Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements [Abstract]

Carrying Amount and Fair Value of Financial Instruments

Presented as follows are the carrying amounts and fair values of financial instruments. The carrying values of financial instruments such as short-term investments, cash and bank deposits, accounts and premiums receivable, accrued investment income, and short-term debt approximate fair value due to the short-term nature of the instruments. As such, these financial instruments are not included in the following chart. Certain prior year amounts have been reclassified to conform to current presentation.

	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions of dollars)
Assets
Fixed Maturity Securities	$	44,744.7	$	44,744.7	$	42,486.7	$	42,486.7
Mortgage Loans	1,665.2		1,868.4		1,612.3		1,789.8
Policy Loans	3,117.0		3,199.6		3,051.4		3,124.4
Other Long-term Investments
Derivatives	108.2		108.2		137.7		137.7
Equity Securities	13.0		13.0		11.2		11.2
Miscellaneous Long-term Investments	460.3		460.3		436.4		436.4
Liabilities
Policyholders' Funds
Deferred Annuity Products	$	642.2	$	642.2	$	641.1	$	641.1
Supplementary Contracts without Life Contingencies	536.6		536.6		502.6		502.6
Long-term Debt	2,781.5		2,928.6		2,570.2		2,540.2
Other Liabilities
Derivatives	182.5		182.5		173.7		173.7
Embedded Derivative in Modified Coinsurance Arrangement	107.0		107.0		135.7		135.7
Unfunded Commitments to Investment Partnerships	112.2		112.2		160.6		160.6

Fair Value, Measurement Inputs, Disclosure

Fair value measurements by input level for financial instruments carried at fair value are as follows:

	September 30, 2012
	(in millions of dollars)
	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 Maturity Securities
United States Government and Government Agencies and Authorities	$	539.5	$	836.9	$	—	$	1,376.4
States, Municipalities, and Political Subdivisions	44.0		1,578.5		110.1		1,732.6
Foreign Governments	20.6		1,368.3		46.1		1,435.0
Public Utilities	793.8		9,760.9		499.1		11,053.8
Mortgage/Asset-Backed Securities	—		2,415.2		8.4		2,423.6
All Other Corporate Bonds	5,425.6		20,364.2		894.6		26,684.4
Redeemable Preferred Stocks	24.3		14.6		—		38.9
Total Fixed Maturity Securities	6,847.8		36,338.6		1,558.3		44,744.7
Other Long-term Investments
Derivatives
Interest Rate Swaps and Forwards	—		101.3		—		101.3
Foreign Exchange Contracts	—		6.9		—		6.9
Total Derivatives	—		108.2		—		108.2
Equity Securities	—		8.6		4.4		13.0
Liabilities
Other Liabilities
Derivatives
Interest Rate Swaps	$	—	$	33.3	$	—	$	33.3
Foreign Exchange Contracts	—		149.2		—		149.2
Embedded Derivative in Modified Coinsurance Arrangement	—		—		107.0		107.0
Total Derivatives	—		182.5		107.0		289.5

Note 3 - Fair Values of Financial Instruments - Continued

	December 31, 2011
	(in millions of dollars)
	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 Maturity Securities
United States Government and Government Agencies and Authorities	$	326.6	$	977.8	$	—	$	1,304.4
States, Municipalities, and Political Subdivisions	107.3		1,416.2		68.1		1,591.6
Foreign Governments	—		1,376.7		—		1,376.7
Public Utilities	718.0		9,576.4		338.9		10,633.3
Mortgage/Asset-Backed Securities	—		2,941.5		31.7		2,973.2
All Other Corporate Bonds	3,469.5		20,415.1		665.5		24,550.1
Redeemable Preferred Stocks	—		20.2		37.2		57.4
Total Fixed Maturity Securities	4,621.4		36,723.9		1,141.4		42,486.7
Other Long-term Investments
Derivatives
Interest Rate Swaps	—		134.2		—		134.2
Foreign Exchange Contracts	—		3.5		—		3.5
Total Derivatives	—		137.7		—		137.7
Equity Securities	—		—		11.2		11.2
Liabilities
Other Liabilities
Derivatives
Interest Rate Swaps	$	—	$	32.9	$	—	$	32.9
Foreign Exchange Contracts	—		140.8		—		140.8
Embedded Derivative in Modified Coinsurance Arrangement	—		—		135.7		135.7
Total Derivatives	—		173.7		135.7		309.4

Transfers of Assets between Level 1 and Level 2

Transfers of assets between Level 1 and Level 2 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2012				September 30, 2012
	(in millions of dollars) Transfers into
	Level 1 from Level 2		Level 2 from Level 1		Level 1 from Level 2		Level 2 from Level 1
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	426.8	$	60.5	$	205.9	$	20.5
States, Municipalities, and Political Subdivisions	43.0		62.9		41.9		74.8
Foreign Governments	21.7		—		20.7		—
Public Utilities	382.4		743.6		479.0		483.6
All Other Corporate Bonds	2,152.9		1,667.4		2,823.3		1,706.0
Total Fixed Maturity Securities	$	3,026.8	$	2,534.4	$	3,570.8	$	2,284.9
Equity Securities	$	—	$	7.4	$	—	$	—

