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Investments (Tables)
 12 Months Ended
Dec. 31, 2013
Investment Portfolio by Major Security Type
The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio:
 
($ in millions)
Cost

Gross Unrealized Gains

Gross Unrealized Losses

Net Realized Gains (Losses)1 

Fair Value

% of Total Fair Value

December 31, 2013
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
U.S. government obligations
$
3,630.4

$
48.4

$
(16.6
)
$
0

$
3,662.2

20.3
%
State and local government obligations
2,247.3

27.1

(18.4
)
0

2,256.0

12.5

Foreign government obligations
15.6

0

0

0

15.6

.1

Corporate debt securities
2,885.0

60.4

(20.4
)
1.6

2,926.6

16.2

Residential mortgage-backed securities
1,110.1

31.9

(14.1
)
0

1,127.9

6.2

Commercial mortgage-backed securities
2,154.4

43.9

(37.8
)
0

2,160.5

12.0

Other asset-backed securities
1,073.0

6.6

(2.1
)
.2

1,077.7

6.0

Redeemable preferred stocks
299.5

24.1

(9.7
)
0

313.9

1.7

Total fixed maturities
13,415.3

242.4

(119.1
)
1.8

13,540.4

75.0

Equity securities:
 
 
 
 
 
 
Nonredeemable preferred stocks
445.7

258.7

(4.5
)
11.3

711.2

3.9

Common equities
1,451.1

1,081.8

(2.4
)
0

2,530.5

14.0

Short-term investments:
 
 
 
 
 
 
Other short-term investments
1,272.6

0

0

0

1,272.6

7.1

Total portfolio2,3
$
16,584.7

$
1,582.9

$
(126.0
)
$
13.1

$
18,054.7

100.0
%
($ in millions)
Cost

Gross Unrealized Gains

Gross Unrealized Losses

Net Realized Gains (Losses)1 

Fair Value

% of Total Fair Value

December 31, 2012
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
U.S. government obligations
$
2,806.4

$
90.1

$
0

$
0

$
2,896.5

17.6
%
State and local government obligations
1,914.4

50.6

(.6
)
0

1,964.4

11.9

Foreign government obligations
0

0

0

0

0

0

Corporate debt securities
2,982.9

124.7

(1.0
)
6.4

3,113.0

18.9

Residential mortgage-backed securities
413.4

24.0

(9.2
)
0

428.2

2.6

Commercial mortgage-backed securities
1,963.9

84.9

(.1
)
0

2,048.7

12.4

Other asset-backed securities
936.0

12.9

(.1
)
(.2
)
948.6

5.8

Redeemable preferred stocks
356.9

30.5

(12.7
)
0

374.7

2.3

Total fixed maturities
11,373.9

417.7

(23.7
)
6.2

11,774.1

71.5

Equity securities:
 
 
 
 
 
 
Nonredeemable preferred stocks
404.0

404.6

0

3.8

812.4

4.9

Common equities
1,370.3

539.0

(10.3
)
0

1,899.0

11.5

Short-term investments:
 
 
 
 
 
 
Other short-term investments
1,990.0

0

0

0

1,990.0

12.1

Total portfolio2,3
$
15,138.2

$
1,361.3

$
(34.0
)
$
10.0

$
16,475.5

100.0
%

1 Represents net holding period gains (losses) on certain hybrid securities (discussed below).
2 Reflected in our total portfolio are unsettled security transactions and collateral on open derivative positions, which collectively reflect a liability of $61.3 million at December 31, 2013, compared to an asset of $90.9 million at December 31, 2012.
3 The total fair value of the portfolio included $1.8 billion and $1.4 billion at December 31, 2013 and 2012, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.
Hybrid Securities
Included in our fixed-maturity and equity securities are hybrid securities, which are reported at fair value at December 31:
 
(millions)
2013

2012

Fixed maturities:
 
 
Corporate debt securities
$
164.2

$
176.1

Other asset-backed securities
14.8

16.4

Total fixed maturities
179.0

192.5

Equity securities:
 
 
Nonredeemable preferred stocks
60.3

52.8

Total hybrid securities
$
239.3

$
245.3
Composition of Fixed Maturities by Maturity
 The composition of fixed maturities by maturity at December 31, 2013, was:
 
(millions)
Cost

Fair Value

Less than one year
$
1,829.3

$
1,857.6

One to five years
8,554.8

8,693.6

Five to ten years
2,860.5

2,812.1

Ten years or greater
102.6

109.0

Total1
$
13,347.2

$
13,472.3


1 Excludes $68.1 million related to our open interest rate swap positions.
Gross Unrealized Losses by Major Security
The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:
 
 
Total No. of Sec.

