 | 11,985.3 | ||||||||||||||
Investment borrowings | — | 1,926.0 | — | 1,926.0 | 1,878.0 | ||||||||||||||
Borrowings related to variable interest entities | — | 1,127.4 | — | 1,127.4 | 1,143.7 | ||||||||||||||
Notes payable – direct corporate obligations | — | 965.4 | — | 965.4 | 905.7 |
December 31, 2012 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,682.1 | $ | 1,682.1 | $ | 1,573.2 | |||||||||
Policy loans | — | — | 272.0 | 272.0 | 272.0 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 123.0 | — | 123.0 | 123.0 | ||||||||||||||
Hedge funds | — | 16.1 | — | 16.1 | 16.1 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 432.3 | 150.2 | — | 582.5 | 582.5 | ||||||||||||||
Held by variable interest entities | 54.2 | — | — | 54.2 | 54.2 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Insurance liabilities for interest-sensitive products excluding embedded derivatives (a) | — | — | 12,153.7 | 12,153.7 | 12,153.7 | ||||||||||||||
Investment borrowings | — | 1,702.0 | — | 1,702.0 | 1,650.8 | ||||||||||||||
Borrowings related to variable interest entities | — | 752.2 | — | 752.2 | 767.0 | ||||||||||||||
Notes payable – direct corporate obligations | — | 1,100.3 | — | 1,100.3 | 1,004.2 |
(a) | The estimated fair value of insurance liabilities for interest-sensitive products was approximately equal to its carrying value at June 30, 2013 and December 31, 2012. This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year. |
June 30, 2013 | |||||||||||||||||||||||||||||||
Beginning balance as of March 31, 2013 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 | Transfers out of Level 3 (a) | Ending balance as of June 30, 2013 | Amount of total gains (losses) for the three months ended June 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 356.3 | $ | 2.2 | $ | (.3 | ) | $ | (9.6 | ) | $ | 44.5 | $ | — | $ | 393.1 | $ | — | |||||||||||||
States and political subdivisions | 15.0 | — | — | — | — | (15.0 | ) | — | — | ||||||||||||||||||||||
Asset-backed securities | 46.6 | (.2 | ) | — | (2.5 | ) | 2.0 | (.5 | ) | 45.4 | — | ||||||||||||||||||||
Collateralized debt obligations | 309.7 | (33.7 | ) | (.1 | ) | .9 | 10.8 | — | 287.6 | — | |||||||||||||||||||||
Commercial mortgage-backed securities | 3.8 | (.5 | ) | — | — | — | — | 3.3 | — | ||||||||||||||||||||||
Mortgage pass-through securities | 1.8 | — | — | — | — | — | 1.8 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | 36.6 | — | — | — | — | (36.5 | ) | .1 | — | ||||||||||||||||||||||
Total fixed maturities, available for sale | 769.8 | (32.2 | ) | (.4 | ) | (11.2 | ) | 57.3 | (52.0 | ) | 731.3 | — | |||||||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||||
Corporate securities | .1 | — | — | — | — | — | .1 | — | |||||||||||||||||||||||
Venture capital investments | 3.1 | — | — | — | — | — | 3.1 | — | |||||||||||||||||||||||
Total equity securities | 3.2 | — | — | — | — | — | 3.2 | — | |||||||||||||||||||||||
Trading securities: | |||||||||||||||||||||||||||||||
States and political subdivisions | .6 | — | — | — | — | (.6 | ) | — | — | ||||||||||||||||||||||
Collateralized mortgage obligations | 5.7 | — | — | (.1 | ) | 4.8 | — | 10.4 | — | ||||||||||||||||||||||
Total trading securities | 6.3 | — | — | (.1 | ) | 4.8 | (.6 | ) | 10.4 | — | |||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (794.3 | ) | (32.7 | ) | 30.7 | — | — | — | (796.3 | ) | 30.7 | ||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | (5.1 | ) | 2.5 | — | — | — | — | (2.6 | ) | — | |||||||||||||||||||||
Total liabilities for insurance products | (799.4 | ) | (30.2 | ) | 30.7 | — | — | — | (798.9 | ) | 30.7 |
(a) | For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service which utilized observable inputs at the end of the period, whereas a broker quote was used as of the beginning of the period. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended June 30, 2013 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 10.0 | $ | (7.8 | ) | $ | — | $ | — | $ | 2.2 | ||||||||
Asset-backed securities | — | (.2 | ) | — | — | (.2 | ) | ||||||||||||
Collateralized debt obligations | — | (33.7 | ) | — | — | (33.7 | ) | ||||||||||||
Commercial mortgage-backed securities | — | (.5 | ) | — | — | (.5 | ) | ||||||||||||
Total fixed maturities, available for sale | 10.0 | (42.2 | ) | — | — | (32.2 | ) | ||||||||||||
Liabilities: | |||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (27.7 | ) | — | (14.0 | ) | 9.0 | (32.7 | ) | |||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | 2.5 | — | — | 2.5 | ||||||||||||||
Total liabilities for insurance products | (27.7 | ) | 2.5 | (14.0 | ) | 9.0 | (30.2 | ) |
June 30, 2013 | |||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2012 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 | Transfers out of Level 3 (a) | Ending balance as of June 30, 2013 | Amount of total gains (losses) for the six months ended June 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 355.5 | $ | 63.6 | $ | (.3 | ) | $ | (13.4 | ) | $ | — | $ | (12.3 | ) | $ | 393.1 | $ | — | ||||||||||||
States and political subdivisions | 13.1 | — | — | — | — | (13.1 | ) | — | — | ||||||||||||||||||||||
Asset-backed securities | 44.0 | 7.2 | — | (3.3 | ) | 2.0 | (4.5 | ) | 45.4 | — | |||||||||||||||||||||
Collateralized debt obligations | 324.0 | (42.0 | ) | .1 | 5.5 | — | — | 287.6 | — | ||||||||||||||||||||||
Commercial mortgage-backed securities | 6.2 | (.7 | ) | — | .1 | — | (2.3 | ) | 3.3 | — | |||||||||||||||||||||
Mortgage pass-through securities | 1.9 | (.1 | ) | — | — | — | — | 1.8 | — | ||||||||||||||||||||||
Collateralized mortgage obligations | 16.9 | (.1 | ) | — | — | — | (16.7 | ) | .1 | — | |||||||||||||||||||||
Total fixed maturities, available for sale | 761.6 | 27.9 | (.2 | ) | (11.1 | ) | 2.0 | (48.9 | ) | 731.3 | — | ||||||||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||||
Corporate securities | .1 | — | — | — | — | — | .1 | — | |||||||||||||||||||||||
Venture capital investments | 2.8 | — | — | .3 | — | — | 3.1 | — | |||||||||||||||||||||||
Total equity securities | 2.9 | — | — | .3 | — | — | 3.2 | — | |||||||||||||||||||||||
Trading securities: | |||||||||||||||||||||||||||||||
States and political subdivisions | .6 | — | — | — | — | (.6 | ) | — | — | ||||||||||||||||||||||
Collateralized debt obligations | 7.3 | (7.7 | ) | .6 | (.2 | ) | — | — | — | — | |||||||||||||||||||||
Collateralized mortgage obligations | 5.8 | — | — | (.3 | ) | 4.9 | — | 10.4 | — | ||||||||||||||||||||||
Total trading securities | 13.7 | (7.7 | ) | .6 | (.5 | ) | 4.9 | (.6 | ) | 10.4 | — | ||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (734.0 | ) | (95.8 | ) | 33.5 | — | — | — | (796.3 | ) | 33.5 | ||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | (5.5 | ) | 2.9 | — | — | — | — | (2.6 | ) | — | |||||||||||||||||||||
Total liabilities for insurance products | (739.5 | ) | (92.9 | ) | 33.5 | — | — | — | (798.9 | ) | 33.5 |
(a) | For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service which utilized observable inputs at the end of the period, whereas a broker quote was used as of the beginning of the period. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the six months ended June 30, 2013 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 71.5 | $ | (7.9 | ) | $ | — | $ | — | $ | 63.6 | ||||||||
Asset-backed securities | 7.6 | (.4 | ) | — | — | 7.2 | |||||||||||||
Collateralized debt obligations | 13.3 | (55.3 | ) | — | — | (42.0 | ) | ||||||||||||
Commercial mortgage-backed securities | — | (.7 | ) | — | — | (.7 | ) | ||||||||||||
Mortgage pass-through securities | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Collateralized mortgage obligations | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Total fixed maturities, available for sale | 92.4 | (64.5 | ) | — | — | 27.9 | |||||||||||||
Trading securities - collateralized debt obligations | — | (7.7 | ) | — | — | (7.7 | ) | ||||||||||||
Liabilities: | |||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (52.8 | ) | 1.4 | (64.2 | ) | 19.8 | (95.8 | ) | |||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | 2.9 | — | — | 2.9 | ||||||||||||||
Total liabilities for insurance products | (52.8 | ) | 4.3 | (64.2 | ) | 19.8 | (92.9 | ) |
June 30, 2012 | ||||||||||||||||||||||||||||||||
Beginning balance as of March 31, 2012 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in other comprehensive income (loss) | Transfers into Level 3 | Transfers out of Level 3 (a) | Ending balance as of June 30, 2012 | Amount of total gains (losses) for the three months ended June 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 268.0 | $ | 18.3 | $ | — | $ | 2.0 | $ | 63.5 | $ | (30.8 | ) | $ | 321.0 | $ | — | |||||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | 1.6 | (.1 | ) | — | — | — | — | 1.5 | — | |||||||||||||||||||||||
States and political subdivisions | 9.6 | — | — | .8 | 10.6 | (5.0 | ) | 16.0 | — | |||||||||||||||||||||||
Asset-backed securities | 22.7 | — | — | 1.6 | 1.3 | (2.6 | ) | 23.0 | — | |||||||||||||||||||||||
Collateralized debt obligations | 332.4 | (3.9 | ) | — | 1.6 | — | — | 330.1 | — | |||||||||||||||||||||||
Mortgage pass-through securities | 2.2 | (.1 | ) | — | — | — | — | 2.1 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | 14.7 | — | — | .1 | — | (10.3 | ) | 4.5 | — | |||||||||||||||||||||||
Total fixed maturities, available for sale | 651.2 | 14.2 | — | 6.1 | 75.4 | (48.7 | ) | 698.2 | — | |||||||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Corporate securities | 3.2 | — | — | — | — | — | 3.2 | — | ||||||||||||||||||||||||
Venture capital investments | 65.2 | — | (3.0 | ) | (4.2 | ) | — | — | 58.0 | (3.0 | ) | |||||||||||||||||||||
Total equity securities | 68.4 | — | (3.0 | ) | (4.2 | ) | — | — | 61.2 | (3.0 | ) | |||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||||||
States and political subdivisions | — | — | — | — | .5 | — | .5 | — | ||||||||||||||||||||||||
Collateralized debt obligations | 3.6 | — | — | (.2 | ) | — | — | 3.4 | (.2 | ) | ||||||||||||||||||||||
Total trading securities | 3.6 | — | — | (.2 | ) | .5 | — | 3.9 | (.2 | ) | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Liabilities for insurance products: | ||||||||||||||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (704.3 | ) | 22.6 | (19.3 | ) | — | — | — | (701.0 | ) | (19.3 | ) | ||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | (3.4 | ) | (1.5 | ) | — | — | — | — | (4.9 | ) | — | |||||||||||||||||||||
Total liabilities for insurance products | (707.7 | ) | 21.1 | (19.3 | ) | — | — | — | (705.9 | ) | (19.3 | ) |
(a) | For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service which utilized observable inputs at the end of the period, whereas a broker quote was used as of the beginning of the period. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended June 30, 2012 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 18.3 | $ | — | $ | — | $ | — | $ | 18.3 | |||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Collateralized debt obligations | 7.2 | (11.1 | ) | — | — | (3.9 | ) | ||||||||||||
Mortgage pass-through securities | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Total fixed maturities, available for sale | 25.5 | (11.3 | ) | — | — | 14.2 | |||||||||||||
Liabilities: | |||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (24.5 | ) | 36.7 | — | 10.4 | 22.6 | |||||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | — | (1.5 | ) | — | (1.5 | ) | ||||||||||||
Total liabilities for insurance products | (24.5 | ) | 36.7 | (1.5 | ) | 10.4 | 21.1 |
June 30, 2012 | ||||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2011 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in other comprehensive income (loss) | Transfers into Level 3 | Transfers out of Level 3 (a) | Ending balance as of June 30, 2012 | Amount of total gains (losses) for the six months ended June 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 278.1 | $ | 16.0 | $ | — | $ | 3.5 | $ | 94.3 | $ | (70.9 | ) | $ | 321.0 | $ | — | |||||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | 1.6 | (.1 | ) | — | — | — | — | 1.5 | — | |||||||||||||||||||||||
States and political subdivisions | 2.1 | — | — | 1.7 | 14.3 | (2.1 | ) | 16.0 | — | |||||||||||||||||||||||
Asset-backed securities | 79.7 | (27.3 | ) | (.3 | ) | (2.7 | ) | .6 | (27.0 | ) | 23.0 | — | ||||||||||||||||||||
Collateralized debt obligations | 327.3 | (5.7 | ) | — | 8.5 | — | — | 330.1 | — | |||||||||||||||||||||||
Commercial mortgage-backed securities | 17.3 | — | — | — | — | (17.3 | ) | — | — | |||||||||||||||||||||||
Mortgage pass-through securities | 2.2 | (.1 | ) | — | — | — | — | 2.1 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | 124.8 | (22.5 | ) | — | (1.0 | ) | — | (96.8 | ) | 4.5 | — | |||||||||||||||||||||
Total fixed maturities, available for sale | 833.1 | (39.7 | ) | (.3 | ) | 10.0 | 109.2 | (214.1 | ) | 698.2 | — | |||||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Corporate securities | 6.4 | — | (3.8 | ) | .6 | — | — | 3.2 | (3.8 | ) | ||||||||||||||||||||||
Venture capital investments | 63.5 | — | (3.0 | ) | (2.5 | ) | — | — | 58.0 | (3.0 | ) | |||||||||||||||||||||
Total equity securities | 69.9 | — | (6.8 | ) | (1.9 | ) | — | — | 61.2 | (6.8 | ) | |||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||||||
States and political subdivisions | — | — | — | .1 | .4 | — | .5 | .1 | ||||||||||||||||||||||||
Collateralized debt obligations | — | 4.2 | — | (.8 | ) | — | — | 3.4 | (.8 | ) | ||||||||||||||||||||||
Commercial mortgage-backed securities | .4 | — | — | — | — | (.4 | ) | — | — | |||||||||||||||||||||||
Total trading securities | .4 | 4.2 | — | (.7 | ) | .4 | (.4 | ) | 3.9 | (.7 | ) | |||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Liabilities for insurance products: | ||||||||||||||||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (666.3 | ) | (28.0 | ) | (6.7 | ) | — | — | — | (701.0 | ) | (6.7 | ) | |||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | (3.5 | ) | (1.4 | ) | — | — | — | — | (4.9 | ) | — | |||||||||||||||||||||
Total liabilities for insurance products | (669.8 | ) | (29.4 | ) | (6.7 | ) | — | — | — | (705.9 | ) | (6.7 | ) |
(a) | For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service which utilized observable inputs at the end of the period, whereas a broker quote was used as of the beginning of the period. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the six months ended June 30, 2012 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 43.3 | $ | (27.3 | ) | $ | — | $ | — | $ | 16.0 | ||||||||
United States Treasury securities and obligations of United States governement corporations and agencies | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Asset-backed securities | — | (27.3 | ) | — | — | (27.3 | ) | ||||||||||||
Collateralized debt obligations | 35.5 | (41.2 | ) | — | — | (5.7 | ) | ||||||||||||
Mortgage pass-through securities | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Collateralized mortgage obligations | 4.1 | (26.6 | ) | — | — | (22.5 | ) | ||||||||||||
Total fixed maturities, available for sale | 82.9 | (122.6 | ) | — | — | (39.7 | ) | ||||||||||||
Trading securities - collateralized debt obligations | 4.2 | — | — | — | 4.2 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Liabilities for insurance products: | |||||||||||||||||||
Interest-sensitive products - embedded derivatives associated with fixed index annuity products | (51.8 | ) | 41.7 | (39.0 | ) | 21.1 | (28.0 | ) | |||||||||||
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement | — | — | (1.4 | ) | — | (1.4 | ) | ||||||||||||
Total liabilities for insurance products | (51.8 | ) | 41.7 | (40.4 | ) | 21.1 | (29.4 | ) |
Fair value at June 30, 2013 | Valuation technique(s) | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 250.4 | Discounted cash flow analysis | Discount margins | 1.95% - 3.50% (2.70%) | ||||
Asset-backed securities (b) | 30.3 | Discounted cash flow analysis | Discount margins | 2.38% - 3.45% (3.01%) | |||||
Collateralized debt obligations (c) | 277.5 | Discounted cash flow analysis | Recoveries | 50% - 66% (62.5%) | |||||
Constant prepayment rate | 20% | ||||||||
Discount margins | 1.00% - 2.40% (1.43%) | ||||||||
Annual default rate | 0.96% - 5.20% (3.08%) | ||||||||
Portfolio CCC % | 1.56% - 19.83% (12.41%) | ||||||||
Preferred stock (d) | 3.1 | Market multiples | EBITDA multiple | 7.2 | |||||
Revenue multiple | 1.5 | ||||||||
Other assets categorized as Level 3 (e) | 183.6 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 744.9 | ||||||||
Liabilities: | |||||||||
Interest sensitive products (f) | 798.9 | Discounted projected embedded derivatives | Projected portfolio yields | 5.35% - 5.61% (5.55%) | |||||
Discount rates | 0.00 - 4.19% (2.03%) | ||||||||
Surrender rates | 4% - 43% (19%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes. |