	Three Months Ended				Nine Months Ended
	September 30, 2011				September 30, 2011
	(in millions of dollars) Transfers into
	Level 1 from Level 2		Level 2 from Level 1		Level 1 from Level 2		Level 2 from Level 1
Fixed Maturity Securities
United States Government and Government Agencies and Authorities	$	177.2	$	16.1	$	169.8	$	—
States, Municipalities, and Political Subdivisions	—		20.0		25.4		301.9
Foreign Governments	—		—		—		0.7
Public Utilities	665.7		694.8		710.5		488.6
All Other Corporate Bonds	1,798.1		2,347.2		2,334.1		1,732.3
Total Fixed Maturity Securities	$	2,641.0	$	3,078.1	$	3,239.8	$	2,523.5

Transfers between Level 1 and Level 2 occurred due to the change in availability of either a TRACE or broker market maker price. Depending on current market conditions, the availability of these Level 1 prices can vary from period to period. For fair value measurements of financial instruments that were transferred either into or out of Level 1 or 2, we reflect the transfers using the fair value at the beginning of the period.

Changes in Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs (Level 3)

Changes in assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows:

	Three Months Ended September 30, 2012
	(in millions of dollars)
				Total Realized and Unrealized Investment Gains Included in
	Beginning of Period			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Level 3 Transfers					End of Period
															Into		Out of
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	—		$	—		$	2.0		$	—	$	—		$	108.1	$	—		$	110.1
Foreign Governments	—			—			1.3			—		—			44.8		—			46.1
Public Utilities	162.8			—			8.4			—		(1.7		)	340.5		(10.9		)	499.1
Mortgage/Asset-Backed Securities	0.6			—			0.4			—		—			7.4		—			8.4
All Other Corporate Bonds	639.6			—			19.8			—		(5.3		)	386.7		(146.2		)	894.6
Redeemable Preferred Stocks	22.2			—			—			—		—			—		(22.2		)	—
Total Fixed Maturity Securities	825.2			—			31.9			—		(7.0		)	887.5		(179.3		)	1,558.3
Equity Securities	4.4			—			—			—		—			—		—			4.4
Embedded Derivative in Modified Coinsurance Arrangement	(126.7		)	19.7			—			—		—			—		—			(107.0		)
	Three Months Ended September 30, 2011
	(in millions of dollars)
				Total Realized and Unrealized Investment Gains (Losses) Included in
	Beginning of Period			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Level 3 Transfers					End of Period
															Into		Out of
Fixed Maturity Securities
Public Utilities	$	217.9		$	0.1		$	9.3		$	30.0	$	(11.9	)	$	220.2	$	(69.8	)	$	395.8
Mortgage/Asset-Backed Securities	19.7			—			(0.1		)	—		—			—		—			19.6
All Other Corporate Bonds	528.3			—			1.3			—		(17.6		)	119.6		(164.8		)	466.8
Redeemable Preferred Stocks	22.6			—			(0.9		)	—		—			—		—			21.7
Total Fixed Maturity Securities	788.5			0.1			9.6			30.0		(29.5		)	339.8		(234.6		)	903.9
Equity Securities	3.6			(0.4		)	(2.4		)	—		—			9.6		—			10.4
Embedded Derivative in Modified Coinsurance Arrangement	(87.0		)	(33.7		)	—			—		—			—		—			(120.7		)

Note 3 - Fair Values of Financial Instruments - Continued

	Nine Months Ended September 30, 2012
	(in millions of dollars)
				Total Realized and Unrealized Investment Gains (Losses) Included in
	Beginning of Year			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Level 3 Transfers					End of Period
															Into		Out of
Fixed Maturity Securities
States, Municipalities, and Political Subdivisions	$	68.1		$	—		$	(0.9	)	$	—	$	(0.3	)	$	43.2	$	—		$	110.1
Foreign Governments	—			—			5.2			—		—			40.9		—			46.1
Public Utilities	338.9			—			5.4			3.6		(3.7		)	361.7		(206.8		)	499.1
Mortgage/Asset-Backed Securities	31.7			—			0.9			7.0		(0.1		)	—		(31.1		)	8.4
All Other Corporate Bonds	665.5			—			34.0			30.2		(49.0		)	448.0		(234.1		)	894.6
Redeemable Preferred Stocks	37.2			(1.0		)	0.8			—		(14.3		)	—		(22.7		)	—
Total Fixed Maturity Securities	1,141.4			(1.0		)	45.4			40.8		(67.4		)	893.8		(494.7		)	1,558.3
Equity Securities	11.2			—			—			—		(0.1		)	—		(6.7		)	4.4
Embedded Derivative in Modified Coinsurance Arrangement	(135.7		)	28.7			—			—		—			—		—			(107.0		)
	Nine Months Ended September 30, 2011
	(in millions of dollars)
				Total Realized and Unrealized Investment Gains (Losses) Included in
	Beginning of Year			Earnings			Other Comprehensive Income or Loss			Purchases		Sales			Level 3 Transfers					End of Period
															Into		Out of
Fixed Maturity Securities
Public Utilities	$	173.6		$	0.1		$	17.1		$	30.0	$	(15.7	)	$	299.7	$	(109.0	)	$	395.8
Mortgage/Asset-Backed Securities	0.7			—			(0.4		)	19.4		(0.1		)	—		—			19.6
All Other Corporate Bonds	829.7			(2.1		)	4.7			41.7		(32.5		)	96.2		(470.9		)	466.8
Redeemable Preferred Stocks	21.7			—			—			—		—			—		—			21.7
Total Fixed Maturity Securities	1,025.7			(2.0		)	21.4			91.1		(48.3		)	395.9		(579.9		)	903.9
Equity Securities	1.5			(0.4		)	(1.7		)	2.0		—			9.0		—			10.4
Embedded Derivative in Modified Coinsurance Arrangement	(96.3		)	(24.4		)	—			—		—			—		—			(120.7		)

