Investments

Fixed Maturities and Equity Securities

Available-for-sale and fair value option ("FVO") fixed maturities and equity securities were as follows as of December 31, 2012:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives⁽²⁾		Fair Value		OTTI⁽³⁾
Fixed maturities:
U.S. Treasuries	$	1,011.5	$	135.6	$	0.5	$	—	$	1,146.6	$	—
U.S. government agencies and authorities	379.4		17.6		—		—		397.0		—
State, municipalities and political subdivisions	77.2		15.9		—		—		93.1		—
U.S. corporate securities	9,438.0		1,147.4		11.1		—		10,574.3		2.0

Foreign securities⁽¹⁾:
Government	439.7		57.4		1.1		—		496.0		—
Other	4,570.0		501.3		15.3		—		5,056.0		—
Total foreign securities	5,009.7		558.7		16.4		—		5,552.0		—

Residential mortgage-backed securities:
Agency	1,679.5		181.5		3.4		33.7		1,891.3		0.6
Non-Agency	390.9		70.0		14.7		20.0		466.2		17.4
Total Residential mortgage-backed securities	2,070.4		251.5		18.1		53.7		2,357.5		18.0

Commercial mortgage-backed securities	748.7		90.6		0.2		—		839.1		4.4
Other asset-backed securities	475.7		26.6		6.7		—		495.6		3.1
Total fixed maturities, including securities pledged	19,210.6		2,243.9		53.0		53.7		21,455.2		27.5
Less: Securities pledged	207.2		13.0		0.5		—		219.7		—
Total fixed maturities	19,003.4		2,230.9		52.5		53.7		21,235.5		27.5
Equity securities	129.3		13.6		0.1		—		142.8		—
Total fixed maturities and equity securities investments	$	19,132.7	$	2,244.5	$	52.6	$	53.7	$	21,378.3	$	27.5

⁽¹⁾ Primarily U.S. dollar denominated.

⁽²⁾Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) on the Consolidated Statements of Operations.

⁽³⁾ Represents other-than-temporary impairments ("OTTI") reported as a component of Other comprehensive income.

Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2011:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Embedded Derivatives⁽²⁾		Fair Value		OTTI⁽³⁾
Fixed maturities:
U.S. Treasuries	$	1,096.6	$	135.0	$	—	$	—	$	1,231.6	$	—
U.S. government agencies and authorities	379.7		31.0		—		—		410.7		—
State, municipalities and political subdivisions	95.1		10.9		—		—		106.0		—
U.S. corporate securities	8,166.9		770.8		31.1		—		8,906.6		—

Foreign securities⁽¹⁾:
Government	308.5		39.8		3.1		—		345.2		—
Other	4,352.5		328.8		38.4		—		4,642.9		—
Total foreign securities	4,661.0		368.6		41.5		—		4,988.1		—

Residential mortgage-backed securities:
Agency	1,442.0		218.7		3.4		39.4		1,696.7		0.7
Non-Agency	513.4		66.7		49.5		19.8		550.4		28.8
Total Residential mortgage-backed securities	1,955.4		285.4		52.9		59.2		2,247.1		29.5

Commercial mortgage-backed securities	866.1		51.0		5.8		—		911.3		4.4
Other asset-backed securities	441.5		19.4		22.1		—		438.8		4.2
Total fixed maturities, including securities pledged	17,662.3		1,672.1		153.4		59.2		19,240.2		38.1
Less: Securities pledged	572.5		22.4		1.2		—		593.7		—
Total fixed maturities	17,089.8		1,649.7		152.2		59.2		18,646.5		38.1
Equity securities	131.8		13.1		—		—		144.9		—
Total fixed maturities and equity securities investments	$	17,221.6	$	1,662.8	$	152.2	$	59.2	$	18,791.4	$	38.1

⁽¹⁾ Primarily U.S. dollar denominated.

⁽³⁾ Represents OTTI reported as a component of Other comprehensive income.