(d) | Preferred stock - The significant unobservable inputs used in the fair value measurement of this preferred stock investment are the EBITDA multiple and revenue multiple. Generally, a significant increase (decrease) in the EBITDA or revenue multiples in isolation would result in a significantly higher (lower) fair value measurement. |
(e) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(f) | Interest sensitive products - The significant unobservable inputs used in the fair value measurement of our interest sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
Fair value at December 31, 2012 | Valuation technique(s) | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 248.3 | Discounted cash flow analysis | Discount margins | 1.90% - 3.25% (2.78%) | ||||
Asset-backed securities (b) | 33.3 | Discounted cash flow analysis | Discount margins | 2.78% - 3.14% (2.99%) | |||||
Collateralized debt obligations (c) | 331.4 | Discounted cash flow analysis | Recoveries | 65% - 66% | |||||
Constant prepayment rate | 20% | ||||||||
Discount margins | .95% - 8.75% (2.02%) | ||||||||
Annual default rate | .95% - 5.54% (3.01%) | ||||||||
Portfolio CCC % | 1.18% - 21.56% (11.99%) | ||||||||
Venture capital investments (d) | 2.8 | Market multiples | EBITDA multiple | 6.8 | |||||
Revenue multiple | 1.5 | ||||||||
Other assets categorized as Level 3 (e) | 162.4 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 778.2 | ||||||||
Liabilities: | |||||||||
Interest sensitive products (f) | 739.5 | Discounted projected embedded derivatives | Projected portfolio yields | 5.35% - 5.61% (5.55%) | |||||
Discount rates | 0.0 - 3.6% (1.4%) | ||||||||
Surrender rates | 4% - 43% (19%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. |
(d) | Venture capital investments - The significant unobservable inputs used in the fair value measurement of our venture capital investments are the EBITDA multiple and revenue multiple. Generally, a significant increase (decrease) in the EBITDA or revenue multiples in isolation would result in a significantly higher (lower) fair value measurement. |
(e) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(f) | Interest sensitive products - The significant unobservable inputs used in the fair value measurement of our interest sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
• | changes in or sustained low interest rates causing reductions in investment income, the margins of our fixed annuity and life insurance businesses, and sales of, and demand for, our products; |
• | expectations of lower future investment earnings may cause us to accelerate amortization, write down the balance of insurance acquisition costs or establish additional liabilities for insurance products; |
• | general economic, market and political conditions, including the performance and fluctuations of the financial markets which may affect the value of our investments as well as our ability to raise capital or refinance existing indebtedness and the cost of doing so; |
• | the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject; |
• | our ability to make anticipated changes to certain NGEs of our life insurance products; |
• | our ability to obtain adequate and timely rate increases on our health products, including our long-term care business; |
• | the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries; |
• | mortality, morbidity, the increased cost and usage of health care services, persistency, the adequacy of our previous reserve estimates and other factors which may affect the profitability of our insurance products; |
• | changes in our assumptions related to deferred acquisition costs or the present value of future profits; |
• | the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value; |
• | our assumption that the positions we take on our tax return filings, including our position that our 7.0% Debentures will not be treated as stock for purposes of Section 382 of the Code and will not trigger an ownership change, will not be successfully challenged by the IRS; |
• | changes in accounting principles and the interpretation thereof (including changes in principles related to accounting for deferred acquisition costs); |
• | our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements; |
• | our ability to achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued automation and rationalization of operating systems; |
• | performance and valuation of our investments, including the impact of realized losses (including other-than-temporary impairment charges); |
• | our ability to identify products and markets in which we can compete effectively against competitors with greater market share, higher ratings, greater financial resources and stronger brand recognition; |
• | our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs; |
• | our ability to maintain effective controls over financial reporting; |
• | our ability to continue to recruit and retain productive agents and distribution partners and customer response to new products, distribution channels and marketing initiatives; |
• | our ability to achieve additional upgrades of the financial strength ratings of CNO and our insurance company subsidiaries as well as the impact of our ratings on our business, our ability to access capital, and the cost of capital; |
• | the risk factors or uncertainties listed from time to time in our filings with the SEC; |
• | regulatory changes or actions, including those relating to regulation of the financial affairs of our insurance companies, such as the payment of dividends and surplus debenture interest to us, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products; and |
• | changes in the Federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products or affect the value of our deferred tax assets. |
• | Bankers Life, which markets and distributes Medicare supplement insurance, interest-sensitive life insurance, traditional life insurance, fixed annuities and long-term care insurance products to the middle-income senior market through a dedicated field force of career agents and sales managers supported by a network of community-based sales offices. The Bankers Life segment includes primarily the business of Bankers Life and Casualty Company. Bankers |
• | Washington National, which markets and distributes supplemental health (including specified disease, accident and hospital indemnity insurance products) and life insurance to middle-income consumers at home and at the worksite. These products are marketed through Performance Matters Associates, Inc. ("PMA"), a wholly owned subsidiary, and through independent marketing organizations and insurance agencies including worksite marketing. The products being marketed are underwritten by Washington National Insurance Company. |
• | Colonial Penn, which markets primarily graded benefit and simplified issue life insurance directly to customers in the senior middle-income market through television advertising, direct mail, the internet and telemarketing. The Colonial Penn segment includes primarily the business of Colonial Penn Life Insurance Company. |
• | Other CNO Business, which consists of blocks of interest-sensitive life insurance, traditional life insurance, annuities, long-term care insurance and other supplemental health products. These blocks of business are not actively marketed and were primarily issued or acquired by Conseco Life and Washington National Insurance Company. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Income before net realized investment gains, fair value changes in embedded derivative liabilities, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, corporate interest expense, loss on extinguishment of debt and income taxes ("EBIT" a non-GAAP financial measure) (a): | |||||||||||||||
Bankers Life | $ | 79.1 | $ | 76.1 | $ | 141.2 | $ | 146.6 | |||||||
Washington National | 31.8 | 33.9 | 61.2 | 58.6 | |||||||||||
Colonial Penn | 1.2 | .6 | (4.2 | ) | (9.2 | ) | |||||||||
Other CNO Business | 2.6 | 1.9 | 6.2 | (.4 | ) | ||||||||||
EBIT from business segments | 114.7 | 112.5 | 204.4 | 195.6 | |||||||||||
Corporate operations, excluding corporate interest expense | 2.4 | (9.1 | ) | 5.4 | (10.9 | ) | |||||||||
EBIT | 117.1 | 103.4 | 209.8 | 184.7 | |||||||||||
Corporate interest expense | (13.1 | ) | (16.6 | ) | (28.2 | ) | (34.1 | ) | |||||||
Income before net realized investment gains, fair value changes in embedded derivative liabilities, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes | 104.0 | 86.8 | 181.6 | 150.6 | |||||||||||
Tax expense on operating income | 36.3 | 32.6 | 64.2 | 55.8 | |||||||||||
Net operating income | 67.7 | 54.2 | 117.4 | 94.8 | |||||||||||
Net realized investment gains (net of related amortization and taxes) | 1.8 | 18.7 | 11.2 | 32.8 | |||||||||||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) | 12.1 | (6.9 | ) | 13.4 | (2.4 | ) | |||||||||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests (net of taxes) | (2.7 | ) | — | (4.5 | ) | — | |||||||||
Loss on extinguishment of debt (net of taxes) | (6.8 | ) | (.3 | ) | (64.0 | ) | (.4 | ) | |||||||
Net income before valuation allowance for deferred tax assets | 72.1 | 65.7 | 73.5 | 124.8 | |||||||||||
Valuation allowance for deferred tax assets | 5.0 | — | 15.5 | — | |||||||||||
Net income | $ | 77.1 | $ | 65.7 | $ | 89.0 | $ | 124.8 | |||||||
Per diluted share: | |||||||||||||||
Net operating income | $ | .30 | $ | .20 | $ | .50 | $ | .35 | |||||||
Net realized investment gains (net of related amortization and taxes) | .01 | .06 | .05 | .11 | |||||||||||
Fair value changes in embedded derivative liabilities (net of related amortization and taxes) | .05 | (.02 | ) | .06 | (.01 | ) | |||||||||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests (net of taxes) | (.01 | ) | — | (.02 | ) | — | |||||||||
Loss on extinguishment of debt (net of taxes) | (.03 | ) | — | (.27 | ) | — | |||||||||
Valuation allowance for deferred tax assets | .02 | — | .06 | — | |||||||||||
Net income | $ | .34 | $ | .24 | $ | .38 | $ | .45 |
(a) | Management believes that an analysis of EBIT provides a clearer comparison of the operating results of the Company from period to period because it excludes: (i) corporate interest expense; (ii) loss on extinguishment of debt; (iii) net realized investment gains; (iv) fair value changes in embedded derivative liabilities that are unrelated to the Company's underlying fundamentals; and (v) equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests. Net realized investment gains or losses include: (i) gains or losses on the sales of investments; (ii) other-than-temporary impairments recognized through net income; and (iii) changes in fair |
June 30, | December 31, | |||||||
2013 | 2012 | |||||||
Amounts classified as liabilities for insurance products - traditional products: | ||||||||
Active life reserves | $ | 3,499.0 | $ | 3,441.6 | ||||
Reserves for the present value of amounts not yet due on claims | 1,237.4 | 1,213.2 | ||||||
Future loss reserves | 86.9 | 76.0 | ||||||
Amounts classified as claims liabilities and other policyholder liabilities: | ||||||||
Liability for due and unpaid claims, claims in the course of settlement and incurred but not reported claims | 184.9 | 181.3 | ||||||
Total | $ | 5,008.2 | $ | 4,912.1 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Income (loss) before net realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes (a non-GAAP measure) (a): | |||||||||||||||
Bankers Life | $ | 79.1 | $ | 76.1 | $ | 141.2 | $ | 146.6 | |||||||
Washington National | 31.8 | 33.9 | 61.2 | 58.6 | |||||||||||
Colonial Penn | 1.2 | .6 | (4.2 | ) | (9.2 | ) | |||||||||
Other CNO Business | 2.6 | 1.9 | 6.2 | (.4 | ) | ||||||||||
Corporate operations | (10.7 | ) | (25.7 | ) | (22.8 | ) | (45.0 | ) | |||||||
104.0 | 86.8 | 181.6 | 150.6 | ||||||||||||
Net realized investment gains (losses), net of related amortization: | |||||||||||||||
Bankers Life | 2.9 | 16.2 | 10.8 | 25.9 | |||||||||||
Washington National | (1.0 | ) | 3.5 | .6 | 6.6 | ||||||||||
Colonial Penn | .4 | 1.9 | .1 | 4.5 | |||||||||||
Other CNO Business | .8 | 6.1 | 5.6 | 12.6 | |||||||||||
Corporate operations | (.3 | ) | 1.1 | .2 | 1.0 | ||||||||||
2.8 | 28.8 | 17.3 | 50.6 | ||||||||||||
Fair value changes in embedded derivative liabilities, net of related amortization: | |||||||||||||||
Bankers Life | 18.2 | (10.4 | ) | 20.3 | (3.6 | ) | |||||||||
Other CNO Business | .3 | (.2 | ) | .3 | (.1 | ) | |||||||||
18.5 | (10.6 | ) | 20.6 | (3.7 | ) | ||||||||||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests | |||||||||||||||
Corporate operations | (2.9 | ) | — | (4.8 | ) | — | |||||||||
Loss on extinguishment of debt: | |||||||||||||||
Corporate operations | (7.7 | ) | (.5 | ) | (65.4 | ) | (.7 | ) | |||||||
Income (loss) before income taxes: | |||||||||||||||
Bankers Life | 100.2 | 81.9 | 172.3 | 168.9 | |||||||||||
Washington National | 30.8 | 37.4 | 61.8 | 65.2 | |||||||||||
Colonial Penn | 1.6 | 2.5 | (4.1 | ) | (4.7 | ) | |||||||||
Other CNO Business | 3.7 | 7.8 | 12.1 | 12.1 | |||||||||||
Corporate operations | (21.6 | ) | (25.1 | ) | (92.8 | ) | (44.7 | ) | |||||||
Income before income taxes | $ | 114.7 | $ | 104.5 | $ | 149.3 | $ | 196.8 |
(a) | These non-GAAP measures as presented in the above table and in the following segment financial data and discussions of segment results exclude net realized investment gains (losses), fair value changes in embedded derivative liabilities, net of related amortization, equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and before income taxes. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premium collections: | |||||||||||||||
Annuities | $ | 183.7 | $ | 169.5 | $ | 349.3 | $ | 354.2 | |||||||
Medicare supplement and other supplemental health | 324.6 | 331.3 | 659.7 | 660.8 | |||||||||||
Life | 91.1 | 75.4 | 180.6 | 145.5 | |||||||||||
Total collections | $ | 599.4 | $ | 576.2 | $ | 1,189.6 | $ | 1,160.5 | |||||||
Average liabilities for insurance products: | |||||||||||||||
Annuities: | |||||||||||||||
Mortality based | $ | 227.2 | $ | 231.7 | $ | 228.2 | $ | 232.7 | |||||||
Fixed index | 3,132.2 | 2,798.2 | 3,085.5 | 2,752.8 | |||||||||||
Deposit based | 4,301.3 | 4,577.8 | 4,343.3 | 4,611.4 | |||||||||||
Medicare supplement and other supplemental health | 5,030.3 | 4,653.2 | 5,125.3 | 4,643.9 | |||||||||||
Life: | |||||||||||||||
Interest sensitive | 480.3 | 444.7 | 473.9 | 443.0 | |||||||||||
Non-interest sensitive | 616.8 | 506.2 | 603.2 | 494.6 | |||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 13,788.1 | $ | 13,211.8 | $ | 13,859.4 | $ | 13,178.4 | |||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 419.1 | $ | 419.0 | $ | 837.1 | $ | 825.5 | |||||||
Net investment income: | |||||||||||||||
General account invested assets | 211.0 | 204.9 | 423.8 | 405.2 | |||||||||||
Fixed index products | 15.6 | (19.3 | ) | 64.5 | 15.3 | ||||||||||
Fee revenue and other income | 4.0 | 3.3 | 7.7 | 6.2 | |||||||||||
Total revenues | 649.7 | 607.9 | 1,333.1 | 1,252.2 | |||||||||||
Expenses: | |||||||||||||||
Insurance policy benefits | 368.0 | 366.3 | 743.2 | 701.5 | |||||||||||
Amounts added to policyholder account balances: | |||||||||||||||
Annuity products and interest-sensitive life products other than fixed index products | 35.2 | 36.6 | 69.3 | 75.1 | |||||||||||
Fixed index products | 30.9 | (6.2 | ) | 92.1 | 41.0 | ||||||||||
Amortization related to operations | 45.7 | 50.5 | 100.2 | 107.4 | |||||||||||
Interest expense on investment borrowings | 1.7 | 1.4 | 3.1 | 2.8 | |||||||||||
Other operating costs and expenses | 89.1 | 83.2 | 184.0 | 177.8 | |||||||||||
Total benefits and expenses | 570.6 | 531.8 | 1,191.9 | 1,105.6 | |||||||||||
Income before net realized investment gains, net of related amortization, and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes | 79.1 | 76.1 | 141.2 | 146.6 | |||||||||||
Net realized investment gains | 3.3 | 17.9 | 11.9 | 28.5 | |||||||||||
Amortization related to net realized investment gains | (.4 | ) | (1.7 | ) | (1.1 | ) | (2.6 | ) | |||||||
Net realized investment gains, net of related amortization | 2.9 | 16.2 | 10.8 | 25.9 | |||||||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | 27.3 | (16.7 | ) | 30.5 | (5.7 | ) | |||||||||
Amortization related to fair value changes in embedded derivative liabilities | (9.1 | ) | 6.3 | (10.2 | ) | 2.1 | |||||||||
Fair value changes in embedded derivative liabilities, net of related amortization | 18.2 | (10.4 | ) | 20.3 | (3.6 | ) | |||||||||
Income before income taxes | $ | 100.2 | $ | 81.9 | $ | 172.3 | $ | 168.9 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Health benefit ratios: | |||||||||||||||
All health lines: | |||||||||||||||
Insurance policy benefits | $ | 310.0 | $ | 313.7 | $ | 620.8 | $ | 596.5 | |||||||
Benefit ratio (a) | 92.8 | % | 91.9 | % | 93.1 | % | 88.3 | % | |||||||
Medicare supplement: | |||||||||||||||
Insurance policy benefits | $ | 127.2 | $ | 132.9 | $ | 256.2 | $ | 250.7 | |||||||