Note 3 - Fair Values of Financial Instruments - Continued

Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses only for the time during which the applicable financial instruments were classified as Level 3. The transfers between levels resulted primarily from a change in observability of three inputs used to determine fair values of the securities transferred: (1) transactional data for new issuance and secondary trades, (2) broker/dealer quotes and pricing, primarily related to changes in the level of activity in the market and whether the market was considered orderly, and (3) comparable bond metrics from which to perform an analysis. For fair value measurements of financial instruments that were transferred either into or out of Level 3, we reflect the transfers using the fair value at the beginning of the period. Gains (losses) which are included in earnings and are attributable to the change in unrealized gains or losses relating to assets or liabilities valued using significant unobservable inputs and still held at period end were $19.7 million and $28.7 million, respectively, for the three and nine months ended September 30, 2012 and $(33.7) million and $(24.4) million, respectively, for the three and nine months ended September 30, 2011. These amounts relate entirely to the changes in fair value of an embedded derivative in a modified coinsurance arrangement which are reported as realized investment gains and losses.

Level 3 Quantitative Sensitivity Analysis

Quantitative information regarding the significant unobservable inputs used in Level 3 fair value measurements, all of which are internally derived, is as follows:

	September 30, 2012
	(in millions of dollars)
	Fair Value			Unobservable Input		Range/Weighted Average
Fixed Maturity Securities
Public Utilities	$	17.4		- Comparability Adjustment	(b)	0.20% - 0.20%/0.20%
Mortgage/Asset-Backed Securities - Private	0.5			- Discount for Size	(c)	5.77% - 5.86%/5.84%
All Other Corporate Bonds - Private	485.1			- Change in Benchmark Reference - Comparability Adjustment - Discount for Size - Lack of Marketability - Volatility of Credit - Market Convention	(a) (b) (c) (d) (e) (f)	(0.05)% - 2.60%/0.15% (0.50)% - (0.50)%/(0.50)% 0.50% - 0.50%/0.50% 0.01% - 1.00%/0.22% (0.50)% - 6.92%/1.37% Priced at Par
All Other Corporate Bonds - Public	115.9			- Comparability Adjustment - Discount for Size - Lack of Marketability - Volatility of Credit - Market Convention	(b) (c) (d) (e) (f)	(1.24)% - 0.50%/(0.16)% 0.00% - 0.10%/0.04% 0.01% - 0.40%/0.19% 0.01% - 0.01%/0.01% Priced at Par
Equity Securities - Private	4.1			- Market Convention	(f)	Priced at Cost or Owner's Equity
Embedded Derivative in Modified Coinsurance Arrangement	(107.0		)	- Projected Liability Cash Flows	(g)	Actuarial Assumptions

(a) Represents basis point adjustments for changes in benchmark spreads associated with various ratings categories

(b) Represents basis point adjustments for changes in benchmark spreads associated with various industry sectors

(c) Represents basis point adjustments based on issue/issuer size relative to the benchmark

(d) Represents basis point adjustments to apply a discount due to the illiquidity of an investment

(e) Represents basis point adjustments for credit-specific factors

(f) Represents a decision to price based on par value, cost, or owner's equity when limited data is available

(g) Represents various actuarial assumptions required to derive the liability cash flows including incidence, termination, and lapse rates

Isolated increases in unobservable inputs other than market convention will result in a lower fair value measurement, whereas isolated decreases will result in a higher fair value measurement. The unobservable input for market convention is not sensitive to input movements. The projected liability cash flows used in the fair value measurement of our Level 3 embedded derivative are based on expected claim payments. If claim payments increase, the projected liability cash flows will increase, resulting in a decrease in the fair value of the embedded derivative. Decreases in projected liability cash flows will result in an increase in the fair value of the embedded derivative.