Accounting Developments

Accounting Updates Adopted in 2012:

Accounting Standards Codification (ASC) 220 "Comprehensive Income"

In June 2011, the Financial Accounting Standards Board (FASB) issued an update related to the financial statement presentation of comprehensive income. This update requires that non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present net income and its components, followed consecutively by a second statement presenting total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. In December 2011, the FASB issued an update to indefinitely defer the effective date pertaining to the presentation of reclassification adjustments and reinstated the previous requirement to present reclassification adjustments either on the face of the statement or in financial statement footnotes. We adopted these updates effective January 1, 2012. The adoption of these updates modified our financial statement presentation but had no effect on our financial position or results of operations.

ASC 350 "Intangibles - Goodwill and Other"

In September 2011, the FASB issued an update which gives companies the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. We adopted this update effective January 1, 2012. The adoption of this update had no effect on our financial position or results of operations.

ASC 820 "Fair Value Measurements and Disclosures"

In May 2011, the FASB issued an update to require additional disclosures regarding fair value measurements and to provide clarifying guidance on the application of existing fair value measurement requirements. Specifically, the update requires additional information on Level 1 and Level 2 transfers within the fair value hierarchy; the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position, but for which the fair value of such items is required to be disclosed; and information about the sensitivity of a fair value measurement in Level 3 of the fair value hierarchy to changes in unobservable inputs and any interrelationships between those unobservable inputs. We adopted this update effective January 1, 2012. The adoption of this update expanded our disclosures but had no effect on our financial position or results of operations.

ASC 860 "Transfers and Servicing"

In April 2011, the FASB issued an update to revise the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The determination of whether the transfer of a financial asset subject to a repurchase agreement is a sale is based, in part, on whether the entity maintains effective control over the financial asset. This update removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially the agreed terms, even in the event of default by the transferee, and the related requirement to demonstrate that the transferor possess adequate collateral to fund substantially all the cost of purchasing replacement financial assets. We adopted this update effective January 1, 2012. The adoption of this update had no effect on our financial position or results of operations.

ASC 944 "Financial Services - Insurance"

In October 2010, the FASB issued an update to address the diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify as deferred acquisition costs. The amendments in the update require that only incremental direct costs associated with the successful acquisition of a new or renewal insurance contract can be capitalized. All other costs are to be expensed as incurred. We adopted this update effective January 1, 2012 and applied the amendments retrospectively, adjusting all prior periods. The cumulative effect of the adoption as of January 1, 2011, was a decrease to stockholders' equity of $459.5 million. The following table summarizes the effects on our financial statements.



	Historical						Effect			Historical						Effect
	Accounting			As			of			Accounting			As			of
	Method			Adjusted			Change			Method			Adjusted			Change
	(in millions of dollars, except share data)
	Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
Consolidated Statements of Income
Deferral of Acquisition Costs	$	(155.6	)	$	(110.1	)	$	45.5		$	(472.1	)	$	(334.7	)	$	137.4
Amortization of Deferred Acquisition Costs	125.2			84.3			(40.9		)	400.4			273.9			(126.5		)
Income Tax - Deferred	33.3			32.3			(1.0		)	90.0			86.7			(3.3		)
Net Income	205.6			202.0			(3.6		)	660.8			653.2			(7.6		)

Net Income Per Common Share
Basic	0.69			0.68			(0.01		)	2.16			2.14			(0.02		)
Assuming Dilution	0.69			0.68			(0.01		)	2.15			2.13			(0.02		)

Consolidated Statements of Comprehensive Income
Net Income	$	205.6		$	202.0		$	(3.6	)	$	660.8		$	653.2		$	(7.6	)
Change in Adjustment to Reserves for Future Policy and Contract Benefits, Net of Reinsurance and Other	(705.3		)	(703.3		)	2.0			(934.0		)	(931.2		)	2.8
Change in Foreign Currency Translation Adjustment	(34.1		)	(33.8		)	0.3			(6.0		)	(6.0		)	—

Consolidated Statement of Cash Flows
Net Income										$	660.8		$	653.2		$	(7.6	)
Change in Deferred Acquisition Costs										(71.7		)	(60.8		)	10.9
Change in Income Taxes										41.2			37.9			(3.3		)

	December 31, 2011									September 30, 2011
Consolidated Balance Sheets
Deferred Acquisition Costs	$	2,300.9		$	1,677.1		$	(623.8	)	$	2,572.4		$	1,860.6		$	(711.8	)
Deferred Income Tax	261.2			44.7			(216.5		)	795.3			547.8			(247.5		)
Net Unrealized Gain on Securities Not Other-Than-Temporarily Impaired	605.8			614.8			9.0			885.6			894.0			8.4
Foreign Currency Translation Adjustment	(121.5		)	(117.6		)	3.9			(116.9		)	(113.0		)	3.9
Retained Earnings	7,031.2			6,611.0			(420.2		)	7,487.3			7,010.7			(476.6		)

Accounting Updates Adopted in 2011:

ASC 310 “Receivables”

In January and April 2011, the FASB deferred the effective date of disclosures about troubled debt restructurings and issued updates providing additional clarification to help creditors in determining whether a creditor has granted a concession as well as whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. We adopted these updates effective July 1, 2011. The adoption of these updates expanded our disclosures but had no effect on our financial position or results of operations.

Accounting Updates Outstanding:

ASC 210 "Balance Sheet - Disclosures about Offsetting Assets and Liabilities"

In December 2011, the FASB issued an update to require additional disclosures and information about financial instruments and derivative instruments that are either offset on the balance sheet or are subject to an enforceable master netting arrangement. These disclosures are intended to provide information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. The amendments in this update are effective for interim and annual periods beginning on or after January 1, 2013. The adoption of this update will expand our disclosures but will have no effect on our financial position or results of operations.