The amortized cost and fair value of fixed maturities, including securities pledged, as of December 31, 2012, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called, or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.



	Amortized Cost		Fair Value
Due to mature:
One year or less	$	853.5	$	880.9
After one year through five years	3,953.8		4,249.9
After five years through ten years	5,700.3		6,339.8
After ten years	5,408.2		6,292.4
Mortgage-backed securities	2,819.1		3,196.6
Other asset-backed securities	475.7		495.6
Fixed maturities, including securities pledged	$	19,210.6	$	21,455.2

The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer.

As of December 31, 2012, the Company did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies with a carrying value in excess of 10% of the Company’s consolidated Shareholder’s equity. As of December 31, 2011, the Company did not have any investments in a single issuer, other than obligations of the U.S. government and government agencies and the Dutch State loan obligation, with a carrying value in excess of 10% of the Company’s consolidated Shareholder’s equity.

The following tables set forth the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of December 31, 2012 and 2011:



	Amortized Cost		Gross Unrealized Capital Gains		Gross Unrealized Capital Losses		Fair Value
2012
Communications	$	1,154.1	$	161.4	$	0.9	$	1,314.6
Financial	1,859.3		240.1		10.9		2,088.5
Industrial and other companies	7,883.1		850.9		6.9		8,727.1
Utilities	2,715.4		349.8		7.3		3,057.9
Transportation	396.1		46.5		0.4		442.2
Total	$	14,008.0	$	1,648.7	$	26.4	$	15,630.3

2011
Communications	$	1,108.8	$	116.3	$	2.0	$	1,223.1
Financial	1,948.9		133.2		39.6		2,042.5
Industrial and other companies	6,577.6		559.0		20.7		7,115.9
Utilities	2,527.2		259.2		6.4		2,780.0
Transportation	356.9		31.9		0.8		388.0
Total	$	12,519.4	$	1,099.6	$	69.5	$	13,549.5

The Company invests in various categories of collateralized mortgage obligations ("CMOs"), including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of December 31, 2012 and 2011, approximately 41.8% and 41.1%, respectively, of the Company’s CMO holdings, such as interest-only or principal-only strips, were invested in those types of CMOs which are subject to more prepayment and extension risk than traditional CMOs.

Repurchase Agreements

As described in the Business, Basis of Presentation and Significant Accounting Policy note, the Company engages in dollar repurchase agreements with mortgage-backed securities ("dollar rolls") and repurchase agreements with other collateral types to increase its return on investments and improve liquidity. Such arrangements meet the requirements to be accounted for as financing arrangements. As of December 31, 2012 and 2011, the Company did not have any securities pledged in dollar rolls and repurchase agreement transactions.

The Company also enters into reverse repurchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. As of December 31, 2012 and 2011, the Company did not have any securities pledged under reverse repurchase agreements.

Securities Lending

As described in the Business, Basis of Presentation and Significant Accounting Policy note, the Company engages in securities lending whereby certain domestic securities from its portfolio are loaned to other institutions for short periods of time. As of December 31, 2012 and 2011, the fair value of loaned securities was $180.2 and $515.8, respectively and is included in Securities pledged on the Consolidated Balance Sheets. As of December 31, 2012 and 2011, collateral retained by the lending agent and invested in liquid assets on the Company's behalf was $186.1 and $524.8, respectively, and is recorded in Short-term investments under securities loan agreement, including collateral delivered. As of December 31, 2012 and 2011, liabilities to return collateral of $186.1 and $524.8, respectively, are included in Payables under securities loan agreement, including collateral held, on the Consolidated Balance Sheets.