Benefit ratio (a) | 67.2 | % | 72.2 | % | 67.9 | % | 68.3 | % | |||||||
PDP: | |||||||||||||||
Insurance policy benefits | $ | 9.2 | $ | 11.4 | $ | 15.9 | $ | 20.6 | |||||||
Benefit ratio (a) | 85.2 | % | 64.2 | % | 80.5 | % | 72.4 | % | |||||||
Long-term care: | |||||||||||||||
Insurance policy benefits | $ | 173.6 | $ | 169.5 | $ | 348.7 | $ | 325.4 | |||||||
Benefit ratio (a) | 129.5 | % | 121.4 | % | 129.4 | % | 116.1 | % | |||||||
Interest-adjusted benefit ratio (b) | 81.4 | % | 75.4 | % | 81.5 | % | 70.4 | % |
(a) | We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income. |
(b) | We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Bankers Life's long-term care products by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Expenses related to the marketing and quota-share agreements with Coventry | $ | 2.4 | $ | 1.9 | $ | 4.7 | $ | 3.8 | |||||||
Commission expense and agent manager benefits | 15.1 | 14.9 | 31.3 | 28.9 | |||||||||||
Other operating expenses | 71.6 | 66.4 | 148.0 | 145.1 | |||||||||||
Total | $ | 89.1 | $ | 83.2 | $ | 184.0 | $ | 177.8 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premium collections: | |||||||||||||||
Medicare supplement and other supplemental health | $ | 147.6 | $ | 145.1 | $ | 295.1 | $ | 286.8 | |||||||
Life | 3.4 | 3.8 | 7.0 | 7.8 | |||||||||||
Total collections | $ | 151.0 | $ | 148.9 | $ | 302.1 | $ | 294.6 | |||||||
Average liabilities for insurance products: | |||||||||||||||
Medicare supplement and other supplemental health | $ | 2,427.0 | $ | 2,418.9 | $ | 2,424.2 | $ | 2,424.3 | |||||||
Non-interest sensitive life | 202.6 | 199.1 | 199.9 | 199.7 | |||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 2,629.6 | $ | 2,618.0 | $ | 2,624.1 | $ | 2,624.0 | |||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 149.2 | $ | 147.6 | $ | 298.3 | $ | 295.0 | |||||||
Net investment income: | |||||||||||||||
General account invested assets | 51.3 | 51.0 | 103.3 | 101.0 | |||||||||||
Trading account income related to reinsurer accounts | (.6 | ) | 1.4 | (.6 | ) | 1.5 | |||||||||
Change in value of embedded derivatives related to modified coinsurance agreements | .6 | (1.4 | ) | .6 | (1.5 | ) | |||||||||
Fee revenue and other income | .2 | .3 | .4 | .5 | |||||||||||
Total revenues | 200.7 | 198.9 | 402.0 | 396.5 | |||||||||||
Expenses: | |||||||||||||||
Insurance policy benefits | 117.3 | 113.7 | 235.6 | 229.4 | |||||||||||
Amortization related to operations | 13.0 | 10.8 | 26.7 | 23.5 | |||||||||||
Interest expense on investment borrowings | .5 | .8 | 1.0 | 1.5 | |||||||||||
Other operating costs and expenses | 38.1 | 39.7 | 77.5 | 83.5 | |||||||||||
Total benefits and expenses | 168.9 | 165.0 | 340.8 | 337.9 | |||||||||||
Income before net realized investment gains and income taxes | 31.8 | 33.9 | 61.2 | 58.6 | |||||||||||
Net realized investment gains (losses) | (1.0 | ) | 3.5 | .6 | 6.6 | ||||||||||
Income before income taxes | $ | 30.8 | $ | 37.4 | $ | 61.8 | $ | 65.2 | |||||||
Health benefit ratios: | |||||||||||||||
Medicare supplement: | |||||||||||||||
Insurance policy benefits | $ | 17.0 | $ | 20.5 | $ | 34.4 | $ | 40.6 | |||||||
Benefit ratio (a) | 65.5 | % | 67.7 | % | 65.3 | % | 66.6 | % | |||||||
Supplemental health: | |||||||||||||||
Insurance policy benefits | $ | 93.6 | $ | 87.1 | $ | 187.0 | $ | 179.1 | |||||||
Benefit ratio (a) | 78.6 | % | 77.0 | % | 79.0 | % | 79.7 | % | |||||||
Interest-adjusted benefit ratio (b) | 52.6 | % | 50.1 | % | 52.8 | % | 52.6 | % |
(a) | We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income. |
(b) | We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Washington National's supplemental health products by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premium collections: | |||||||||||||||
Life | $ | 56.4 | $ | 52.5 | $ | 112.5 | $ | 105.1 | |||||||
Supplemental health | 1.0 | 1.2 | 2.1 | 2.5 | |||||||||||
Total collections | $ | 57.4 | $ | 53.7 | $ | 114.6 | $ | 107.6 | |||||||
Average liabilities for insurance products: | |||||||||||||||
Annuities-mortality based | $ | 74.4 | $ | 76.8 | $ | 74.6 | $ | 76.9 | |||||||
Supplemental health | 14.1 | 15.1 | 14.3 | 15.3 | |||||||||||
Life: | |||||||||||||||
Interest sensitive | 17.7 | 18.9 | 17.7 | 19.4 | |||||||||||
Non-interest sensitive | 629.9 | 601.8 | 624.0 | 600.1 | |||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 736.1 | $ | 712.6 | $ | 730.6 | $ | 711.7 | |||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 58.0 | $ | 54.6 | $ | 114.9 | $ | 108.0 | |||||||
Net investment income on general account invested assets | 9.9 | 10.2 | 19.8 | 20.2 | |||||||||||
Fee revenue and other income | .2 | .2 | .4 | .4 | |||||||||||
Total revenues | 68.1 | 65.0 | 135.1 | 128.6 | |||||||||||
Expenses: | |||||||||||||||
Insurance policy benefits | 41.1 | 39.3 | 83.9 | 81.2 | |||||||||||
Amounts added to annuity and interest-sensitive life product account balances | .1 | .3 | .3 | .5 | |||||||||||
Amortization related to operations | 3.7 | 3.9 | 7.4 | 7.6 | |||||||||||
Other operating costs and expenses | 22.0 | 20.9 | 47.7 | 48.5 | |||||||||||
Total benefits and expenses | 66.9 | 64.4 | 139.3 | 137.8 | |||||||||||
Income (loss) before net realized investment gains and income taxes | 1.2 | .6 | (4.2 | ) | (9.2 | ) | |||||||||
Net realized investment gains | .4 | 1.9 | .1 | 4.5 | |||||||||||
Income (loss) before income taxes | $ | 1.6 | $ | 2.5 | $ | (4.1 | ) | $ | (4.7 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premium collections: | |||||||||||||||
Annuities | $ | 1.5 | $ | 1.2 | $ | 2.5 | $ | 2.1 | |||||||
Other health | 6.2 | 6.5 | 12.7 | 13.4 | |||||||||||
Life | 39.5 | 40.9 | 80.6 | 86.2 | |||||||||||
Total collections | $ | 47.2 | $ | 48.6 | $ | 95.8 | $ | 101.7 | |||||||
Average liabilities for insurance products: | |||||||||||||||
Annuities: | |||||||||||||||
Mortality based | $ | 212.9 | $ | 225.5 | $ | 213.9 | $ | 227.3 | |||||||
Fixed index | 462.9 | 532.5 | 468.6 | 543.2 | |||||||||||
Deposit based | 621.2 | 633.1 | 626.4 | 635.7 | |||||||||||
Separate accounts | 15.3 | 15.8 | 15.2 | 15.6 | |||||||||||
Other health | 474.7 | 479.8 | 474.7 | 480.4 | |||||||||||
Life: | |||||||||||||||
Interest sensitive | 2,232.6 | 2,365.9 | 2,245.7 | 2,391.4 | |||||||||||
Non-interest sensitive | 810.1 | 763.3 | 809.7 | 764.9 | |||||||||||
Total average liabilities for insurance products, net of reinsurance ceded | $ | 4,829.7 | $ | 5,015.9 | $ | 4,854.2 | $ | 5,058.5 | |||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 65.0 | $ | 73.6 | $ | 132.2 | $ | 152.6 | |||||||
Net investment income: | |||||||||||||||
General account invested assets | 78.3 | 84.0 | 157.7 | 168.0 | |||||||||||
Fixed index products | 2.4 | (4.1 | ) | 11.4 | 2.7 | ||||||||||
Trading account income related to policyholder accounts | (.1 | ) | (.1 | ) | 1.2 | 1.8 | |||||||||
Total revenues | 145.6 | 153.4 | 302.5 | 325.1 | |||||||||||
Expenses: | |||||||||||||||
Insurance policy benefits | 77.4 | 93.8 | 165.5 | 176.8 | |||||||||||
Amounts added to policyholder account balances: | |||||||||||||||
Annuity products and interest-sensitive life products other than fixed index products | 27.0 | 27.5 | 55.8 | 57.2 | |||||||||||
Fixed index products | 5.2 | .7 | 13.7 | 9.9 | |||||||||||
Amortization related to operations | 5.9 | 7.1 | 11.5 | 14.6 | |||||||||||
Interest expense on investment borrowings | 4.8 | 5.0 | 9.6 | 10.1 | |||||||||||
Other operating costs and expenses | 22.7 | 17.4 | 40.2 | 56.9 | |||||||||||
Total benefits and expenses | 143.0 | 151.5 | 296.3 | 325.5 | |||||||||||
Income (loss) before net realized investment gains, net of related amortization, and fair value changes in embedded derivative liabilities, net of related amortization, and income taxes | 2.6 | 1.9 | 6.2 | (.4 | ) | ||||||||||
Net realized investment gains | .8 | 7.5 | 5.7 | 14.2 | |||||||||||
Amortization related to net realized investment gains | — | (1.4 | ) | (.1 | ) | (1.6 | ) | ||||||||
Net realized investment gains, net of related amortization | .8 | 6.1 | 5.6 | 12.6 | |||||||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | 1.7 | (1.0 | ) | 1.6 | (.4 | ) | |||||||||
Amortization related to fair value changes in embedded derivative liabilities | (1.4 | ) | .8 | (1.3 | ) | .3 | |||||||||
Fair value changes in embedded derivative liabilities, net of related amortization | .3 | (.2 | ) | .3 | (.1 | ) | |||||||||
Income before income taxes | $ | 3.7 | $ | 7.8 | $ | 12.1 | $ | 12.1 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Health benefit ratios: | |||||||||||||||
Long-term care: | |||||||||||||||
Insurance policy benefits | $ | 15.3 | $ | 14.9 | $ | 30.9 | $ | 30.0 | |||||||
Benefit ratio (a) | 251.0 | % | 230.2 | % | 251.6 | % | 228.8 | % | |||||||
Interest-adjusted benefit ratio (b) | 137.6 | % | 121.3 | % | 139.2 | % | 121.7 | % |
(a) | We calculate benefit ratios by dividing the related product's insurance policy benefits by insurance policy income. |
(b) | We calculate the interest-adjusted benefit ratio (a non-GAAP measure) for Other CNO Business long-term care products by dividing such product's insurance policy benefits less the imputed interest income on the accumulated assets backing the insurance liabilities by policy income. These are considered non-GAAP financial measures. A non-GAAP measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Corporate operations: | |||||||||||||||
Interest expense on corporate debt | $ | (13.1 | ) | $ | (16.6 | ) | $ | (28.2 | ) | $ | (34.1 | ) | |||
Net investment income (loss): | |||||||||||||||
General investment portfolio | 1.5 | 1.0 | 2.6 | 1.9 | |||||||||||
Other special-purpose portfolios: | |||||||||||||||
COLI | .1 | (4.0 | ) | 4.7 | 2.3 | ||||||||||
Investments held in a rabbi trust | — | — | .4 | 4.1 | |||||||||||
Investments in certain hedge funds | (.2 | ) | (1.6 | ) | — | (1.8 | ) | ||||||||
Other trading account activities | 3.1 | 4.5 | 6.9 | 10.5 | |||||||||||
Fee revenue and other income | 1.5 | .2 | 3.2 | .6 | |||||||||||
Net operating results of variable interest entities | — | 2.9 | — | 5.1 | |||||||||||
Interest expense on investment borrowings | — | (.2 | ) | (.1 | ) | (.3 | ) | ||||||||
Other operating costs and expenses | (3.6 | ) | (11.9 | ) | (12.3 | ) | (33.3 | ) | |||||||
Loss before net realized investment gains (losses), equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests, loss on extinguishment of debt and income taxes | (10.7 | ) | (25.7 | ) | (22.8 | ) | (45.0 | ) | |||||||
Net realized investment gains (losses) | (.3 | ) | 1.1 | .2 | 1.0 | ||||||||||
Equity in earnings of certain non-strategic investments and earnings attributable to non-controlling interests | (2.9 | ) | — | (4.8 | ) | — | |||||||||
Loss on extinguishment of debt | (7.7 | ) | (.5 | ) | (65.4 | ) | (.7 | ) | |||||||
Loss before income taxes | $ | (21.6 | ) | $ | (25.1 | ) | $ | (92.8 | ) | $ | (44.7 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
EBIT from In-Force Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 594.6 | $ | 601.7 | $ | 1,186.8 | $ | 1,198.7 | |||||||
Net investment income and other | 365.6 | 324.7 | 771.8 | 702.5 | |||||||||||
Total revenues | 960.2 | 926.4 | 1,958.6 | 1,901.2 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 638.3 | 611.7 | 1,324.6 | 1,247.0 | |||||||||||
Amortization | 60.3 | 64.6 | 131.1 | 137.7 | |||||||||||
Other expenses | 106.0 | 100.2 | 209.1 | 237.7 | |||||||||||
Total benefits and expenses | 804.6 | 776.5 | 1,664.8 | 1,622.4 | |||||||||||
EBIT from In-Force Business | $ | 155.6 | $ | 149.9 | $ | 293.8 | $ | 278.8 | |||||||
EBIT from New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 96.7 | $ | 93.1 | $ | 195.7 | $ | 182.4 | |||||||
Net investment income and other | 7.2 | 5.7 | 18.4 | 18.8 | |||||||||||
Total revenues | 103.9 | 98.8 | 214.1 | 201.2 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 63.9 | 60.3 | 134.8 | 125.6 | |||||||||||
Amortization | 8.0 | 7.7 | 14.7 | 15.4 | |||||||||||
Other expenses | 72.9 | 68.2 | 154.0 | 143.4 | |||||||||||
Total benefits and expenses | 144.8 | 136.2 | 303.5 | 284.4 | |||||||||||
EBIT from New Business | $ | (40.9 | ) | $ | (37.4 | ) | $ | (89.4 | ) | $ | (83.2 | ) | |||
EBIT from In-Force and New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 691.3 | $ | 694.8 | $ | 1,382.5 | $ | 1,381.1 | |||||||
Net investment income and other | 372.8 | 330.4 | 790.2 | 721.3 | |||||||||||
Total revenues | 1,064.1 | 1,025.2 | 2,172.7 | 2,102.4 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 702.2 | 672.0 | 1,459.4 | 1,372.6 | |||||||||||
Amortization | 68.3 | 72.3 | 145.8 | 153.1 | |||||||||||
Other expenses | 178.9 | 168.4 | 363.1 | 381.1 | |||||||||||
Total benefits and expenses | 949.4 | 912.7 | 1,968.3 | 1,906.8 | |||||||||||
EBIT from In-Force and New Business | $ | 114.7 | $ | 112.5 | $ | 204.4 | $ | 195.6 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
EBIT from In-Force Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 349.4 | $ | 351.6 | $ | 695.2 | $ | 693.4 | |||||||
Net investment income and other | 223.4 | 183.2 | 477.6 | 407.9 | |||||||||||
Total revenues | 572.8 | 534.8 | 1,172.8 | 1,101.3 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 383.4 | 348.7 | 796.2 | 716.1 | |||||||||||
Amortization | 38.7 | 43.7 | 87.4 | 93.7 | |||||||||||
Other expenses | 41.1 | 39.8 | 83.5 | 91.8 | |||||||||||
Total benefits and expenses | 463.2 | 432.2 | 967.1 | 901.6 | |||||||||||
EBIT from In-Force Business | $ | 109.6 | $ | 102.6 | $ | 205.7 | $ | 199.7 | |||||||
EBIT from New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 69.7 | $ | 67.4 | $ | 141.9 | $ | 132.1 | |||||||
Net investment income and other | 7.2 | 5.7 | 18.4 | 18.8 | |||||||||||
Total revenues | 76.9 | 73.1 | 160.3 | 150.9 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 50.7 | 48.0 | 108.4 | 101.5 | |||||||||||
Amortization | 7.0 | 6.8 | 12.8 | 13.7 | |||||||||||
Other expenses | 49.7 | 44.8 | 103.6 | 88.8 | |||||||||||
Total benefits and expenses | 107.4 | 99.6 | 224.8 | 204.0 | |||||||||||
EBIT from New Business | $ | (30.5 | ) | $ | (26.5 | ) | $ | (64.5 | ) | $ | (53.1 | ) | |||
EBIT from In-Force and New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 419.1 | $ | 419.0 | $ | 837.1 | $ | 825.5 | |||||||
Net investment income and other | 230.6 | 188.9 | 496.0 | 426.7 | |||||||||||
Total revenues | 649.7 | 607.9 | 1,333.1 | 1,252.2 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 434.1 | 396.7 | 904.6 | 817.6 | |||||||||||
Amortization | 45.7 | 50.5 | 100.2 | 107.4 | |||||||||||
Other expenses | 90.8 | 84.6 | 187.1 | 180.6 | |||||||||||
Total benefits and expenses | 570.6 | 531.8 | 1,191.9 | 1,105.6 | |||||||||||
EBIT from In-Force and New Business | $ | 79.1 | $ | 76.1 | $ | 141.2 | $ | 146.6 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
EBIT from In-Force Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 133.7 | $ | 132.8 | $ | 267.3 | $ | 265.8 | |||||||
Net investment income and other | 51.5 | 51.3 | 103.7 | 101.5 | |||||||||||
Total revenues | 185.2 | 184.1 | 371.0 | 367.3 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 110.7 | 107.6 | 222.3 | 217.4 | |||||||||||
Amortization | 12.1 | 10.0 | 25.0 | 22.0 | |||||||||||
Other expenses | 31.4 | 32.3 | 63.0 | 66.3 | |||||||||||
Total benefits and expenses | 154.2 | 149.9 | 310.3 | 305.7 | |||||||||||
EBIT from In-Force Business | $ | 31.0 | $ | 34.2 | $ | 60.7 | $ | 61.6 | |||||||
EBIT from New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 15.5 | $ | 14.8 | $ | 31.0 | $ | 29.2 | |||||||
Net investment income and other | — | — | — | — | |||||||||||
Total revenues | 15.5 | 14.8 | 31.0 | 29.2 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 6.6 | 6.1 | 13.3 | 12.0 | |||||||||||
Amortization | .9 | .8 | 1.7 | 1.5 | |||||||||||
Other expenses | 7.2 | 8.2 | 15.5 | 18.7 | |||||||||||
Total benefits and expenses | 14.7 | 15.1 | 30.5 | 32.2 | |||||||||||
EBIT from New Business | $ | .8 | $ | (.3 | ) | $ | .5 | $ | (3.0 | ) | |||||
EBIT from In-Force and New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 149.2 | $ | 147.6 | $ | 298.3 | $ | 295.0 | |||||||
Net investment income and other | 51.5 | 51.3 | 103.7 | 101.5 | |||||||||||
Total revenues | 200.7 | 198.9 | 402.0 | 396.5 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 117.3 | 113.7 | 235.6 | 229.4 | |||||||||||
Amortization | 13.0 | 10.8 | 26.7 | 23.5 | |||||||||||
Other expenses | 38.6 | 40.5 | 78.5 | 85.0 | |||||||||||
Total benefits and expenses | 168.9 | 165.0 | 340.8 | 337.9 | |||||||||||
EBIT from In-Force and New Business | $ | 31.8 | $ | 33.9 | $ | 61.2 | $ | 58.6 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
EBIT from In-Force Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 46.5 | $ | 43.7 | $ | 92.1 | $ | 86.9 | |||||||
Net investment income and other | 10.1 | 10.4 | 20.2 | 20.6 | |||||||||||
Total revenues | 56.6 | 54.1 | 112.3 | 107.5 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 34.6 | 33.4 | 71.1 | 69.6 | |||||||||||