Total
Fair
Value

Gross Unrealized Losses

Less than 12 Months
 
12 Months or Greater
($ in millions)
No. of Sec.

Fair
Value

Unrealized Losses

 
No. of Sec.

Fair
 Value

Unrealized Losses

December 31, 2013
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
U.S. government obligations
29

$
1,444.3

$
(16.6
)
28

$
1,434.6

$
(16.3
)
 
1

$
9.7

$
(.3
)
State and local government obligations
141

844.2

(18.4
)
119

759.3

(17.1
)
 
22

84.9

(1.3
)
Corporate debt securities
51

997.6

(20.4
)
45

831.1

(17.8
)
 
6

166.5

(2.6
)
Residential mortgage-backed securities
66

763.5

(14.1
)
45

597.6

(7.9
)
 
21

165.9

(6.2
)
Commercial mortgage-backed securities
76

1,061.9

(37.8
)
60

809.2

(19.7
)
 
16

252.7

(18.1
)
Other asset-backed securities
25

287.2

(2.1
)
22

233.3

(1.8
)
 
3

53.9

(.3
)
Redeemable preferred stocks
4

122.7

(9.7
)
0

0

0

 
4

122.7

(9.7
)
Total fixed maturities
392

5,521.4

(119.1
)
319

4,665.1

(80.6
)
 
73

856.3

(38.5
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
Nonredeemable preferred stocks
7

142.3

(4.5
)
7

142.3

(4.5
)
 
0

0

0

Common equities
24

59.7

(2.4
)
20

58.5

(2.4
)
 
4

1.2

0

Total equity securities
31

202.0

(6.9
)
27

200.8

(6.9
)
 
4

1.2

0

Total portfolio
423

$
5,723.4

$
(126.0
)
346

$
4,865.9

$
(87.5
)
 
77

$
857.5

$
(38.5
)
 
 
Total No. of Sec.

Total
Fair
Value

Gross
Unrealized
Losses

Less than 12 Months
 
12 Months or Greater
($ in millions)
No. of Sec.

Fair
Value

Unrealized
Losses

 
No. of Sec.

Fair
Value

Unrealized
Losses

December 31, 2012
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
U.S. government obligations
0

$
0

$
0

0

$
0

$
0

 
0

$
0

$
0

State and local government obligations
44

162.8

(.6
)
37

123.1

(.5
)
 
7

39.7

(.1
)
Corporate debt securities
8

128.2

(1.0
)
8

128.2

(1.0
)
 
0

0

0

Residential mortgage-backed securities
28

149.2

(9.2
)
5

40.2

(.6
)
 
23

109.0

(8.6
)
Commercial mortgage-backed securities
10

7.1

(.1
)
5

2.1

0

 
5

5.0

(.1
)
Other asset-backed securities
4

25.0

(.1
)
3

20.8

0

 
1

4.2

(.1
)
Redeemable preferred stocks
5

155.7

(12.7
)
1

24.9

0

 
4

130.8

(12.7
)
Total fixed maturities
99

628.0

(23.7
)
59

339.3

(2.1
)
 
40

288.7

(21.6
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
Nonredeemable preferred stocks
0

0

0

0

0

0

 
0

0

0

Common equities
97

118.2

(10.3
)
80

100.7

(8.2
)
 
17

17.5

(2.1
)
Total equity securities
97

118.2

(10.3
)
80

100.7

(8.2
)
 
17

17.5

(2.1
)
Total portfolio
196

$
746.2

$
(34.0
)
139

$
440.0

$
(10.3
)
 
57

$
306.2

$
(23.7
)
Total Non-Credit Portion of Other-Than-Temporary Impairment Recorded in Accumulated Other Comprehensive Income, Reflecting Orginal Non-Credit Loss at the Time Credit Impairment
The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined:
 
 
December 31,
(millions)
2013

2012

Fixed maturities:
 
 
Residential mortgage-backed securities
$
(44.1
)
$
(44.2
)
Commercial mortgage-backed securities
(.9
)
(.9
)
Total fixed maturities
$
(45.0
)
$
(45.1
)
OTTI Credit Losses Recognized in Earnings
The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2013, 2012, and 2011, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:
 
