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Investments (Tables)

3 Months Ended

Mar. 31, 2012

Investments

Net Investment Income

		First Quarter
		2012			2011
		(in millions)
Income from fixed maturity securities		$	98.9		$	98.5
Income from short-term investments		0.2			0.3
Income from assets acquired in refinancing transactions		1.0			1.3
Gross investment income		100.1			100.1
Investment expenses		(2.3		)	(2.7		)
Net investment income		$	97.8		$	97.4

Net Realized Investment Gains (Losses)

		First Quarter
		2012			2011
		(in millions)
Realized gains on investment portfolio		$	9.5		$	9.9
Realized losses on investment portfolio		(3.3		)	(2.5		)
Other-than-temporary impairment (“OTTI”)
Intent to sell		(0.3		)	(2.7		)
Credit component of OTTI securities		(4.6		)	(1.9		)
OTTI		(4.9		)	(4.6		)
Net realized investment gains (losses)		$	1.3		$	2.8

Roll Forward of Credit Losses in the Investment Portfolio

		First Quarter
		2012			2011
		(in millions)
Balance, beginning of period		$	46.7		$	27.3
Additions for credit losses on securities for which an OTTI was not previously recognized		2.1			1.4
Additions for credit losses on securities for which an OTTI was previously recognized		2.5			0.5
Balance, end of period		$	51.3		$	29.2

Fixed Maturity Securities and Short Term Investments by Security Type

		As of March 31, 2012
Investment Category		Percent of Total(1)		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value			AOCI Gain(2) (Loss) on Securities with OTTI			Weighted Average Credit Quality (3)
		(dollars in millions)
Fixed maturity securities:
U.S. government and agencies		8	%	$	803.2		$	63.7		$	(0.2	)	$	866.7		$	—		AA+
Obligations of state and political subdivisions		49		5,144.3			383.2			(1.4		)	5,526.1			6.4			AA
Corporate securities		9		986.8			56.2			(0.2		)	1,042.8			0.3			A+
Mortgage-backed securities(4):
RMBS		14		1,439.7			63.7			(79.4		)	1,424.0			(54.1		)	AA
CMBS		4		472.1			29.4			(0.0		)	501.5			3.1			AAA
Asset-backed securities		4		463.6			34.6			(15.3		)	482.9			25.6			BBB-
Foreign government securities		3		349.7			15.7			(4.5		)	360.9			—			AA+
Total fixed maturity securities		91		9,659.4			646.5			(101.0		)	10,204.9			(18.7		)	AA
Short-term investments		9		902.9			0.5			—			903.4			—			AAA
Total investment portfolio		100	%	$	10,562.3		$	647.0		$	(101.0	)	$	11,108.3		$	(18.7	)	AA

		As of December 31, 2011
Investment Category		Percent of Total(1)		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value			AOCI Gain (Loss) on Securities with OTTI			Weighted Average Credit Quality (2)
		(dollars in millions)
Fixed maturity securities:
U.S. government and agencies		8	%	$	850.2		$	72.3		$	(0.1	)	$	922.4		$	—		AA+
Obligations of state and political subdivisions		49		5,097.3			358.6			(0.5		)	5,455.4			5.7			AA
Corporate securities		10		989.0			51.8			(2.4		)	1,038.4			(0.2		)	A+
Mortgage-backed securities(3):
RMBS		14		1,454.3			63.9			(90.3		)	1,427.9			(35.1		)	AA
CMBS		5		475.6			24.4			—			500.0			2.7			AAA
Asset-backed securities		4		439.5			37.7			(19.1		)	458.1			29.2			BBB-
Foreign government securities		3		332.6			13.3			(6.2		)	339.7			—			AAA
Total fixed maturity securities		93		9,638.5			622.0			(118.6		)	10,141.9			2.3			AA
Short-term investments		7		734.0			—			—			734.0			—			AAA
Total investment portfolio		100	%	$	10,372.5		$	622.0		$	(118.6	)	$	10,875.9		$	2.3		AA

(1) Based on amortized cost.

(2) Accumulated OCI.

(3) Ratings in the tables above represent the lower of the Moody’s and S&P classifications except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio consists primarily of high-quality, liquid instruments.

(4) Government-agency obligations were approximately 65% of mortgage backed securities as of March 31, 2012 and 66% as of December 31, 2011 based on fair value. Excluding loss mitigation related purchases, government- agency obligations were 70% of mortgage backed securities as of March 31, 2012 and 71% as of December 31, 2011 based on fair value.

Fair Value of Available-for-Sale Municipal Bond Portfolio by State

		As of March 31, 2012
State		State General Obligation			Local General Obligation			Revenue			Fair Value			Amortized Cost			Average Credit Rating
		(in millions)
Texas		$	86.6		$	330.4		$	365.2		$	782.2		$	726.7		AA
New York		12.5			59.8			644.1			716.4			672.4			AA
California		18.8			69.3			307.5			395.6			360.7			AA
Florida		34.1			61.5			243.1			338.7			311.0			AA
Illinois		14.1			83.4			194.3			291.8			271.6			A
Washington		38.1			52.3			142.5			232.9			218.3			AA
Massachusetts		42.4			9.6			168.3			220.3			202.0			AA
Arizona		—			7.6			171.0			178.6			168.0			AA
Michigan		—			36.9			99.6			136.5			128.1			AA
Georgia		12.5			29.3			87.0			128.8			122.6			AA
All others		293.3			241.3			1,139.7			1,674.3			1,564.9			AA
Total		$	552.4		$	981.4		$	3,562.3		$	5,096.1		$	4,746.3		AA