Amortization | 3.6 | 3.8 | 7.2 | 7.4 | |||||||||||
Other expenses | 6.0 | 5.7 | 12.8 | 12.6 | |||||||||||
Total benefits and expenses | 44.2 | 42.9 | 91.1 | 89.6 | |||||||||||
EBIT from In-Force Business | $ | 12.4 | $ | 11.2 | $ | 21.2 | $ | 17.9 | |||||||
EBIT from New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 11.5 | $ | 10.9 | $ | 22.8 | $ | 21.1 | |||||||
Net investment income and other | — | — | — | — | |||||||||||
Total revenues | 11.5 | 10.9 | 22.8 | 21.1 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 6.6 | 6.2 | 13.1 | 12.1 | |||||||||||
Amortization | .1 | .1 | .2 | .2 | |||||||||||
Other expenses | 16.0 | 15.2 | 34.9 | 35.9 | |||||||||||
Total benefits and expenses | 22.7 | 21.5 | 48.2 | 48.2 | |||||||||||
EBIT from New Business | $ | (11.2 | ) | $ | (10.6 | ) | $ | (25.4 | ) | $ | (27.1 | ) | |||
EBIT from In-Force and New Business | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 58.0 | $ | 54.6 | $ | 114.9 | $ | 108.0 | |||||||
Net investment income and other | 10.1 | 10.4 | 20.2 | 20.6 | |||||||||||
Total revenues | 68.1 | 65.0 | 135.1 | 128.6 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 41.2 | 39.6 | 84.2 | 81.7 | |||||||||||
Amortization | 3.7 | 3.9 | 7.4 | 7.6 | |||||||||||
Other expenses | 22.0 | 20.9 | 47.7 | 48.5 | |||||||||||
Total benefits and expenses | 66.9 | 64.4 | 139.3 | 137.8 | |||||||||||
EBIT from In-Force and New Business | $ | 1.2 | $ | .6 | $ | (4.2 | ) | $ | (9.2 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
EBIT from In-Force Business (a) | |||||||||||||||
Revenues: | |||||||||||||||
Insurance policy income | $ | 65.0 | $ | 73.6 | $ | 132.2 | $ | 152.6 | |||||||
Net investment income and other | 80.6 | 79.8 | 170.3 | 172.5 | |||||||||||
Total revenues | 145.6 | 153.4 | 302.5 | 325.1 | |||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits | 109.6 | 122.0 | 235.0 | 243.9 | |||||||||||
Amortization | 5.9 | 7.1 | 11.5 | 14.6 | |||||||||||
Other expenses | 27.5 | 22.4 | 49.8 | 67.0 | |||||||||||
Total benefits and expenses | 143.0 | 151.5 | 296.3 | 325.5 | |||||||||||
EBIT from In-Force Business | $ | 2.6 | $ | 1.9 | $ | 6.2 | $ | (.4 | ) |
(a) | All activity in the Other CNO Business segment relates to in-force business. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premiums collected by product: | |||||||||||||||
Annuities: | |||||||||||||||
Fixed index (first-year) | $ | 143.4 | $ | 120.2 | $ | 270.0 | $ | 255.1 | |||||||
Other fixed rate (first-year) | 38.5 | 47.9 | 75.7 | 95.7 | |||||||||||
Other fixed rate (renewal) | 1.8 | 1.4 | 3.6 | 3.4 | |||||||||||
Subtotal - other fixed rate annuities | 40.3 | 49.3 | 79.3 | 99.1 | |||||||||||
Total annuities | 183.7 | 169.5 | 349.3 | 354.2 | |||||||||||
Health: | |||||||||||||||
Medicare supplement (first-year) | 22.7 | 25.1 | 45.4 | 48.9 | |||||||||||
Medicare supplement (renewal) | 153.4 | 149.8 | 315.9 | 300.9 | |||||||||||
Subtotal - Medicare supplement | 176.1 | 174.9 | 361.3 | 349.8 | |||||||||||
Long-term care (first-year) | 5.4 | 5.9 | 11.1 | 11.4 | |||||||||||
Long-term care (renewal) | 127.8 | 132.9 | 257.5 | 264.1 | |||||||||||
Subtotal - long-term care | 133.2 | 138.8 | 268.6 | 275.5 | |||||||||||
PDP (first year) | — | .1 | .1 | .4 | |||||||||||
PDP (renewal) | 10.5 | 14.6 | 20.6 | 29.6 | |||||||||||
Subtotal – PDP | 10.5 | 14.7 | 20.7 | 30.0 | |||||||||||
Supplemental health (first-year) | 2.0 | .2 | 3.6 | .2 | |||||||||||
Supplemental health (renewal) | .2 | — | .2 | — | |||||||||||
Subtotal – supplemental health | 2.2 | .2 | 3.8 | .2 | |||||||||||
Other health (first-year) | .4 | .4 | .7 | .8 | |||||||||||
Other health (renewal) | 2.2 | 2.3 | 4.6 | 4.5 | |||||||||||
Subtotal - other health | 2.6 | 2.7 | 5.3 | 5.3 | |||||||||||
Total health | 324.6 | 331.3 | 659.7 | 660.8 | |||||||||||
Life insurance: | |||||||||||||||
First-year | 41.0 | 35.7 | 83.4 | 68.5 | |||||||||||
Renewal | 50.1 | 39.7 | 97.2 | 77.0 | |||||||||||
Total life insurance | 91.1 | 75.4 | 180.6 | 145.5 | |||||||||||
Collections on insurance products: | |||||||||||||||
Total first-year premium collections on insurance products | 253.4 | 235.5 | 490.0 | 481.0 | |||||||||||
Total renewal premium collections on insurance products | 346.0 | 340.7 | 699.6 | 679.5 | |||||||||||
Total collections on insurance products | $ | 599.4 | $ | 576.2 | $ | 1,189.6 | $ | 1,160.5 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premiums collected by product: | |||||||||||||||
Health: | |||||||||||||||
Medicare supplement (first-year) | $ | — | $ | .3 | $ | .2 | $ | .6 | |||||||
Medicare supplement (renewal) | 25.0 | 28.8 | 51.4 | 56.6 | |||||||||||
Subtotal - Medicare supplement | 25.0 | 29.1 | 51.6 | 57.2 | |||||||||||
Supplemental health (first-year) | 16.3 | 15.1 | 31.9 | 29.2 | |||||||||||
Supplemental health (renewal) | 105.6 | 100.3 | 210.3 | 199.1 | |||||||||||
Subtotal – supplemental health | 121.9 | 115.4 | 242.2 | 228.3 | |||||||||||
Other health (all renewal) | .7 | .6 | 1.3 | 1.3 | |||||||||||
Total health | 147.6 | 145.1 | 295.1 | 286.8 | |||||||||||
Life insurance: | |||||||||||||||
First-year | .2 | .3 | .4 | .5 | |||||||||||
Renewal | 3.2 | 3.5 | 6.6 | 7.3 | |||||||||||
Total life insurance | 3.4 | 3.8 | 7.0 | 7.8 | |||||||||||
Collections on insurance products: | |||||||||||||||
Total first-year premium collections on insurance products | 16.5 | 15.7 | 32.5 | 30.3 | |||||||||||
Total renewal premium collections on insurance products | 134.5 | 133.2 | 269.6 | 264.3 | |||||||||||
Total collections on insurance products | $ | 151.0 | $ | 148.9 | $ | 302.1 | $ | 294.6 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premiums collected by product: | |||||||||||||||
Life insurance: | |||||||||||||||
First-year | $ | 11.4 | $ | 10.7 | $ | 22.8 | $ | 21.1 | |||||||
Renewal | 45.0 | 41.8 | 89.7 | 84.0 | |||||||||||
Total life insurance | 56.4 | 52.5 | 112.5 | 105.1 | |||||||||||
Health (all renewal): | |||||||||||||||
Medicare supplement | .9 | 1.1 | 1.9 | 2.3 | |||||||||||
Other health | .1 | .1 | .2 | .2 | |||||||||||
Total health | 1.0 | 1.2 | 2.1 | 2.5 | |||||||||||
Collections on insurance products: | |||||||||||||||
Total first-year premium collections on insurance products | 11.4 | 10.7 | 22.8 | 21.1 | |||||||||||
Total renewal premium collections on insurance products | 46.0 | 43.0 | 91.8 | 86.5 | |||||||||||
Total collections on insurance products | $ | 57.4 | $ | 53.7 | $ | 114.6 | $ | 107.6 |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Premiums collected by product: | |||||||||||||||
Annuities: | |||||||||||||||
Fixed index (first-year) | $ | .1 | $ | .2 | $ | .3 | $ | .2 | |||||||
Fixed index (renewal) | 1.3 | .8 | 1.9 | 1.5 | |||||||||||
Subtotal - fixed index annuities | 1.4 | 1.0 | 2.2 | 1.7 | |||||||||||
Other fixed rate (all renewal) | .1 | .2 | .3 | .4 | |||||||||||
Total annuities | 1.5 | 1.2 | 2.5 | 2.1 | |||||||||||
Health: | |||||||||||||||
Long-term care (all renewal) | 6.1 | 6.3 | 12.4 | 13.0 | |||||||||||
Other health (all renewal) | .1 | .2 | .3 | .4 | |||||||||||
Total health | 6.2 | 6.5 | 12.7 | 13.4 | |||||||||||
Life insurance: | |||||||||||||||
First-year | 1.1 | .8 | 2.1 | 1.4 | |||||||||||
Renewal | 38.4 | 40.1 | 78.5 | 84.8 | |||||||||||
Total life insurance | 39.5 | 40.9 | 80.6 | 86.2 | |||||||||||
Collections on insurance products: | |||||||||||||||
Total first-year premium collections on insurance products | 1.2 | 1.0 | 2.4 | 1.6 | |||||||||||
Total renewal premium collections on insurance products | 46.0 | 47.6 | 93.4 | 100.1 | |||||||||||
Total collections on insurance products | $ | 47.2 | $ | 48.6 | $ | 95.8 | $ | 101.7 |
June 30, 2013 | December 31, 2012 | ||||||
Total capital: | |||||||
Corporate notes payable | $ | 905.7 | $ | 1,004.2 | |||
Shareholders' equity: | |||||||
Common stock | 2.2 | 2.2 | |||||
Additional paid-in capital | 4,128.2 | 4,174.7 | |||||
Accumulated other comprehensive income | 698.1 | 1,197.4 | |||||
Accumulated deficit | (247.1 | ) | (325.0 | ) | |||
Total shareholders' equity | 4,581.4 | 5,049.3 | |||||
Total capital | $ | 5,487.1 | $ | 6,053.5 |
June 30, 2013 | December 31, 2012 | ||||||
Book value per common share | $ | 20.88 | $ | 22.80 | |||
Book value per common share, excluding accumulated other comprehensive income (a) | 17.70 | 17.39 | |||||
Ratio of earnings to fixed charges | 1.80X | 1.40X | |||||
Debt to total capital ratios: | |||||||
Corporate debt to total capital | 16.5 | % | 16.6 | % | |||
Corporate debt to total capital, excluding accumulated other comprehensive income (a) | 18.9 | % | 20.7 | % |
(a) | This non-GAAP measure differs from the corresponding GAAP measure presented immediately above, because accumulated other comprehensive income has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income. Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. However, this measure does not replace the corresponding GAAP measure. |
Amount | Maturity | Interest rate at | ||||
borrowed | date | June 30, 2013 | ||||
$ | 67.0 | February 2014 | Fixed rate – 1.830% | |||
50.0 | August 2014 | Variable rate – 0.405% | ||||
50.0 | September 2015 | Variable rate – 0.576% | ||||
150.0 | October 2015 | Variable rate – 0.543% | ||||
100.0 | November 2015 | Variable rate – 0.354% | ||||
146.0 | November 2015 | Fixed rate – 5.300% | ||||
100.0 | December 2015 | Fixed rate – 4.710% | ||||
100.0 | June 2016 | Variable rate – 0.633% | ||||
75.0 | June 2016 | Variable rate – 0.434% | ||||
100.0 | October 2016 | Variable rate – 0.463% | ||||
50.0 | November 2016 | Variable rate – 0.543% | ||||
50.0 | November 2016 | Variable rate – 0.665% | ||||
57.7 | June 2017 | Variable rate – 0.624% | ||||
100.0 | July 2017 | Fixed rate – 3.900% | ||||
50.0 | August 2017 | Variable rate – 0.475% | ||||
75.0 | August 2017 | Variable rate – 0.423% | ||||
100.0 | October 2017 | Variable rate – 0.707% | ||||
37.0 | November 2017 | Fixed rate – 3.750% | ||||
50.0 | January 2018 | Variable rate – 0.628% | ||||
50.0 | January 2018 | Variable rate – 0.616% | ||||
50.0 | February 2018 | Variable rate – 0.583% | ||||
22.0 | February 2018 | Variable rate – 0.603% | ||||
100.0 | May 2018 | Variable rate – 0.645% | ||||
50.0 | July 2018 | Variable rate – 0.746% | ||||
21.8 | June 2020 | Fixed rate – 1.960% | ||||
27.8 | March 2023 | Fixed rate – 2.160% | ||||
20.5 | June 2025 | Fixed rate – 2.940% | ||||
$ | 1,849.8 |
Earned surplus | ||||||
Subsidiary of CDOC | (deficit) | Additional information | ||||
Subsidiaries of Conseco Life of Texas: | ||||||
Bankers Life | $ | 323.7 | (a) | |||
Colonial Penn Life Insurance Company | (242.9 | ) | (b) |
(a) | Bankers Life paid ordinary dividends of $75.0 million to Conseco Life of Texas in the first six months of 2013. |
(b) | The deficit is primarily due to transactions which occurred several years ago, including a tax planning transaction and the fee paid to recapture a block of business previously ceded to an unaffiliated insurer. |
(i) | modifications of mandatory prepayments resulting from certain restricted payments made (including any common stock dividends and share repurchases) as defined in the Senior Secured Credit Agreement. Pursuant to the amended terms, the amount of the mandatory prepayment is: (a) 100% of the amount of certain restricted payments provided that if, as of the end of the fiscal quarter immediately preceding such restricted payment, the debt to total capitalization ratio is: (x) equal to or less than 25.0% but greater than 20.0%, the prepayment requirement shall be reduced to 33.33% (previously less than or equal to 22.5% but greater than 17.5%); or (y) equal to or less than 20.0%, the prepayment requirement shall not apply (previously equal to or less than 17.5%); and |
(ii) | that there will be a 1.00% fee in connection with any repricing of the six-year term loan facility that reduces the interest rate prior to the date that is six months after the closing of the amendment of the Senior Secured Credit Agreement. |
Year ending June 30, | Principal | ||
2014 | $ | 51.1 | |
2015 | 73.0 | ||
2016 | 79.2 | ||
2017 | 52.2 | ||
2018 | 4.2 | ||
Thereafter | 651.0 | ||
$ | 910.7 |
Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | ||||||||||||
Investment grade (a): | |||||||||||||||
Corporate securities | $ | 13,686.2 | $ | 1,250.4 | $ | (116.0 | ) | $ | 14,820.6 | ||||||
United States Treasury securities and obligations of United States government corporations and agencies | 127.9 | 3.6 | (.4 | ) | 131.1 | ||||||||||
States and political subdivisions | 1,929.7 | 162.8 | (19.2 | ) | 2,073.3 | ||||||||||
Asset-backed securities | 918.9 | 47.8 | (5.6 | ) | 961.1 | ||||||||||
Collateralized debt obligations | 295.6 | 9.1 | (.7 | ) | 304.0 | ||||||||||
Commercial mortgage-backed securities | 1,302.6 | 101.8 | (6.7 | ) | 1,397.7 | ||||||||||
Mortgage pass-through securities | 14.8 | .8 | — | 15.6 | |||||||||||
Collateralized mortgage obligations | 1,173.4 | 67.0 | (2.4 | ) | 1,238.0 | ||||||||||
Total investment grade fixed maturities, available for sale | 19,449.1 | 1,643.3 | (151.0 | ) | 20,941.4 | ||||||||||
Below-investment grade (a): | |||||||||||||||
Corporate securities | 1,266.6 | 44.0 | (27.4 | ) | 1,283.2 | ||||||||||
States and political subdivisions | 15.3 | — | (1.4 | ) | 13.9 | ||||||||||
Asset-backed securities | 470.1 | 31.3 | (7.1 | ) | 494.3 | ||||||||||
Collateralized debt obligations | 23.8 | .1 | (.1 | ) | 23.8 | ||||||||||
Collateralized mortgage obligations | 798.8 | 68.0 | (.4 | ) | 866.4 | ||||||||||
Total below-investment grade fixed maturities, available for sale | 2,574.6 | 143.4 | (36.4 | ) | 2,681.6 | ||||||||||
Total fixed maturities, available for sale | $ | 22,023.7 | $ | 1,786.7 | $ | (187.4 | ) | $ | 23,623.0 | ||||||
Equity securities | $ | 230.8 | $ | 11.8 | $ | (1.3 | ) | $ | 241.3 |
(a) | Investment ratings – Investment ratings are assigned the second lowest rating by Nationally Recognized Statistical Rating Organizations ("NRSROs") (Moody's, S&P or Fitch), or if not rated by such firms, the rating assigned by the NAIC. NAIC designations of "1" or "2" include fixed maturities generally rated investment grade (rated "Baa3" or higher by Moody's or rated "BBB-" or higher by S&P and Fitch). NAIC designations of "3" through "6" are referred to as below-investment grade (which generally are rated "Ba1" or lower by Moody's or rated "BB+" or lower by S&P and Fitch). References to investment grade or below-investment grade throughout our consolidated financial statements are determined as described above. |
NAIC Designation | NRSRO Equivalent Rating | |
1 | AAA/AA/A | |
2 | BBB | |
3 | BB | |
4 | B | |
5 | CCC and lower | |
6 | In or near default |
Percentage | |||||||||||
Estimated | of total | ||||||||||
NAIC | Amortized | fair | estimated | ||||||||
designation | cost | value | fair value | ||||||||
1 | $ | 10,271.8 | $ | 11,173.8 | 47.3 | % | |||||
2 | 10,381.6 | 11,055.4 | 46.8 | ||||||||
3 | 1,008.5 | 1,028.5 | 4.4 | ||||||||
4 | 334.4 | 339.4 | 1.4 | ||||||||
5 | 27.0 | 25.4 | .1 | ||||||||
6 | .4 | .5 | — | ||||||||
$ | 22,023.7 | $ | 23,623.0 | 100.0 | % |
Carrying value | Percent of fixed maturities | Gross unrealized losses | Percent of gross unrealized losses | ||||||||||
Energy/pipelines | $ | 2,431.1 | 10.3 | % | $ | 19.0 | 10.1 | % | |||||
Collateralized mortgage obligations | 2,104.4 | 8.9 | 2.8 | 1.5 | |||||||||
States and political subdivisions | 2,087.2 | 8.8 | 20.6 | 11.0 | |||||||||
Utilities | 1,908.8 | 8.1 | 4.3 | 2.3 | |||||||||
Insurance | 1,549.0 | 6.6 | 4.2 | 2.2 | |||||||||
Asset-backed securities | 1,455.4 | 6.2 | 12.7 | 6.8 | |||||||||
Commercial mortgage-backed securities | 1,397.7 | 5.9 | 6.7 | 3.6 | |||||||||
Healthcare/pharmaceuticals | 1,221.7 | 5.2 | 21.9 | 11.7 | |||||||||
Food/beverage | 1,104.7 | 4.7 | 10.0 | 5.4 | |||||||||
Cable/media | 908.3 | 3.8 | 20.6 | 11.0 | |||||||||
Banks | 861.2 | 3.6 | 9.3 | 5.0 | |||||||||
Real estate/REITs | 857.8 | 3.6 | .6 | .3 | |||||||||
Capital goods | 709.8 | 3.0 | .3 | .1 | |||||||||
Telecom | 483.3 | 2.0 | 3.7 | 1.9 | |||||||||
Aerospace/defense | 469.9 | 2.0 | .9 | .5 | |||||||||
Transportation | 426.7 | 1.8 | .7 | .4 | |||||||||
Chemicals | 405.9 | 1.7 | 6.1 | 3.3 | |||||||||
Building materials | 380.4 | 1.6 | 4.2 | 2.2 | |||||||||
Metals and mining | 342.2 | 1.4 | 16.6 | 8.8 | |||||||||
Paper | 328.8 | 1.4 | 1.2 | .6 | |||||||||
Collateralized debt obligations | 327.8 | 1.4 | .8 | .4 | |||||||||
Brokerage | 279.2 | 1.2 | 1.3 | .7 | |||||||||
Technology | 275.9 | 1.2 | 1.1 | .6 | |||||||||
Business services | 248.6 | 1.1 | 9.3 | 5.0 | |||||||||
Consumer products | 235.9 | 1.0 | .6 | .3 | |||||||||
Other | 821.3 | 3.5 | 7.9 | 4.3 | |||||||||
Total fixed maturities, available for sale | $ | 23,623.0 | 100.0 | % | $ | 187.4 | 100.0 | % |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Realized gains on sale | $ | 10.8 | $ | 39.6 | $ | 27.4 | $ | 68.3 | |||||||
Realized losses on sale | (1.4 | ) | (5.5 | ) | (3.4 | ) | (7.8 | ) | |||||||