(millions)
Residential
Mortgage-
Backed

Commercial
Mortgage-
Backed

Corporate
Debt

Total

Balance at December 31, 2012
$
27.1

$
.6

$
0

$
27.7

Credit losses for which an OTTI was previously recognized
.1

0

0

.1

Credit losses for which an OTTI was not previously recognized
0

0

0

0

Reductions for securities sold/matured
0

0

0

0

Change in recoveries of future cash flows expected to be collected1,2
(7.8
)
(.2
)
0

(8.0
)
Reductions for previously recognized credit impairments
written-down to fair value3 
(.2
)
0

0

(.2
)
Balance at December 31, 2013
$
19.2

$
.4

$
0

$
19.6

(millions)
Residential
Mortgage-
Backed

Commercial
Mortgage-
Backed

Corporate
Debt

Total

Balance at December 31, 2011
$
34.5

$
1.3

$
0

$
35.8

Credit losses for which an OTTI was previously recognized
.1

0

0

.1

Credit losses for which an OTTI was not previously recognized
.3

0

0

.3

Reductions for securities sold/matured
0

(.2
)
0

(.2
)
Change in recoveries of future cash flows expected to be collected1,2
(3.8
)
(.2
)
0

(4.0
)
Reductions for previously recognized credit impairments
written-down to fair value3 
(4.0
)
(.3
)
0

(4.3
)
Balance at December 31, 2012
$
27.1

$
.6

$
0

$
27.7


(millions)
Residential
Mortgage-
Backed

Commercial
Mortgage-
Backed

Corporate
Debt

Total

Balance at December 31, 2010
$
32.3

$
1.0

$
6.5

$
39.8

Credit losses for which an OTTI was previously recognized
1.4

0

0

1.4

Credit losses for which an OTTI was not previously recognized
1.1

.4

0

1.5

Reductions for securities sold/matured
0

0

0

0

Change in recoveries of future cash flows expected to be collected1,2
.8

.3

(6.5
)
(5.4
)
Reductions for previously recognized credit impairments
written-down to fair value3 
(1.1
)
(.4
)
0

(1.5
)
Balance at December 31, 2011
$
34.5

$
1.3

$
0

$
35.8


1 Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.
2 Includes $2.6 million, $1.4 million, and $2.0 million at December 31, 2013, 2012, and 2011, respectively, received in excess of the cash flows expected to be collected at the time of the write-downs.
3 Reflects reductions of prior credit impairments where the current credit impairment requires writing securities down to fair value (i.e., no remaining non-credit loss).
Components of Net Realized Gains (Losses)
The components of net realized gains (losses) for the years ended December 31, were:
 
(millions)
2013

2012

2011

Gross realized gains on security sales
 
 
 
Fixed maturities:
 
 
 
U.S. government obligations
$
8.5

$
20.2

$
59.1

State and local government obligations
7.7

15.0

3.5

Corporate and other debt securities
47.7

58.1

23.0

Residential mortgage-backed securities
3.0

1.2

2.0

Commercial mortgage-backed securities
10.0

19.3

.3

Other asset-backed securities
0

.9

2.1

Redeemable preferred stocks
0

.7

4.6

Total fixed maturities
76.9

115.4

94.6

Equity securities:
 
 
 
Nonredeemable preferred stocks
126.3

78.2

148.9

Common equities
68.6

167.0

11.6

Subtotal gross realized gains on security sales
271.8

360.6

255.1

Gross realized losses on security sales
 
 
 
Fixed maturities:
 
 
 
U.S. government obligations
(3.7
)
(1.9
)
(9.3
)
Corporate and other debt securities
(6.2
)
(.6
)
(3.5
)
Commercial mortgage-backed securities
(1.8
)
0

0

Redeemable preferred stocks
(.1
)
(.4
)
(2.2
)
Total fixed maturities
(11.8
)
(2.9
)
(15.0
)
Equity securities:
 
 
 
Nonredeemable preferred stocks
(.1
)
(1.1
)
0

Common equities
(.6
)
(27.1
)
(36.5
)
Subtotal gross realized losses on security sales
(12.5
)
(31.1
)
(51.5
)
Net realized gains (losses) on security sales
 
 
 
Fixed maturities:
 
 
 
