Investments (Tables)

6 Months Ended

Jun. 30, 2012



	Second Quarter						Six Months
	2012			2011			2012			2011
	(in millions)
Income from fixed maturity securities	$	102.8		$	103.1		$	201.7		$	201.6
Income from short-term investments	0.2			0.3			0.4			0.6
Income from assets acquired in refinancing transactions	0.9			1.5			1.9			2.8
Gross investment income	103.9			104.9			204.0			205.0
Investment expenses	(2.3		)	(2.3		)	(4.6		)	(5.0		)
Net investment income	$	101.6		$	102.6		$	199.4		$	200.0

Net Realized Investment Gains (Losses)



	Second Quarter						Six Months
	2012			2011			2012			2011
	(in millions)
Realized gains on investment portfolio	$	16.3		$	10.8		$	25.8		$	20.8
Realized losses on investment portfolio	(17.6		)	(4.3		)	(20.9		)	(6.9		)
Other-than-temporary impairment (“OTTI”)
Intent to sell	—			(0.8		)	(0.3		)	(3.5		)
Credit component of OTTI securities	(1.8		)	(10.8		)	(6.4		)	(12.7		)
OTTI	(1.8		)	(11.6		)	(6.7		)	(16.2		)
Net realized investment gains (losses)	$	(3.1	)	$	(5.1	)	$	(1.8	)	$	(2.3	)

Roll Forward of Credit Losses in the Investment Portfolio



	Second Quarter					Six Months
	2012		2011			2012		2011
	(in millions)
Balance, beginning of period	$	51.3	$	29.2		$	46.7	$	27.3
Additions for credit losses on securities for which an OTTI was not previously recognized	0.4		9.1			2.5		10.5
Eliminations of securities issued by FG VIEs	—		(13.5		)	—		(13.5		)
Reductions for securities sold during the period	—		(5.0		)	—		(5.0		)
Additions for credit losses on securities for which an OTTI was previously recognized	1.4		1.7			3.9		2.2
Balance, end of period	$	53.1	$	21.5		$	53.1	$	21.5

Fixed Maturity Securities and Short Term Investments by Security Type

Fixed Maturity Securities and Short Term Investments

by Security Type



	As of June 30, 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	7	%	$	761.4	$	66.7	$	—		$	828.1	$	—		AA+
Obligations of state and political subdivisions	50		5,243.4		433.9		(0.6		)	5,676.7		7.4			AA
Corporate securities	9		967.4		64.8		(0.1		)	1,032.1		0.2			A+
Mortgage-backed securities(4):	—
RMBS	13		1,422.0		68.0		(94.4		)	1,395.6		(54.1		)	AA-
CMBS	4		455.9		30.6		—			486.5		3.1			AAA
Asset-backed securities	5		480.9		37.1		(29.7		)	488.3		19.2			BIG
Foreign government securities	3		287.8		14.6		(2.2		)	300.2		—			AAA
Total fixed maturity securities	91		9,618.8		715.7		(127.0		)	10,207.5		(24.2		)	AA-
Short-term investments	9		919.1		0.7		—			919.8		—			AAA
Total investment portfolio	100	%	$	10,537.9	$	716.4	$	(127.0	)	$	11,127.3	$	(24.2	)	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 Other Comprehensive Income ("AOCI").


(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 64% of mortgage backed securities as of June 30, 2012 and 66% as of December 31, 2011 based on fair value.

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



	As of June 30, 2012
State	State General Obligation		Local General Obligation		Revenue		Fair Value		Amortized Cost		Average Credit Rating
	(in millions)
Texas	$	88.2	$	337.9	$	370.7	$	796.8	$	734.1	AA
New York	12.5		70.0		654.4		736.9		687.1		AA
California	19.0		74.5		328.8		422.3		383.2		AA
Florida	34.5		62.5		245.2		342.2		310.5		AA
Illinois	14.2		81.9		195.0		291.1		268.8		A
Washington	38.4		45.4		157.5		241.3		224.5		AA
Massachusetts	43.3		9.8		168.6		221.7		200.8		AA
Arizona	—		7.7		168.8		176.5		163.9		AA
Georgia	12.4		29.5		108.2		150.1		142.7		AA
Michigan	—		29.2		111.6		140.8		131.2		AA
All others	288.5		259.6		1,099.0		1,647.1		1,526.1		AA
Total	$	551.0	$	1,008.0	$	3,607.8	$	5,166.8	$	4,772.9	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 June 30, 2012				As of December 31, 2011
Type	Fair Value		Amortized Cost		Fair Value		Amortized Cost
	(in millions)
Transportation	$	789.5	$	726.4	$	717.4	$	669.7
Tax backed	764.3		706.9		800.0		748.7
Water and sewer	577.5		538.3		530.4		500.7
Municipal utilities	549.4		505.9		528.8		493.5
Higher education	408.0		374.7		332.1		307.2
Healthcare	307.9		285.9		273.4		257.6
All others	211.2		199.7		277.6		265.4
Total	$	3,607.8	$	3,337.8	$	3,459.7	$	3,242.8

Fixed Maturity Securities Gross Unrealized Loss by Length of Time

Fixed Maturity Securities

Gross Unrealized Loss by Length of Time



	As of June 30, 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	$	71.4	$	—		$	—	$	—		$	71.4	$	—
Obligations of state and political subdivisions	99.9		(0.6		)	3.5		—			103.4		(0.6		)
Corporate securities	40.7		(0.1		)	—		—			40.7		(0.1		)
Mortgage-backed securities:
RMBS	168.0		(51.7		)	67.3		(42.7		)	235.3		(94.4		)
CMBS	1.4		—			—		—			1.4		—
Asset-backed securities	33.9		(8.2		)	22.5		(21.5		)	56.4		(29.7		)
Foreign government securities	66.5		(2.2		)	—		—			66.5		(2.2		)
Total	$	481.8	$	(62.8	)	$	93.3	$	(64.2	)	$	575.1	$	(127.0	)
Number of securities			77					18					95
Number of securities with OTTI			4					6					10



	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		—			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:											0		0
RMBS	186.6		(68.2		)	36.5		(22.1		)	223.1		(90.3		)
CMBS	2.8		—			—		—			2.8		—
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

Distribution of Fixed-Maturity Securities

by Contractual Maturity



	As of June 30, 2012
	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	388.9	$	390.1
Due after one year through five years	1,408.7		1,479.8
Due after five years through 10 years	2,373.5		2,599.3
Due after 10 years	3,569.8		3,856.2
Mortgage-backed securities:
RMBS	1,422.0		1,395.6
CMBS	455.9		486.5
Total	$	9,618.8	$	10,207.5

- Definition

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

- Definition

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