Impairments: | |||||||||||||||
Total other-than-temporary impairment losses | — | (.5 | ) | — | (.9 | ) | |||||||||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income (loss) | — | — | — | — | |||||||||||
Net impairment losses recognized | — | (.5 | ) | — | (.9 | ) | |||||||||
Net realized investment gains from fixed maturities | 9.4 | 33.6 | 24.0 | 59.6 | |||||||||||
Equity securities | — | .1 | — | .1 | |||||||||||
Commercial mortgage loans | — | (.6 | ) | .7 | (.1 | ) | |||||||||
Impairments of mortgage loans and other investments | (.6 | ) | (3.0 | ) | (.6 | ) | (10.5 | ) | |||||||
Other | (5.6 | ) | 1.8 | (5.6 | ) | 5.7 | |||||||||
Net realized investment gains | $ | 3.2 | $ | 31.9 | $ | 18.5 | $ | 54.8 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 25.3 | $ | 25.2 | |||
Due after one year through five years | 111.0 | 108.4 | |||||
Due after five years through ten years | 585.2 | 568.5 | |||||
Due after ten years | 2,267.0 | 2,122.0 | |||||
Subtotal | 2,988.5 | 2,824.1 | |||||
Structured securities | 677.2 | 654.2 | |||||
Total | $ | 3,665.7 | $ | 3,478.3 |
Investment grade | Below investment grade | |||||||||||||||||||
AAA/AA/A | BBB | BB | B+ and below | Total gross unrealized losses | ||||||||||||||||
Healthcare/pharmaceuticals | $ | — | $ | 17.0 | $ | 4.7 | $ | .2 | $ | 21.9 | ||||||||||
Cable/media | .1 | 15.5 | 2.9 | 2.1 | 20.6 | |||||||||||||||
States and political subdivisions | 12.5 | 6.7 | 1.4 | — | 20.6 | |||||||||||||||
Energy/pipelines | .9 | 14.2 | .4 | 3.5 | 19.0 | |||||||||||||||
Metals and mining | .4 | 15.4 | .8 | — | 16.6 | |||||||||||||||
Asset-backed securities | 1.2 | 4.4 | 1.2 | 5.9 | 12.7 | |||||||||||||||
Food/beverage | .9 | 5.5 | 3.6 | — | 10.0 | |||||||||||||||
Banks | 3.4 | 3.5 | 2.4 | — | 9.3 | |||||||||||||||
Business services | — | 9.3 | — | — | 9.3 | |||||||||||||||
Commercial mortgage-backed securities | 2.9 | 3.8 | — | — | 6.7 | |||||||||||||||
Chemicals | — | 5.0 | 1.1 | — | 6.1 | |||||||||||||||
Utilities | .3 | 4.0 | — | — | 4.3 | |||||||||||||||
Building materials | — | 1.2 | 2.7 | .3 | 4.2 | |||||||||||||||
Insurance | .3 | 3.9 | — | — | 4.2 | |||||||||||||||
Autos | — | 3.1 | .6 | .1 | 3.8 | |||||||||||||||
Telecom | .6 | 2.5 | .3 | .3 | 3.7 | |||||||||||||||
Collateralized mortgage obligations | 1.9 | .5 | .1 | .3 | 2.8 | |||||||||||||||
Retail | — | 1.8 | — | — | 1.8 | |||||||||||||||
Brokerage | .5 | .8 | — | — | 1.3 | |||||||||||||||
Paper | — | 1.1 | — | .1 | 1.2 | |||||||||||||||
Technology | — | .7 | .3 | .1 | 1.1 | |||||||||||||||
Aerospace/defense | .1 | .6 | .2 | — | .9 | |||||||||||||||
Collateralized debt obligations | .2 | .5 | — | .1 | .8 | |||||||||||||||
Transportation | — | .7 | — | — | .7 | |||||||||||||||
Consumer products | — | .3 | .3 | — | .6 | |||||||||||||||
Real estate/REITs | — | .6 | — | — | .6 | |||||||||||||||
Entertainment/hotels | — | .3 | .1 | — | .4 | |||||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | .4 | — | — | — | .4 | |||||||||||||||
Capital goods | — | — | .2 | .1 | .3 | |||||||||||||||
Other | — | 1.5 | — | — | 1.5 | |||||||||||||||
Total fixed maturities, available for sale | $ | 26.6 | $ | 124.4 | $ | 23.3 | $ | 13.1 | $ | 187.4 |
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Description of securities | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | ||||||||||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | $ | 24.0 | $ | (.4 | ) | $ | — | $ | — | $ | 24.0 | $ | (.4 | ) | ||||||||||
States and political subdivisions | 276.8 | $ | (14.0 | ) | 63.4 | $ | (6.6 | ) | 340.2 | (20.6 | ) | |||||||||||||
Corporate securities | 2,388.2 | (135.5 | ) | 71.7 | (7.9 | ) | 2,459.9 | (143.4 | ) | |||||||||||||||
Asset-backed securities | 297.3 | (10.6 | ) | 42.5 | (2.1 | ) | 339.8 | (12.7 | ) | |||||||||||||||
Collateralized debt obligations | 46.5 | (.8 | ) | — | — | 46.5 | (.8 | ) | ||||||||||||||||
Commercial mortgage-backed securities | 107.0 | (6.4 | ) | 3.3 | (.3 | ) | 110.3 | (6.7 | ) | |||||||||||||||
Mortgage pass-through securities | 1.8 | — | 1.8 | — | 3.6 | — | ||||||||||||||||||
Collateralized mortgage obligations | 151.2 | (2.8 | ) | 2.8 | — | 154.0 | (2.8 | ) | ||||||||||||||||
Total fixed maturities, available for sale | $ | 3,292.8 | $ | (170.5 | ) | $ | 185.5 | $ | (16.9 | ) | $ | 3,478.3 | $ | (187.4 | ) | |||||||||
Equity securities | $ | 31.7 | $ | (1.3 | ) | $ | — | $ | — | $ | 31.7 | $ | (1.3 | ) |
Par value | Amortized cost | Estimated fair value | |||||||||
Below 4 percent | $ | 776.0 | $ | 724.2 | $ | 737.1 | |||||
4 percent – 5 percent | 893.0 | 853.1 | 888.8 | ||||||||
5 percent – 6 percent | 2,580.6 | 2,430.0 | 2,608.2 | ||||||||
6 percent – 7 percent | 820.5 | 769.8 | 834.1 | ||||||||
7 percent – 8 percent | 120.6 | 123.3 | 133.3 | ||||||||
8 percent and above | 96.5 | 97.6 | 99.4 | ||||||||
Total structured securities | $ | 5,287.2 | $ | 4,998.0 | $ | 5,300.9 |
Estimated fair value | ||||||||||
Type | Amortized cost | Amount | Percent of fixed maturities | |||||||
Pass-throughs, sequential and equivalent securities | $ | 1,317.8 | $ | 1,403.8 | 5.9 | % | ||||
Planned amortization classes, target amortization classes and accretion-directed securities | 646.1 | 690.4 | 2.9 | |||||||
Commercial mortgage-backed securities | 1,302.6 | 1,397.7 | 5.9 | |||||||
Asset-backed securities | 1,389.0 | 1,455.4 | 6.2 | |||||||
Collateralized debt obligations | 319.4 | 327.8 | 1.4 | |||||||
Other | 23.1 | 25.8 | .1 | |||||||
Total structured securities | $ | 4,998.0 | $ | 5,300.9 | 22.4 | % |
Estimated fair value | |||||||||||
Loan-to-value ratio (a) | Carrying value | Mortgage loans | Collateral | ||||||||
Less than 60% | $ | 819.8 | $ | 875.5 | $ | 2,388.1 | |||||
60% to 70% | 381.5 | 386.0 | 586.0 | ||||||||
Greater than 70% to 80% | 293.7 | 288.2 | 394.2 | ||||||||
Greater than 80% to 90% | 144.2 | 146.2 | 168.3 | ||||||||
Greater than 90% | 53.0 | 50.4 | 58.0 | ||||||||
Total | $ | 1,692.2 | $ | 1,746.3 | $ | 3,594.6 |
(a) | Loan-to-value ratios are calculated as the ratio of: (i) the carrying value of the commercial mortgage loans; to (ii) the estimated fair value of the underlying collateral. |
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Net investment income – policyholder and reinsurer accounts and other special-purpose portfolios | $ | 10.9 | $ | 7.3 | $ | 20.4 | $ | 13.4 | |||||||
Fee revenue and other income | .5 | .5 | 1.3 | .7 | |||||||||||
Total revenues | 11.4 | 7.8 | 21.7 | 14.1 | |||||||||||
Expenses: | |||||||||||||||
Interest expense | 6.8 | 4.7 | 12.2 | 8.7 | |||||||||||
Other operating expenses | .8 | .2 | .9 | .3 | |||||||||||
Total expenses | 7.6 | 4.9 | 13.1 | 9.0 | |||||||||||
Income before net realized investment gains (losses) and income taxes | 3.8 | 2.9 | 8.6 | 5.1 | |||||||||||
Net realized investment gains (losses) | (.4 | ) | .3 | (.3 | ) | (.2 | ) | ||||||||
Income before income taxes | $ | 3.4 | $ | 3.2 | $ | 8.3 | $ | 4.9 |
Carrying value | Percent of fixed maturities | Gross unrealized losses | Percent of gross unrealized losses | ||||||||||
Cable/media | $ | 146.5 | 13.5 | % | $ | .9 | 22.0 | % | |||||
Healthcare/pharmaceuticals | 134.4 | 12.4 | .3 | 7.8 | |||||||||
Technology | 105.2 | 9.7 | .4 | 9.5 | |||||||||
Food/beverage | 78.0 | 7.2 | .3 | 7.5 | |||||||||
Autos | 60.4 | 5.5 | .1 | 2.5 | |||||||||
Insurance | 50.9 | 4.7 | .2 | 5.3 | |||||||||
Brokerage | 50.0 | 4.6 | .2 | 3.6 | |||||||||
Consumer products | 46.7 | 4.3 | .1 | 3.4 | |||||||||
Gaming | 46.5 | 4.3 | .2 | 4.6 | |||||||||
Utilities | 35.2 | 3.2 | .3 | 7.7 | |||||||||
Entertainment/hotels | 34.0 | 3.1 | .1 | 1.1 | |||||||||
Aerospace/defense | 28.9 | 2.7 | .2 | 5.0 | |||||||||
Capital goods | 27.5 | 2.5 | .1 | 2.8 | |||||||||
Energy/pipelines | 26.5 | 2.4 | — | .8 | |||||||||
Building materials | 22.9 | 2.1 | .1 | 2.1 | |||||||||
Business services | 20.8 | 1.9 | .1 | 1.5 | |||||||||
Retail | 19.9 | 1.8 | .1 | 1.4 | |||||||||
Metals and mining | 19.6 | 1.8 | — | .3 | |||||||||
Chemicals | 17.3 | 1.6 | — | 1.1 | |||||||||
Transportation | 17.3 | 1.6 | .1 | 1.9 | |||||||||
Paper | 16.0 | 1.5 | .1 | 1.5 | |||||||||
Real estate/REITs | 15.8 | 1.4 | .1 | 2.5 | |||||||||
Textiles | 6.0 | .5 | .1 | 1.5 | |||||||||
Other | 61.6 | 5.7 | .1 | 2.6 | |||||||||
Total | $ | 1,087.9 | 100.0 | % | $ | 4.2 | 100.0 | % |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 2.1 | $ | 2.1 | |||
Due after one year through five years | 121.9 | 121.4 | |||||
Due after five years through ten years | 433.0 | 429.3 | |||||
Total | $ | 557.0 | $ | 552.8 |
Period | Total number of shares (or units) | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (a) | |||||||||||
(dollars in millions) | |||||||||||||||
April 1 through April 30 | 2,582,900 | $ | 11.03 | 2,582,900 | $ | 196.7 | |||||||||
May 1 through May 31 | 1,839,182 | 11.70 | 1,838,800 | 165.7 | (b) | ||||||||||
June 1 through June 30 | — | — | — | 165.7 | |||||||||||
Total | 4,422,082 | 11.31 | 4,421,700 | 165.7 |
(a) | In May 2011, the Company announced a common share repurchase program of up to $100.0 million. In February 2012, June 2012 and December 2012, the Company's Board of Directors approved, in aggregate, an additional $500.0 million to repurchase the Company's outstanding securities. |
(b) | In May 2013, the Company repurchased $4.5 million principal amount of the 7.0% Debentures for an aggregate purchase price of $9.4 million. The repurchase was part of our previously announced securities repurchase program. |
10.1 | Amended and Restated Employment Agreement dated as of May 31, 2013 between CNO Services, LLC and Susan L. Menzel. |
12.1 | Computation of Ratio of Earnings to Fixed Charges. |
31.1 | Certification Pursuant to the Securities Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification Pursuant to the Securities Exchange Act Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
By: | /s/ Frederick J. Crawford | |
Frederick J. Crawford | ||
Executive Vice President and Chief Financial Officer | ||
(authorized officer and principal financial officer) |
11. | Payments Following Termination. |
Six months ended June 30, 2013 | Year ended December 31, 2012 | ||||||
Pretax income from operations: | |||||||
Net income | $ | 89.0 | $ | 221.0 | |||
Add income tax expense (benefit) | 60.3 | (65.3 | ) | ||||
Pretax income from operations | 149.3 | 155.7 | |||||
Add fixed charges: | |||||||
Interest expense on corporate debt | 28.2 | 66.2 | |||||
Interest expense on investment borrowings and borrowings related to variable interest entities | 26.0 | 48.4 | |||||
Interest added to policyholder account balances | 125.4 | 260.5 | |||||
Portion of rental (a) | 6.4 | 14.6 | |||||
Fixed charges | 186.0 | 389.7 | |||||
Adjusted earnings | $ | 335.3 | $ | 545.4 | |||
Ratio of earnings to fixed charges | 1.80X | 1.40X |
(a) | Interest portion of rental is estimated to be 33 percent. |
1. | I have reviewed this quarterly report on Form 10-Q of CNO Financial Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; |
4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of CNO Financial Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; |
4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS | NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS The following notes payable were direct corporate obligations of the Company as of June 30, 2013 and December 31, 2012 (dollars in millions):
Senior Secured Credit Agreement On September 28, 2012, the Company entered into a senior secured credit agreement, providing for: (i) a $425.0 million six-year term loan facility ($394.0 million remains outstanding at June 30, 2013); (ii) a $250.0 million four-year term loan facility ($212.5 million remains outstanding at June 30, 2013); and (iii) a $50.0 million three-year revolving credit facility, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (the "Senior Secured Credit Agreement"). The Senior Secured Credit Agreement is guaranteed by the Subsidiary Guarantors (as defined below) and secured by a first-priority lien (which ranks pari passu with the liens securing the 6.375% Notes) on substantially all of the Company's and the Subsidiary Guarantors' assets. As of June 30, 2013, no amounts have been borrowed under the revolving credit facility. The revolving credit facility includes an uncommitted subfacility for swingline loans of up to $5.0 million, and up to $5.0 million of the revolving credit facility is available for the issuance of letters of credit. The six-year term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 1% and the four-year term loan facility amortizes in quarterly installments resulting in an annual amortization of 20% during the first and second years and 30% during the third and fourth years. Subject to certain conditions, the Company may incur additional incremental loans under the Senior Secured Credit Agreement in an amount of up to $250.0 million. In May 2013, we amended our Senior Secured Credit Agreement. Pursuant to the amended terms, the applicable interest rates were decreased. The new interest rates with respect to loans under: (i) the six-year term loan facility are, at the Company's option, equal to a eurodollar rate, plus 2.75% per annum, or a base rate, plus 1.75% per annum, subject to a eurodollar rate "floor" of 1.00% and a base rate "floor" of 2.25% (previously a eurodollar rate, plus 3.75% per annum, or a base rate, plus 2.75% per annum, subject to a eurodollar rate "floor" of 1.25% and a base rate "floor" of 2.25%); (ii) the four-year term loan facility are, at the Company's option, equal to a eurodollar rate, plus 2.25% per annum, or a base rate, plus 1.25% per annum, subject to a eurodollar rate "floor" of .75% and a base rate "floor" of 2.00% (previously a eurodollar rate, plus 3.25% per annum, or a base rate, plus 2.25% per annum, subject to a eurodollar rate "floor" of 1.00% and a base rate "floor" of 2.00%); and (iii) the revolving credit facility will be, at the Company's option, equal to a eurodollar rate, plus 3.00% per annum, or a base rate, plus 2.00% per annum, in each case, with respect to revolving credit facility borrowings only, subject to certain step-downs based on the debt to total capitalization ratio of the Company (previously a eurodollar rate, plus 3.50% per annum, or a base rate, plus 2.50% per annum, subject to certain step-downs based on the debt to total capitalization ratio of the Company). At June 30, 2013, the interest rates on the six-year term loan facility and the four-year term loan facility were 3.75% and 3.00%, respectively. Other changes to the Senior Secured Credit Agreement included:
In the first six months of 2013, we made mandatory prepayments of $20.4 million in an amount equal to 33.33% of our share repurchases and common stock dividend payments, as required under the terms of our Senior Secured Credit Agreement. We also made additional payments of $17.7 million to cover the remaining portion of the scheduled quarterly principal payments due under the Senior Secured Credit Agreement. In the second quarter of 2013, we recognized a loss on extinguishment of debt totaling $2.9 million reflecting expenses related to the amendment of the Senior Secured Credit Agreement and the write-off of unamortized discount and issuance costs associated with prepayments on the Senior Secured Credit Agreement. Mandatory prepayments of the Senior Secured Credit Agreement will be required, subject to certain exceptions, in an amount equal to: (i) 100% of the net cash proceeds from certain asset sales or casualty events; (ii) 100% of the net cash proceeds received by the Company or any of its restricted subsidiaries from certain debt issuances; and (iii) 100% of the amount of certain restricted payments made (including any common stock dividends and share repurchases) as defined in the Senior Secured Credit Agreement provided that if, as of the end of the fiscal quarter immediately preceding such restricted payment, the debt to total capitalization ratio is: (x) equal to or less than 25.0%, but greater than 20.0%, the prepayment requirement shall be reduced to 33.33%; or (y) equal to or less than 20.0%, the prepayment requirement shall not apply. Notwithstanding the foregoing, no mandatory prepayments pursuant to item (i) in the preceding paragraph shall be required if: (x) the debt to total capitalization ratio is equal or less than 20% and (y) either (A) the financial strength rating of certain of the Company's insurance subsidiaries is equal or better than A- (stable) from A.M. Best Company ("A.M. Best") or (B) the Senior Secured Credit Agreement is rated equal or better than BBB- (stable) from S&P and Baa3 (stable) by Moody's Investor Services, Inc. ("Moody's"). The Senior Secured Credit Agreement requires the Company to maintain (each as calculated in accordance with the Senior Secured Credit Agreement): (i) a debt to total capitalization ratio of not more than 27.5 percent (such ratio was 19.1 percent at June 30, 2013); (ii) an interest coverage ratio of not less than 2.50 to 1.00 for each rolling four quarters (or, if less, the number of full fiscal quarters commencing after the effective date of the Senior Secured Credit Agreement) (such ratio was 7.84 to 1.00 for the period ended June 30, 2013); (iii) an aggregate ratio of total adjusted capital to company action level risk-based capital for the Company's insurance subsidiaries of not less than 250 percent (such ratio was 376 percent at June 30, 2013); and (iv) a combined statutory capital and surplus for the Company's insurance subsidiaries of at least $1,300.0 million (combined statutory capital and surplus at June 30, 2013, was $1,864.9 million). 6.375% Notes On September 28, 2012, we issued $275.0 million in aggregate principal amount of 6.375% Notes pursuant to an Indenture, dated as of September 28, 2012 (the "6.375% Indenture"), among the Company, the subsidiary guarantors party thereto (the "Subsidiary Guarantors") and Wilmington Trust, National Association, as trustee and as collateral agent. The 6.375% Notes mature on October 1, 2020. Interest on the 6.375% Notes accrues at a rate of 6.375% per annum and is payable semiannually in arrears on April 1 and October 1 of each year, commencing on April 1, 2013. The 6.375% Notes and the guarantees thereof (the "Guarantees") are senior secured obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future senior obligations, and senior to all of the Company's and the Subsidiary Guarantors' future subordinated indebtedness. The 6.375% Notes are secured by a first-priority lien on substantially all of the assets of the Company and the Subsidiary Guarantors, subject to certain exceptions. The 6.375% Notes and the Guarantees are pari passu with respect to security and in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future secured indebtedness under the Senior Secured Credit Agreement. The 6.375% Notes are structurally subordinated to all of the liabilities and preferred stock of each of the Company's insurance subsidiaries, which are not guarantors of the 6.375% Notes. Under the 6.375% Indenture, the Company can make Restricted Payments (as such term is defined in the 6.375% Indenture) up to a calculated limit, provided that the Company's pro forma risk-based capital ratio exceeds 225% after giving effect to the Restricted Payment and certain other conditions are met. Restricted Payments include, among other items, repurchases of common stock and cash dividends on common stock (to the extent such dividends exceed $30 million in the aggregate in any calendar year). Restricted payments do not include cash paid to purchase our outstanding 7.0% Debentures pursuant to the previously announced tender offer discussed below. The limit of Restricted Payments permitted under the 6.375% Indenture is the sum of (x) 50% of the Company's "Net Excess Cash Flow" (as defined in the 6.375% Indenture) for the period (taken as one accounting period) from July 1, 2012 to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment, (y) $175.0 million and (z) certain other amounts specified in the 6.375% Indenture. Based on the provisions set forth in the 6.375% Indenture and the Company's Net Excess Cash Flow for the period from July 1, 2012 through June 30, 2013, the Company could have made additional Restricted Payments under this 6.375% Indenture covenant of approximately $238 million as of June 30, 2013. This limitation on Restricted Payments does not apply if the Debt to Total Capitalization Ratio (as defined in the 6.375% Indenture) as of the last day of the Company's most recently ended fiscal quarter for which financial statements are available that immediately precedes the date of any Restricted Payment, calculated immediately after giving effect to such Restricted Payment and any related transactions on a pro forma basis, is equal to or less than 17.5%. 7.0% Debentures On March 28, 2013, the Company completed the cash tender offer (the "Offer") for $59.3 million aggregate principal amount of its 7.0% Debentures for an aggregate purchase price of $124.8 million. The Offer was conducted as part of our previously announced securities repurchase program. Pursuant to the terms of the Offer, holders of the 7.0% Debentures who tendered their 7.0% Debentures prior to the expiration date, received, for each $1,000 principal amount of such 7.0% Debentures, a cash purchase price (the "Purchase Price") equal to the sum of: (i) the average volume weighted average price of our common stock (as defined in the Offer) ($11.2393 at the close of trading on March 27, 2013) multiplied by 183.5145; plus (ii) a fixed cash amount of $61.25. The final Purchase Price per $1,000 principal amount of 7.0% Debentures was $2,123.82. In addition to the Purchase Price, holders received accrued and unpaid interest on any 7.0% Debentures that were tendered to, but excluding, the settlement date of the Offer. In May 2013, we repurchased $4.5 million principal amount of the 7.0% Debentures for an aggregate purchase price of $9.4 million. In the first six months of 2013, we recognized a loss on extinguishment of debt totaling $62.5 million as a result of the Offer and repurchase of 7.0% Debentures described above, the write-off of unamortized discount and issuance costs associated with the 7.0% Debentures that were repurchased and other transaction costs. Additional paid-in capital was also reduced by $12.6 million to extinguish the beneficial conversion feature associated with a portion of the 7.0% Debentures that were repurchased. On July 1, 2013, the Company issued a conversion right termination notice (the “Conversion Termination Notice”) to holders of the 7.0% Debentures. The Company elected to terminate the right to convert the 7.0% Debentures into shares of its common stock, par value $0.01 per share, effective as of July 30, 2013 (the “Conversion Termination Date”). Holders of the 7.0% Debentures were able to exercise their conversion right at any time on or prior to the close of business on July 30, 2013. Holders exercising their conversion right received 184.3127 shares of common stock per $1,000 principal amount of 7.0% Debentures converted. 7.0% Debentures submitted for conversion were deemed paid in full and the Company has no further obligation with respect to such 7.0% Debentures. Holders of $25.7 million in aggregate principal amount of the 7.0% Debentures exercised their conversion right and received 4.7 million shares of our common stock. As of July 31, 2013, $3.5 million in aggregate principal amount of the 7.0% Debentures remained outstanding. Scheduled Repayment of our Direct Corporate Obligations The scheduled repayment of our direct corporate obligations was as follows at June 30, 2013 (dollars in millions):
|
SALES INDUCEMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
|
Deferred Sales Inducements [Abstract] | |||
Deferred Sales Inducements, Additions | $ 2.5 | $ 2.3 | |
Deferred Sales Inducements, Amortization Expense | 13.3 | 14.3 | |
Deferred Sales Inducements, Net | 115.7 | 126.5 | |
Persistency Bonus Benefits Included in Insurance Liabilities | $ 31.3 | $ 34.6 |
OUT-OF-PERIOD ADJUSTMENT (Notes)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Out-of-Period Adjustment [Abstract] | |
OUT-OF-PERIOD ADJUSTMENT | OUT-OF-PERIOD ADJUSTMENT We recorded the net effect of an out-of-period adjustment which increased our insurance policy benefits by $6.7 million, increased amortization expense by $2.5 million, decreased tax expense by $3.2 million and decreased our net income by $6.0 million (or 3 cents per diluted share) in the six months ended June 30, 2013 (none of which was recognized in the second quarter of 2013). We evaluated this error taking into account both qualitative and quantitative factors and considered the impact of this error in relation to the 2013 period, as well as the materiality to the periods in which they originated. The impact of correcting this error in prior years was not significant to any individual period. Management believes this error is immaterial to the consolidated financial statements and all previously issued financial statements. |
CONSOLIDATED STATEMENT CASH FLOWS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | CONSOLIDATED STATEMENT OF CASH FLOWS The following disclosures supplement our consolidated statement of cash flows. The following reconciles net income to net cash provided by operating activities (dollars in millions):
Non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):
|
CONSOLIDATED STATEMENT CASH FLOWS (DETAILS) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Cash flows from operating activities: | ||||
Net income | $ 77.1 | $ 65.7 | $ 89.0 | $ 124.8 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Amortization and depreciation | 172.6 | 167.7 | ||
Income taxes | 57.4 | 67.7 | ||
Insurance liabilities | 205.3 | 105.4 | ||
Accrual and amortization of investment income | (125.0) | (84.6) | ||
Deferral of policy acquisition costs | (107.2) | (94.7) | ||
Net realized investment gains | (3.2) | (31.9) | (18.5) | (54.8) |
Loss on extinguishment of debt | 7.7 | 0.5 | 65.4 | 0.7 |
Other | (49.1) | 6.8 | ||
Net cash provided by operating activities | 289.9 | 239.0 | ||
Other Noncash Investing and Financing Items [Abstract] | ||||
Stock options, restricted stock and performance units | $ 7.2 | $ 7.2 |
INVESTMENT BORROWINGS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Borrowings [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT BORROWINGS | INVESTMENT BORROWINGS Three of the Company's insurance subsidiaries (Conseco Life Insurance Company ("Conseco Life"), Washington National Insurance Company and Bankers Life and Casualty Company ("Bankers Life")) are members of the Federal Home Loan Bank ("FHLB"). As members of the FHLB, Conseco Life, Washington National Insurance Company and Bankers Life have the ability to borrow on a collateralized basis from the FHLB. Conseco Life, Washington National Insurance Company and Bankers Life are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings. At June 30, 2013, the carrying value of the FHLB common stock was $92.5 million. As of June 30, 2013, collateralized borrowings from the FHLB totaled $1.8 billion and the proceeds were used to purchase fixed maturity securities. The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet. The borrowings are collateralized by investments with an estimated fair value of $2.3 billion at June 30, 2013, which are maintained in a custodial account for the benefit of the FHLB. Substantially all of such investments are classified as fixed maturities, available for sale, in our consolidated balance sheet. Interest expense of $13.6 million and $14.4 million in the first six months of 2013 and 2012, respectively, was recognized related to the borrowings. The following summarizes the terms of the borrowings (dollars in millions):
The variable rate borrowings are pre-payable on each interest reset date without penalty. The fixed rate borrowings are pre-payable subject to payment of a yield maintenance fee based on current market interest rates. At June 30, 2013, the aggregate yield maintenance fee to prepay all fixed rate borrowings was $48.0 million. As part of our investment strategy, we may enter into repurchase agreements to increase our investment return. Pursuant to such agreements, the Company sells securities subject to an obligation to repurchase the same securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. Such borrowings totaled $27.6 million at June 30, 2013. The borrowings mature as follows: $20.9 million - within 30 days; and $6.7 million - between 30 and 90 days. The primary risks associated with short-term collateralized borrowings are: (i) a substantial decline in the market value of the margined security; and (ii) that a counterparty may be unable to perform under the terms of the contract or be unwilling to extend such financing in future periods especially if the liquidity or value of the margined security has declined. Exposure is limited to any depreciation in value of the related securities. At June 30, 2013, investment borrowings consisted of: (i) collateralized borrowings from the FHLB of $1.8 billion; (ii) repurchase agreements of $27.6 million; and (iii) other borrowings of $.6 million. At December 31, 2012, investment borrowings consisted of: (i) collateralized borrowings from the FHLB of $1.7 billion; and (ii) other borrowings of $.8 million. |
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (SCHEDULE OF DIRECT CORPORATE OBLIGATIONS) (DETAILS) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt Instrument [Line Items] | ||
Debenture interest rate | 7.00% | |
Debt Instruments [Abstract] | ||
Direct corporate obligations | $ 905.7 | $ 1,004.2 |
Senior Secured Credit Agreement [Member]
|
||
Debt Instruments [Abstract] | ||
Direct corporate obligations | 606.5 | 644.6 |
Unamortized discount | (4.2) | (5.0) |
Senior Secured Note 6.375% [Member]
|
||
Debt Instrument [Line Items] | ||
Debenture interest rate | 6.375% | |
Debt Instruments [Abstract] | ||
Direct corporate obligations | 275.0 | 275.0 |
Convertible Subordinated Debt [Member]
|
||
Debt Instrument [Line Items] | ||
Debenture interest rate | 7.00% | |
Debt Instruments [Abstract] | ||
Direct corporate obligations | 29.2 | 93.0 |
Unamortized discount | $ (0.8) | $ (3.4) |
OUT-OF-PERIOD ADJUSTMENT (Details) (Out of Period Adjustment [Member], USD $)
In Millions, except Per Share data, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Out of Period Adjustment [Member]
|
|
Out of Period Adjustment[Line Items] | |
Out of Period Adjustment, Effect on Insurance Policy Benefits | $ 6.7 |
Out of Period Adjustment, Increase in Amortization Expense | 2.5 |
Out of Period Adjustment, Decrease in Tax Expense | (3.2) |
Out Of Period Adjustment, Effect on Net Income | $ (6.0) |
Adjustment to Earnings Per Diluted Share | $ (0.03) |
INVESTMENTS (TABLES)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments. These amounts, included in shareholders' equity as of June 30, 2013 and December 31, 2012, were as follows (dollars in millions):
_________
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities Reconciliation [Table Text Block] | At June 30, 2013, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, were as follows (dollars in millions):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Classified by Contractual Maturity Date [Table Text Block] | The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at June 30, 2013, by contractual maturity. Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties. In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as "structured securities") frequently include provisions for periodic principal payments and permit periodic unscheduled payments.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block] | The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and six months ended June 30, 2013 and 2012 (dollars in millions):
__________
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unrealized Loss on Investments [Table Text Block] | The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at June 30, 2013 (dollars in millions):
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2012 (dollars in millions):
|
FAIR VALUE MEASUREMENTS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and, therefore, represents an exit price, not an entry price. We carry certain assets and liabilities at fair value on a recurring basis, including fixed maturities, equity securities, trading securities, investments held by VIEs, derivatives, cash and cash equivalents, separate account assets and embedded derivatives. We carry our company-owned life insurance policy, which is backed by a series of mutual funds, at its cash surrender value and our hedge fund investments at their net asset values; in both cases, we believe these values approximate their fair values. In addition, we disclose fair value for certain financial instruments, including mortgage loans and policy loans, insurance liabilities for interest-sensitive products, investment borrowings, notes payable and borrowings related to VIEs. The degree of judgment utilized in measuring the fair value of financial instruments is largely dependent on the level to which pricing is based on observable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. Financial instruments with readily available active quoted prices would be considered to have fair values based on the highest level of observable inputs, and little judgment would be utilized in measuring fair value. Financial instruments that rarely trade would often have fair value based on a lower level of observable inputs, and more judgment would be utilized in measuring fair value. Valuation Hierarchy There is a three-level hierarchy for valuing assets or liabilities at fair value based on whether inputs are observable or unobservable.