U.S. government obligations
4.8

18.3

49.8

State and local government obligations
7.7

15.0

3.5

Corporate and other debt securities
41.5

57.5

19.5

Residential mortgage-backed securities
3.0

1.2

2.0

Commercial mortgage-backed securities
8.2

19.3

.3

Other asset-backed securities
0

.9

2.1

Redeemable preferred stocks
(.1
)
.3

2.4

Total fixed maturities
65.1

112.5

79.6

Equity securities:
 
 
 
Nonredeemable preferred stocks
126.2

77.1

148.9

Common equities
68.0

139.9

(24.9
)
Subtotal net realized gains (losses) on security sales
259.3

329.5

203.6

Other-than-temporary impairment losses
 
 
 
Fixed maturities:
 
 
 
Residential mortgage-backed securities
(.6
)
(1.6
)
(3.3
)
Commercial mortgage-backed securities
0

(.1
)
(.6
)
Total fixed maturities
(.6
)
(1.7
)
(3.9
)
Equity securities:
 
 
 
Common equities
(5.5
)
(1.8
)
(.2
)
Subtotal other-than-temporary impairment losses
(6.1
)
(3.5
)
(4.1
)
Other gains (losses)
 
 
 
Hybrid securities
6.4

14.3

1.7

Derivative instruments
56.6

(43.1
)
(98.9
)
Litigation settlements
2.2

9.6

.3

Subtotal other gains (losses)
65.2

(19.2
)
(96.9
)
Total net realized gains (losses) on securities
$
318.4

$
306.8

$
102.6
Components of Net Investment Income
The components of net investment income for the years ended December 31, were:
 
(millions)
2013

2012

2011

Fixed maturities:
 
 
 
U.S. government obligations
$
50.2

$
49.8

$
58.0

State and local government obligations
48.0

51.1

60.0

Foreign government obligations
.2

0

0

Corporate debt securities
98.8

107.5

106.7

Residential mortgage-backed securities
28.1

16.1

18.6

Commercial mortgage-backed securities
74.8

82.2

83.4

Other asset-backed securities
16.7

20.3

24.5

Redeemable preferred stocks
21.2

24.2

33.0

Total fixed maturities
338.0

351.2

384.2

Equity securities:
 
 
 
Nonredeemable preferred stocks
36.2

43.8

57.7

Common equities
45.8

44.9

35.7

Short-term investments:
 
 
 
Other short-term investments
2.0

3.1

2.4

Investment income
422.0

443.0

480.0

Investment expenses
(18.8
)
(15.4
)
(13.5
)
Net investment income
$
403.2

$
427.6

$
466.5
Derivative Instruments
The following table shows the status of our derivative instruments at December 31, 2013 and 2012, and for the years ended December 31, 2013, 2012, and 2011; amounts are on a pretax basis:
 
(millions)
 
Balance Sheet2
Comprehensive
Income Statement
 
Notional Value1
 
 
Assets
(Liabilities)
Fair Value
Net Realized
Gains (Losses)
on Securities
 
 
 
 
 
Years ended
 
December 31,
 
 
December 31,
December 31,
Derivatives
designated as:
2013

2012

2011

Purpose
Classification
2013

2012

2013

2012

2011

Hedging instruments
 
 
 
 
 
 
 
 
 
 
Closed:
 
 
 
 
 
 
 
 
 
 
Ineffective cash flow hedge
$
54

$
31

$
15

Manage
interest
rate risk
NA
$
0

$
0

$
.8

$
.6

$
.3

Non-hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
750

0

0

Manage portfolio duration
Investments - fixed
maturities
68.1

0

59.8

0

0

Corporate credit default swaps
0

0

25

Manage
credit
risk
Investments - fixed
maturities
0

0

0

0

(.2
)
Liabilities:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
0

1,263

1,263

Manage
portfolio
duration
Other liabilities
0

(95.5
)
0

(42.7
)
(74.0
)
Closed:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
1,263

0

350

Manage
portfolio
duration
NA
0

0

(4.0
)
0

(25.5
)
Corporate credit default swaps
0

25

10

Manage
credit
risk
NA
0

0

0

(1.0
)
.5

Total
NA

NA

NA

 
 
$
68.1

$
(95.5
)
$
56.6

$
(43.1
)
$
(98.9
)

1 The amounts represent the value held at year end for open positions and the maximum amount held during the year for closed positions.
2 To the extent we hold both derivative assets and liabilities with the same counterparty that are subject to an enforceable master netting arrangement, we expect that we will report them on a gross basis on our balance sheets, consistent with our historical presentation.
NA = Not Applicable