		As of December 31, 2011
State		State General Obligation			Local General Obligation			Revenue			Fair Value			Amortized Cost			Average Credit Rating
		(in millions)
Texas		$	86.3		$	342.0		$	345.6		$	773.9		$	724.0		AA
New York		12.3			60.3			622.6			695.2			653.8			AA
California		19.1			50.9			296.8			366.8			336.2			AA
Florida		34.2			61.7			247.4			343.3			316.9			AA
Illinois		16.2			86.9			197.1			300.2			281.5			AA
Massachusetts		42.5			9.7			163.7			215.9			198.9			AA
Washington		37.8			52.5			123.4			213.7			199.7			AA
Arizona		—			7.7			164.6			172.3			163.0			AA
Ohio		—			52.7			85.9			138.6			128.8			AA
Michigan		—			37.2			99.0			136.2			128.5			AA
All others		310.5			271.8			1,113.6			1,695.9			1,588.6			AA
Total		$	558.9		$	1,033.4		$	3,459.7		$	5,052.0		$	4,719.9		AA

Revenue Sources

		As of March 31, 2012						As of December 31, 2011
Type		Fair Value			Amortized Cost			Fair Value			Amortized Cost
		(in millions)
Tax backed		$	804.8		$	749.9		$	800.0		$	748.7
Transportation		748.9			693.9			717.4			669.7
Municipal utilities		562.1			522.4			528.8			493.5
Water and sewer		546.1			511.9			530.4			500.7
Higher education		401.4			374.4			332.1			307.2
Healthcare		275.9			257.0			273.4			257.6
All others		223.1			211.3			277.6			265.4
Total		$	3,562.3		$	3,320.8		$	3,459.7		$	3,242.8

Fixed Maturity Securities Gross Unrealized Loss by Length of Time

		As of March 31, 2012
		Less than 12 months						12 months or more						Total
		Fair value			Unrealized loss			Fair value			Unrealized loss			Fair value			Unrealized loss
		(dollars in millions)
U.S. government and agencies		$	7.2		$	(0.2	)	$	—		$	—		$	7.2		$	(0.2	)
Obligations of state and political subdivisions		132.7			(1.3		)	3.7			(0.1		)	136.4			(1.4		)
Corporate securities		27.7			(0.2		)	—			—			27.7			(0.2		)
Mortgage-backed securities:
RMBS		170.7			(36.7		)	67.8			(42.7		)	238.5			(79.4		)
CMBS		2.8			(0.0		)	—			—			2.8			(0.0		)
Asset-backed securities		19.3			(9.1		)	11.0			(6.2		)	30.3			(15.3		)
Foreign government securities		117.9			(4.5		)	—			—			117.9			(4.5		)
Total		$	478.3		$	(52.0	)	$	82.5		$	(49.0	)	$	560.8		$	(101.0	)
Number of securities					97						18						115
Number of securities with OTTI					4						5						9

		As of December 31, 2011
		Less than 12 months						12 months or more						Total
		Fair value			Unrealized loss			Fair value			Unrealized loss			Fair value			Unrealized loss
		(dollars in millions)
U.S. government and agencies		$	3.8		$	(0.1	)	$	—		$	—		$	3.8		$	(0.1	)
Obligations of state and political subdivisions		17.0			(0.0		)	20.6			(0.5		)	37.6			(0.5		)
Corporate securities		79.9			(2.3		)	3.1			(0.1		)	83.0			(2.4		)
Mortgage-backed securities:
RMBS		186.6			(68.2		)	36.5			(22.1		)	223.1			(90.3		)
CMBS		2.8			(0.0		)	—			—			2.8			(0.0		)
Asset-backed securities		—			—			25.7			(19.1		)	25.7			(19.1		)
Foreign government securities		141.4			(6.2		)	—			—			141.4			(6.2		)
Total		$	431.5		$	(76.8	)	$	85.9		$	(41.8	)	$	517.4		$	(118.6	)
Number of securities					72						54						126
Number of securities with OTTI					6						4						10

Distribution of Fixed Maturity Securities by Contractual Maturity

		As of March 31, 2012
		Amortized Cost			Estimated Fair Value
		(in millions)
Due within one year		$	461.5		$	463.7
Due after one year through five years		1,384.1			1,447.6
Due after five years through 10 years		2,426.2			2,639.4
Due after 10 years		3,475.8			3,728.7
Mortgage-backed securities:
RMBS		1,439.7			1,424.0
CMBS		472.1			501.5
Total		$	9,659.4		$	10,204.9

Tabular disclosure of investment income derived from investments in debt and equity securities consisting of interest income earned from investments in debt securities and on cash and cash equivalents, dividend income from investments in equity securities, and income or expense derived from the amortization of investment related discounts or premiums, respectively. This item does not include realized or unrealized gains or losses on the sale or holding of investments in debt and equity securities required to be included in earnings for the period or for other than temporary losses related to investments in debt and equity securities which are included in realized losses in the period recognized.

+ References+ Details

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

+ References+ Details