At each reporting date, we classify assets and liabilities into the three input levels based on the lowest level of input that is significant to the measurement of fair value for each asset and liability reported at fair value. This classification is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions. Our assessment of the significance of a particular input to the fair value measurement and the ultimate classification of each asset and liability requires judgment and is subject to change from period to period based on the observability of the valuation inputs. Any transfers between levels are reported as having occurred at the beginning of the period. There were no transfers between Level 1 and Level 2 in both the first six months of 2013 and 2012. The vast majority of our fixed maturity and equity securities, including those held in trading portfolios and those held by consolidated VIEs, short-term and separate account assets use Level 2 inputs for the determination of fair value. These fair values are obtained primarily from independent pricing services, which use Level 2 inputs for the determination of fair value. Substantially all of our Level 2 fixed maturity securities and separate account assets were valued from independent pricing services. Third party pricing services normally derive the security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. If there are no recently reported trades, the third party pricing services may use matrix or model processes to develop a security price where future cash flow expectations are developed and discounted at an estimated risk-adjusted market rate. The number of prices obtained for a given security is dependent on the Company's analysis of such prices as further described below. For securities that are not priced by pricing services and may not be reliably priced using pricing models, we obtain broker quotes. These broker quotes are non-binding and represent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs. Approximately 24 percent of our Level 3 fixed maturity securities were valued using unadjusted broker quotes or broker-provided valuation inputs. The remaining Level 3 fixed maturity investments do not have readily determinable market prices and/or observable inputs. For these securities, we use internally developed valuations. Key assumptions used to determine fair value for these securities may include risk-free rates, risk premiums, performance of underlying collateral and other factors involving significant assumptions which may not be reflective of an active market. For certain investments, we use a matrix or model process to develop a security price where future cash flow expectations are developed and discounted at an estimated market rate. The pricing matrix utilizes a spread level to determine the market price for a security. The credit spread generally incorporates the issuer's credit rating and other factors relating to the issuer's industry and the security's maturity. In some instances issuer-specific spread adjustments, which can be positive or negative, are made based upon internal analysis of security specifics such as liquidity, deal size, and time to maturity. As the Company is responsible for the determination of fair value, we have control processes designed to ensure that the fair values received from third-party pricing sources are reasonable and the valuation techniques and assumptions used appear reasonable and consistent with prevailing market conditions. Additionally, when inputs are provided by third-party pricing sources, we have controls in place to review those inputs for reasonableness. As part of these controls, we perform monthly quantitative and qualitative analysis on the prices received from third parties to determine whether the prices are reasonable estimates of fair value. The Company's analysis includes: (i) a review of the methodology used by third party pricing services; (ii) where available, a comparison of multiple pricing services' valuations for the same security; (iii) a review of month to month price fluctuations; (iv) a review to ensure valuations are not unreasonably stale; and (v) back testing to compare actual purchase and sale transactions with valuations received from third parties. As a result of such procedures, the Company may conclude the prices received from third parties are not reflective of current market conditions. In those instances, we may request additional pricing quotes or apply internally developed valuations. However, the number of instances is insignificant and the aggregate change in value of such investments is not materially different from the original prices received. The categorization of the fair value measurements of our investments priced by independent pricing services was based upon the Company's judgment of the inputs or methodologies used by the independent pricing services to value different asset classes. Such inputs include: benchmark yields, reported trades, broker dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. The Company categorizes such fair value measurements based upon asset classes and the underlying observable or unobservable inputs used to value such investments. The fair value measurements for derivative instruments, including embedded derivatives requiring bifurcation, are determined based on the consideration of several inputs including closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options; market interest rates; and non-performance risk. For certain embedded derivatives, we use actuarial assumptions in the determination of fair value. The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at June 30, 2013 is as follows (dollars in millions):
The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 2012 is as follows (dollars in millions):
For those financial instruments disclosed at fair value, we use the following methods and assumptions to determine the estimated fair values: Mortgage loans and policy loans. We discount future expected cash flows for loans included in our investment portfolio based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. We aggregate loans with similar characteristics in our calculations. The fair value of policy loans approximates their carrying value. Company-owned life insurance is backed by a series of mutual funds and is carried at cash surrender value which approximates estimated fair value. Hedge fund investments are carried at their net asset values which approximates estimated fair value. Insurance liabilities for interest-sensitive products. We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities. Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates estimated fair value. Insurance liabilities for interest-sensitive products. We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities. Investment borrowings, notes payable and borrowings related to variable interest entities. For publicly traded debt, we use current fair values. For other notes, we use discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements. The fair value measurements for our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):
____________________
The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended June 30, 2013 (dollars in millions):
____________
The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the six months ended June 30, 2013 (dollars in millions):
____________
The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended June 30, 2012 (dollars in millions):
____________
The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the six months ended June 30, 2012 (dollars in millions):
____________
At June 30, 2013, 93 percent of our Level 3 fixed maturities, available for sale, were investment grade and 39 percent and 54 percent of our Level 3 fixed maturities, available for sale, consisted of collateralized debt obligations and corporate securities, respectively. Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses during the time the applicable financial instruments were classified as Level 3. Realized and unrealized gains (losses) on Level 3 assets are primarily reported in either net investment income for policyholder and reinsurer accounts and other special-purpose portfolios, net realized investment gains (losses) or insurance policy benefits within the consolidated statement of operations or accumulated other comprehensive income within shareholders' equity based on the appropriate accounting treatment for the instrument. The amount presented for gains (losses) included in our net loss for assets and liabilities still held as of the reporting date primarily represents impairments for fixed maturities, available for sale, changes in fair value of trading securities and certain derivatives and changes in fair value of embedded derivative instruments included in liabilities for insurance products that exist as of the reporting date. The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at June 30, 2013 (dollars in millions):
________________________________
The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at December 31, 2012 (dollars in millions):
________________________________
|
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offsetting Assets and Liabilities | The following tables summarize information related to call options and repurchase agreements as of June 30, 2013 and December 31, 2012 (dollars in millions):
_________________
|
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (DETAILS) (USD $)
|
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
May 20, 2013
|
Dec. 31, 2012
|
Jun. 30, 2013
Senior Secured Credit Agreement [Member]
|
Dec. 31, 2012
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Senior Secured Note 6.375% [Member]
|
Dec. 31, 2012
Senior Secured Note 6.375% [Member]
|
Jun. 30, 2013
Convertible Subordinated Debt [Member]
|
May 31, 2013
Convertible Subordinated Debt [Member]
|
Mar. 28, 2013
Convertible Subordinated Debt [Member]
Rate
|
Dec. 31, 2012
Convertible Subordinated Debt [Member]
|
Dec. 31, 2009
Convertible Subordinated Debt [Member]
|
Jun. 30, 2013
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
|
Jun. 30, 2013
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Notes Payable, Other Payables [Member]
Convertible Subordinated Debt [Member]
|
Mar. 28, 2013
Notes Payable, Other Payables [Member]
Convertible Subordinated Debt [Member]
|
Jun. 30, 2013
Maximum [Member]
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
|
Sep. 28, 2012
Maximum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Maximum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Minimum [Member]
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
|
Jun. 30, 2013
Minimum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Minimum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Minimum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Term Loan Facility, Six-Year [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Term Loan Facility, Four-Year [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Revolving Credit Facility [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Uncommitted Subfacility [Member]
Maximum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Letter of Credit [Member]
Maximum [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Eurodollar Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Eurodollar Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Eurodollar Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Eurodollar Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Base Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Base Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Base Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Base Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Base Rate [Member]
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Base Rate [Member]
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Eurodollar Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Eurodollar Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Eurodollar Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Eurodollar Floor [Member]
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Base Rate Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Base Rate Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Base Rate Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Base Rate Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
May 20, 2013
Base Rate Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Sep. 28, 2012
Base Rate Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
Senior Secured Credit Agreement [Member]
|
Jun. 30, 2013
Common stock and additional paid-in capital
|
Mar. 28, 2013
Repayment of Debt [Member]
Convertible Subordinated Debt [Member]
|
Jun. 30, 2013
Subsequent Event [Member]
Convertible Subordinated Debt [Member]
|
Jul. 31, 2013
Subsequent Event [Member]
Convertible Subordinated Debt [Member]
|
|
Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Repurchased Face Amount | $ 4,500,000 | $ 63,800,000 | $ 59,300,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | 905,700,000 | 905,700,000 | 1,004,200,000 | 606,500,000 | 644,600,000 | 275,000,000 | 275,000,000 | 29,200,000 | 93,000,000 | 394,000,000 | 425,000,000 | 212,500,000 | 250,000,000 | 3,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
Line of Credit Facility, Maximum Borrowing Capacity | 50,000,000 | 5,000,000 | 5,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Annual Amortization Percentage of Loan | 1.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Annual Amortization Percentage of Loan in First and Second Year | 20.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Annual Amortization Percentage of Loan in Third and Fourth Year | 30.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Increase, Additional Borrowings | 250,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Basis Spread on Variable Rate | 3.00% | 2.75% | 3.75% | 2.25% | 3.25% | 1.75% | 2.75% | 1.25% | 2.25% | 2.00% | 2.50% | 3.50% | |||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Variable Interest Rate, Floor | 1.25% | 1.00% | 0.75% | 1.00% | 2.25% | 2.25% | 2.00% | 2.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Interest Rate at Period End | 3.75% | 3.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Net Cash Proceeds from Asset Sales and Casualty Events | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Net Cash Proceeds Received for Restricted Subsidiaries from Debt Issuances | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Restricted Payments | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt to Capitalization Ratio, Threshold Requiring Equal Debt Repayment | 22.50% | 25.00% | 20.00% | 17.50% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Terms, Mandatory Prepayments, Reduced Percentage | 33.33% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt to Capitalization Ratio, Maximum Threshold for Repayment Requirement | 20.00% | 17.50% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Fee for Repricing of Secured Credit Agreements, Percentage | 1.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Debt to Capitalization Ratio, Percentage Required No Mandatory Prepayment | 20.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mandatory Debt Repayment | 20,400,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Debt Repayment | 17,700,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 7.00% | 7.00% | 6.375% | 7.00% | 6.375% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Repurchase Amount | 9,400,000 | 124,800,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payments for Repurchase of Common Stock | 50,000,000 | 58,200,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Terms, Risk-Based Capital Ratio | 225.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Limit of Restricted Payments Permitted, Cash Dividends on Common Stock | 30,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Limit of Restricted Payments Permitted, Percent | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Limit of Restricted Payments Permitted, Amount | 175,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Limit of Restricted Payments Permitted, Amount of Allowed Additional Payments | 238,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Limit of Restricted Payments Permitted, Debt to Total Capitalization Ratio | 17.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument, Term of Agreement | 6 years | 4 years | 3 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion Rate for Convertible Senior Debentures | 184.3127 | 182.1494 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final Purchase Price Per Principal Amount of Each Convertible Senior Debenture | 2,123.82 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt to Capitalization Ratio Required | 27.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt to Capitalization Ratio at Period End | 19.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Coverage Ratio Required | 7.84 | 2.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate Adjusted Capital to Company Action Level Risk-Based Capital Ratio, After Stated Date | 250.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate Adjusted Capital to Company Action Level Risk Based Capital Ratio at Period End | 376.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum Combined Statutory Capital and Surplus | 1,300,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Statutory Capital and Surplus at Period End | 1,864,900,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Par Value of Each Convertible Senior Debenture | 1,000 | 1,000 | 1,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debentures Submitted for Conversion, Face Amount | 25,700,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt Repurchase Tender Offer, Average Volume Weighted Average, Amount Per Share | $ 11.2393 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt Repurchase Tender Offer Weighted Average Common Stock Price Multiplier Before Additions | 183.5145 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debt Repurchase Tender Offer Addition to Multiplier, Amount Per Share | $ 61.25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gains (Losses) on Extinguishment of Debt | (7,700,000) | (500,000) | (65,400,000) | (700,000) | (2,900,000) | (62,500,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures | $ (12,600,000) | $ (12,600,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock, shares issued | 4,700,000 |
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (TABLES)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments [Table Text Block] | The following notes payable were direct corporate obligations of the Company as of June 30, 2013 and December 31, 2012 (dollars in millions):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Long-term Debt [Table Text Block] | s The scheduled repayment of our direct corporate obligations was as follows at June 30, 2013 (dollars in millions):
|
FAIR VALUE MEASUREMENTS - ADDITIONAL INFORMATION (DETAILS) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
Jun. 30, 2012
|
Jun. 30, 2013
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 31, 2012
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Jun. 30, 2013
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 31, 2012
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Jun. 30, 2013
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 31, 2012
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Jun. 30, 2013
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 31, 2012
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 31, 2012
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Jun. 30, 2013
Preferred Stock [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Preferred Stock [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Jun. 30, 2013
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Minimum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Minimum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Minimum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Minimum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Minimum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Minimum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Minimum [Member]
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Maximum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Maximum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Maximum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Maximum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Maximum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Maximum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Interest Sensitive Products Fixed Index Annuity Products [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Interest Sensitive Products Fixed Index Annuity Products [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Interest Sensitive Products Fixed Index Annuity Products [Member]
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Interest Sensitive Products Fixed Index Annuity Products [Member]
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Jun. 30, 2013
Interest Sensitive Products Fixed Index Annuity Products [Member]
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
|
Dec. 31, 2012
Interest Sensitive Products Fixed Index Annuity Products [Member]
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
|
||||||||||||||||||||||||||||||||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount | $ 0 | $ 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | 27,467.1 | 27,959.3 | 744.9 | 778.2 | 250.4 | [1] | 248.3 | 30.3 | [2] | 33.3 | 277.5 | [3] | 331.4 | 2.8 | 3.1 | [4] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Investments | 312.6 | 248.1 | 183.6 | [5] | 162.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities For Interest Sensitive Products | $ 12,784.2 | $ 12,893.2 | $ 798.9 | [6] | $ 739.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Discount Rate | 1.95% | [1] | 1.90% | 2.38% | [2] | 2.78% | 1.00% | [3] | 0.95% | 3.50% | [1] | 3.25% | 3.45% | [2] | 3.14% | 2.40% | [3] | 8.75% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Discount Rate | 2.70% | [1] | 2.78% | 3.01% | [2] | 2.99% | 1.43% | [3] | 2.02% | 62.50% | [3] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Recoveries | 50.00% | [3] | 65.00% | 66.00% | [3] | 66.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Constant Prepayment Rate | 20.00% | [3] | 20.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Annual Default Rate | 0.96% | [3] | 0.95% | 5.20% | [3] | 5.54% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Annual Default Rate | 3.08% | [3] | 3.01% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Portfolio CCC Percent | 1.56% | [3] | 1.18% | 19.83% | [3] | 21.56% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, EBITDA Multiple | 7.2 | [4] | 6.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Portfolio CCC Percent | 12.41% | [3] | 11.99% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Projected Portfolio Yields | 5.35% | [6] | 5.35% | 5.61% | [6] | 5.61% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Projected Portfolio Yields | 5.55% | [6] | 5.55% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Discount Rates | 0.00% | [6] | 0.00% | 4.19% | [6] | 3.60% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Discount Rates | 2.03% | [6] | 1.40% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Surrender Rates | 4.00% | [6] | 4.00% | 43.00% | [6] | 43.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Surrender Rates | 19.00% | [6] | 19.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Fair Value Disclosure, Significant Assumptions, Revenue Multiple | 1.5 | [4] | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
FAIR VALUE MEASUREMENTS - UNOBSERVABLE INPUT ACTIVITY (DETAILS) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases | $ (27.7) | $ (24.5) | $ (52.8) | $ (51.8) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Sales | 2.5 | 36.7 | 4.3 | 41.7 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issues | (14.0) | (1.5) | (64.2) | (40.4) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements | 9.0 | 10.4 | 19.8 | 21.1 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements | (30.2) | [1] | 21.1 | [1] | (92.9) | [1] | (29.4) | [1] | ||||
Available-for-sale Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 10.0 | 25.5 | 92.4 | 82.9 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (42.2) | (11.3) | (64.5) | (122.6) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | (32.2) | [1] | 14.2 | [2] | 27.9 | [1] | (39.7) | [2] | ||||
Available-for-sale Securities [Member] | Commercial Mortgage Backed Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (0.5) | (0.7) | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | (0.5) | [1] | (0.7) | [1] | 0 | [2] | ||||||
Available-for-sale Securities [Member] | Corporate Debt Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 10.0 | 18.3 | 71.5 | 43.3 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (7.8) | 0 | (7.9) | (27.3) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 2.2 | [1] | 18.3 | [2] | 63.6 | [1] | 16.0 | [2] | ||||
Available-for-sale Securities [Member] | US Treasury and Government [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (0.1) | (0.1) | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | (0.1) | [2] | (0.1) | [2] | ||||||||
Available-for-sale Securities [Member] | Asset-backed Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 7.6 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (0.2) | (0.4) | (27.3) | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | (0.2) | [1] | 0 | [2] | 7.2 | [1] | (27.3) | [2] | ||||
Available-for-sale Securities [Member] | Collateralized Debt Obligations [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 7.2 | 13.3 | 35.5 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (33.7) | (11.1) | (55.3) | (41.2) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | (33.7) | [1] | (3.9) | [2] | (42.0) | [1] | (5.7) | [2] | ||||
Available-for-sale Securities [Member] | Mortgage Pass Through Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 0 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (0.1) | (0.1) | (0.1) | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | 0 | |||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 0 | [1] | (0.1) | [2] | (0.1) | [1] | (0.1) | [2] | ||||
Available-for-sale Securities [Member] | Collateralized Mortgage Obligations [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 4.1 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (0.1) | (26.6) | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 0 | [1] | 0 | [2] | (0.1) | [1] | (22.5) | [2] | ||||
Equity Securities Classification [Member] | Corporate Debt Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 0 | [1] | 0 | [2] | 0 | [1] | 0 | [2] | ||||
Trading Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 0 | [1] | 0 | [2] | (7.7) | [1] | 4.2 | [2] | ||||
Collateralized Debt Obligations [Member] | Trading Securities [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases | 0 | 4.2 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales | (7.7) | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Issues | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements | 0 | 0 | ||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements | 0 | [2] | (7.7) | [1] | 4.2 | [2] | ||||||
Interest Sensitive Products Fixed Index Annuity Products [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases | (27.7) | (24.5) | (52.8) | (51.8) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Sales | 0 | 36.7 | 1.4 | 41.7 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issues | (14.0) | 0 | (64.2) | (39.0) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements | 9.0 | 10.4 | 19.8 | 21.1 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements | (32.7) | [1] | 22.6 | [1] | (95.8) | [1] | (28.0) | [1] | ||||
Interest Sensitive Products Modified Coinsurance Agreement [Member]
|
||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract] | ||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Sales | 2.5 | 0 | 2.9 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Issues | 0 | (1.5) | 0 | (1.4) | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements | 0 | 0 | 0 | 0 | ||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements | $ 2.5 | [1] | $ (1.5) | [1] | $ 2.9 | [1] | $ (1.4) | [1] | ||||
|
BUSINESS SEGMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||
Revenues: | ||||||||||
Fee revenue and other income | $ 6.4 | $ 4.5 | $ 12.9 | $ 8.4 | ||||||
Revenues | 1,070.1 | 1,033.1 | 2,190.5 | 2,134.1 | ||||||
Benefits and expenses: | ||||||||||
Insurance policy benefits | 673.2 | 689.7 | 1,427.3 | 1,378.7 | ||||||
Other operating costs and expenses | 179.8 | 173.3 | 369.4 | 400.3 | ||||||
Total expenses | 966.1 | 946.3 | 2,008.9 | 1,983.5 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | 104.0 | 86.8 | 181.6 | 150.6 | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 1,070.1 | 1,033.1 | 2,190.5 | 2,134.1 | ||||||
Net realized investment gains (losses) | 3.2 | 31.9 | 18.5 | 54.8 | ||||||
Revenues related to certain non-strategic investments and earnings attributable to non-controlling interests | 8.2 | 0 | 15.1 | 0 | ||||||
Consolidated revenues | 1,081.5 | 1,065.0 | 2,224.1 | 2,188.9 | ||||||
Total segment expenses | 966.1 | 946.3 | 2,008.9 | 1,983.5 | ||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | (29.0) | 17.7 | (32.1) | 6.1 | ||||||
Amortization related to fair value changes in embedded derivative liabilities | 10.5 | (7.1) | 11.5 | (2.4) | ||||||
Amortization related to net realized investment gains (losses) | 0.4 | 3.1 | 1.2 | 4.2 | ||||||
Expenses related to certain non-strategic investments and earnings attributable to non-controlling interests | 11.1 | 0 | 19.9 | 0 | ||||||
Loss on extinguishment of debt | 7.7 | 0.5 | 65.4 | 0.7 | ||||||
Consolidated expenses | 966.8 | 960.5 | 2,074.8 | 1,992.1 | ||||||
Bankers Life [Member]
|
||||||||||
Revenues: | ||||||||||
Annuities | 8.6 | 7.9 | 16.5 | 15.1 | ||||||
Health | 334.1 | 341.4 | 666.7 | 675.5 | ||||||
Life | 76.4 | 69.7 | 153.9 | 134.9 | ||||||
Net investment income | 226.6 | [1] | 185.6 | [1] | 488.3 | [1] | 420.5 | [1] | ||
Fee revenue and other income | 4.0 | [1] | 3.3 | [1] | 7.7 | [1] | 6.2 | [1] | ||
Revenues | 649.7 | 607.9 | 1,333.1 | 1,252.2 | ||||||
Benefits and expenses: | ||||||||||
Insurance policy benefits | 434.1 | 396.7 | 904.6 | 817.6 | ||||||
Amortization | 45.7 | 50.5 | 100.2 | 107.4 | ||||||
Interest expense on investment borrowings | 1.7 | 1.4 | 3.1 | 2.8 | ||||||
Other operating costs and expenses | 89.1 | 83.2 | 184.0 | 177.8 | ||||||
Total expenses | 570.6 | 531.8 | 1,191.9 | 1,105.6 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | 79.1 | 76.1 | 141.2 | 146.6 | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 649.7 | 607.9 | 1,333.1 | 1,252.2 | ||||||
Total segment expenses | 570.6 | 531.8 | 1,191.9 | 1,105.6 | ||||||
Washington National [Member]
|
||||||||||
Revenues: | ||||||||||
Health | 145.6 | 143.9 | 290.9 | 287.0 | ||||||
Life | 3.6 | 3.7 | 7.4 | 8.0 | ||||||
Net investment income | 51.3 | [1] | 51.0 | [1] | 103.3 | [1] | 101.0 | [1] | ||
Fee revenue and other income | 0.2 | [1] | 0.3 | [1] | 0.4 | [1] | 0.5 | [1] | ||
Revenues | 200.7 | 198.9 | 402.0 | 396.5 | ||||||
Benefits and expenses: | ||||||||||
Insurance policy benefits | 117.3 | 113.7 | 235.6 | 229.4 | ||||||
Amortization | 13.0 | 10.8 | 26.7 | 23.5 | ||||||
Interest expense on investment borrowings | 0.5 | 0.8 | 1.0 | 1.5 | ||||||
Other operating costs and expenses | 38.1 | 39.7 | 77.5 | 83.5 | ||||||
Total expenses | 168.9 | 165.0 | 340.8 | 337.9 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | 31.8 | 33.9 | 61.2 | 58.6 | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 200.7 | 198.9 | 402.0 | 396.5 | ||||||
Total segment expenses | 168.9 | 165.0 | 340.8 | 337.9 | ||||||
Colonial Penn [Member]
|
||||||||||
Revenues: | ||||||||||
Health | 1.1 | 1.3 | 2.2 | 2.7 | ||||||
Life | 56.9 | 53.3 | 112.7 | 105.3 | ||||||
Net investment income | 9.9 | [1] | 10.2 | [1] | 19.8 | [1] | 20.2 | [1] | ||
Fee revenue and other income | 0.2 | [1] | 0.2 | [1] | 0.4 | [1] | 0.4 | [1] | ||
Revenues | 68.1 | 65.0 | 135.1 | 128.6 | ||||||
Benefits and expenses: | ||||||||||
Insurance policy benefits | 41.2 | 39.6 | 84.2 | 81.7 | ||||||
Amortization | 3.7 | 3.9 | 7.4 | 7.6 | ||||||
Other operating costs and expenses | 22.0 | 20.9 | 47.7 | 48.5 | ||||||
Total expenses | 66.9 | 64.4 | 139.3 | 137.8 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | 1.2 | 0.6 | (4.2) | (9.2) | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 68.1 | 65.0 | 135.1 | 128.6 | ||||||
Total segment expenses | 66.9 | 64.4 | 139.3 | 137.8 | ||||||
Other CNO Business [Member]
|
||||||||||
Revenues: | ||||||||||
Annuities | 1.8 | 3.5 | 3.7 | 6.2 | ||||||
Health | 6.1 | 6.4 | 12.3 | 13.1 | ||||||
Life | 57.1 | 63.7 | 116.2 | 133.3 | ||||||
Net investment income | 80.6 | [1] | 79.8 | [1] | 170.3 | [1] | 172.5 | [1] | ||
Revenues | 145.6 | 153.4 | 302.5 | 325.1 | ||||||
Benefits and expenses: | ||||||||||
Insurance policy benefits | 109.6 | 122.0 | 235.0 | 243.9 | ||||||
Amortization | 5.9 | 7.1 | 11.5 | 14.6 | ||||||
Interest expense on investment borrowings | 4.8 | 5.0 | 9.6 | 10.1 | ||||||
Other operating costs and expenses | 22.7 | 17.4 | 40.2 | 56.9 | ||||||
Total expenses | 143.0 | 151.5 | 296.3 | 325.5 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | 2.6 | 1.9 | 6.2 | (0.4) | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 145.6 | 153.4 | 302.5 | 325.1 | ||||||
Total segment expenses | 143.0 | 151.5 | 296.3 | 325.5 | ||||||
Corporate Operations [Member]
|
||||||||||
Revenues: | ||||||||||
Net investment income | 4.5 | 7.2 | 14.6 | 30.4 | ||||||
Fee revenue and other income | 1.5 | 0.7 | 3.2 | 1.3 | ||||||
Revenues | 6.0 | 7.9 | 17.8 | 31.7 | ||||||
Benefits and expenses: | ||||||||||
Interest expense on investment borrowings | 0 | 0.2 | 0.1 | 0.3 | ||||||
Interest expense on corporate debt | 13.1 | 16.6 | 28.2 | 34.1 | ||||||
Interest expense on borrowings of variable interest entities | 0 | 4.7 | 0 | 8.7 | ||||||
Other operating costs and expenses | 3.6 | 12.1 | 12.3 | 33.6 | ||||||
Total expenses | 16.7 | 33.6 | 40.6 | 76.7 | ||||||
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes | (10.7) | (25.7) | (22.8) | (45.0) | ||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract] | ||||||||||
Total segment revenues | 6.0 | 7.9 | 17.8 | 31.7 | ||||||
Total segment expenses | 16.7 | 33.6 | 40.6 | 76.7 | ||||||
Loss on extinguishment of debt | $ (7.7) | $ (0.5) | $ (65.4) | $ (0.7) | ||||||
|
INVESTMENTS IN VARIABLE INTEREST ENTITIES
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN VARIABLE INTEREST ENTITIES | INVESTMENTS IN VARIABLE INTEREST ENTITIES We have concluded that we are the primary beneficiary with respect to certain variable interest entities ("VIEs"), which are consolidated in our financial statements. The following is a description of our significant investments in VIEs: All of the VIEs are collateralized loan trusts that were established to issue securities and use the proceeds to principally invest in corporate loans and other permitted investments (including a new VIE which was consolidated in the first quarter of 2013). The assets held by the trusts are legally isolated and not available to the Company. The liabilities of the VIEs are expected to be satisfied from the cash flows generated by the underlying loans held by the trusts, not from the assets of the Company. The Company has no further commitments to the VIEs. Certain of our insurance subsidiaries are noteholders of the VIEs. Another subsidiary of the Company is the investment manager for the VIEs. As such, it has the power to direct the most significant activities of the VIEs which materially impacts the economic performance of the VIEs. The following table provides supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):
The investment portfolios held by the VIEs are primarily comprised of corporate bank loans which are almost entirely rated below-investment grade. At June 30, 2013, such loans had an amortized cost of $1,087.9 million; gross unrealized gains of $4.2 million; gross unrealized losses of $4.2 million; and an estimated fair value of $1,087.9 million. The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at June 30, 2013, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
During the first six months of 2013, we recognized net realized investment losses on the VIE investments of $.3 million, which were comprised of $.3 million of net gains from the sales of fixed maturities, and $.6 million of writedowns of investments for other than temporary declines in fair value recognized through net income. During the first six months of 2012, we recognized net realized investment losses on the VIE investments of $.2 million, which were comprised of $.2 million of net gains from the sales of fixed maturities, and $.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income. At June 30, 2013, there were no investments held by the VIEs that were in default. During the first six months of 2013, no investments held by the VIEs were sold which resulted in gross investment losses. At June 30, 2013, the VIEs held: (i) investments with a fair value of $541.5 million and gross unrealized losses of $4.2 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $11.3 million and gross unrealized losses of nil that had been in an unrealized loss position for greater than twelve months. The investments held by the VIEs are evaluated for other-than-temporary declines in fair value in a manner that is consistent with the Company's fixed maturities, available for sale. In addition, the Company, in the normal course of business, makes passive investments in structured securities issued by VIEs for which the Company is not the investment manager. These structured securities include asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, residential mortgage-backed securities and collateralized mortgage obligations. Our maximum exposure to loss on these securities is limited to our cost basis in the investment. We have determined that we are not the primary beneficiary of these structured securities due to the relative size of our investment in comparison to the total principal amount of the individual structured securities and the level of credit subordination which reduces our obligation to absorb gains or losses. At June 30, 2013, we hold investments in various limited partnerships, in which we are not the primary beneficiary, totaling $29.6 million (classified as other invested assets). At June 30, 2013, we had unfunded commitments to these partnerships of $39.5 million. Our maximum exposure to loss on these investments is limited to the amount of our investment. |
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $)
In Millions |
Total
|
Common stock and additional paid-in capital
|
Accumulated other comprehensive income
|
Retained earnings (accumulated deficit)
|
---|---|---|---|---|
Balance, beginning of period at Dec. 31, 2011 | $ 4,613.8 | $ 4,364.3 | $ 781.6 | $ (532.1) |
Net income | 124.8 | 0 | 0 | 124.8 |
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense (benefit)) | 205.2 | 0 | 205.2 | 0 |
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense (benefit)) | 4.0 | 0 | 4.0 | 0 |
Cost of shares acquired | (58.2) | (58.2) | 0 | 0 |
Dividends on common stock | (4.7) | 0 | 0 | (4.7) |
Stock option, restricted stock and performance units | 8.2 | 8.2 | 0 | 0 |
Balance, end of period at Jun. 30, 2012 | 4,893.1 | 4,314.3 | 990.8 | (412.0) |
Balance, beginning of period at Dec. 31, 2012 | 5,049.3 | 4,176.9 | 1,197.4 | (325.0) |
Net income | 89.0 | 0 | 0 | 89.0 |
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense (benefit)) | (497.9) | 0 | (497.9) | 0 |
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense (benefit)) | (1.4) | 0 | (1.4) | 0 |
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures | (12.6) | (12.6) | 0 | 0 |
Cost of shares acquired | (50.0) | (50.0) | 0 | 0 |
Dividends on common stock | (11.1) | 0 | 0 | (11.1) |
Stock option, restricted stock and performance units | 16.1 | 16.1 | 0 | 0 |
Balance, end of period at Jun. 30, 2013 | $ 4,581.4 | $ 4,130.4 | $ 698.1 | $ (247.1) |
07/UH^
MSOX29N_+OY5_#0/^]Z>0)C_,&T8W>E5`B5S_OQ__+K&^(:1HDO'7G[:_7/S4
M3S6_M?RE5YJ$<;#]^\P^2>8P9OZ=]^!*TADNBK>L/MOZ$HV"C:]@>?7#P=H7
MBK^N_73QIZ7Q#K'GOY;P_=:TX%[7K^2*;,\Z.
MDR3^QO<4YHI7B*1'`YKXTU^9\_,I]B/;C[Y:P1LG^D`=.JY;3;W^\>^%$G[8
M[0'IV65A]$ZF?IJRX9K,U;^SK)F?/,II;-QQ;66Z'.#Y,__&E.
M[7