Variable Interest Entities ("VIEs")

The Company holds certain VIEs for investment purposes. VIEs may be in the form of private placement securities, structured securities, securitization transactions, or limited partnerships. The Company has reviewed each of its holdings and determined that consolidation of these investments in the Company’s financial statements is not required, as the Company is not the primary beneficiary, because the Company does not have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation or right to potentially significant losses or benefits, for any of its investments in VIEs. The Company provided no non-contractual financial support and its carrying value represents the Company’s exposure to loss. The carrying value of the equity tranches of the collateralized loan obligations ("CLOs") of $1.3 and $0.9 as of December 31, 2012 and 2011, respectively, is included in Limited partnerships/corporations on the Consolidated Balance Sheets. Income and losses recognized on these investments are reported in Net investment income in the Consolidated Statements of Operations.

On June 4, 2012, the Company entered into an agreement to sell certain general account private equity limited partnership investment interest holdings with a carrying value of $331.9 as of March 31, 2012 to a group of private equity funds that are managed by Pomona Management LLC, an affiliate of the Company. The transaction resulted in a net pretax loss of $38.7 in the second quarter of 2012 reported in Net investment income on the Consolidated Statements of Operations. The transaction closed in two tranches with the first tranche closed on June 29, 2012 and the second tranche closed on October 29, 2012. Consideration received included $23.0 of promissory notes due in two equal installments at December 31, 2013 and 2014. In connection with these promissory notes, ING U.S., Inc. unconditionally guarantees payment of the notes in the event of any default of payments due. No additional loss was incurred on the second tranche since the fair value of the alternative investments was reduced to the agreed-upon sales price as of June 30, 2012.

Securitizations

The Company invests in various tranches of securitization entities, including Residential Mortgage-backed Securities ("RMBS"), Commercial Mortgage-backed Securities ("CMBS") and ABS. Through its investments, the Company is not obligated to provide any financial or other support to these entities. Each of the RMBS, CMBS and ABS entities are thinly capitalized by design and considered VIEs under ASC 810-10-25 as amended by ASU 2009-17. The Company's involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed to have the power to direct the activities that most significantly impact the securitization entities' economic performance, in any of these entities, nor does the Company function in any of these roles. The Company through its investments or other arrangements does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity. Therefore, the Company is not the primary beneficiary and does not consolidate any of the RMBS, CMBS and ABS entities in which it holds investments. These investments are accounted for as investments available-for-sale as described in the Business, Basis of Presentation and Significant Accounting Policies note to these Consolidated Financial Statements.

Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2012 and 2011:



	Six Months or Less Below Amortized Cost				More Than Six Months and Twelve Months or Less Below Amortized Cost				More Than Twelve Months Below Amortized Cost				Total
	Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses		Fair Value		Unrealized Capital Losses
2012
U.S. Treasuries	$	300.0	$	0.5	$	—	$	—	$	—	$	—	$	300.0	$	0.5
U.S. corporate, state and municipalities	479.8		6.8		22.5		0.9		49.4		3.4		551.7		11.1
Foreign	166.8		4.7		7.8		0.5		87.7		11.2		262.3		16.4
Residential mortgage-backed	68.7		1.6		7.2		0.3		132.4		16.2		208.3		18.1
Commercial mortgage-backed	7.5		0.1		1.6		—		2.5		0.1		11.6		0.2
Other asset-backed	15.6		—		—		—		34.2		6.7		49.8		6.7
Total	$	1,038.4	$	13.7	$	39.1	$	1.7	$	306.2	$	37.6	$	1,383.7	$	53.0

2011
U.S. Treasuries	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
U.S. corporate, state and municipalities	595.1		22.8		46.5		3.0		52.9		5.3		694.5		31.1
Foreign	435.3		19.1		49.9		4.6		169.5		17.8		654.7		41.5
Residential mortgage-backed	49.4		1.6		97.0		5.2		175.4		46.1		321.8		52.9
Commercial mortgage-backed	28.3		1.8		69.0		2.5		8.9		1.5		106.2		5.8
Other asset-backed	32.6		0.2		4.9		1.3		44.1		20.6		81.6		22.1
Total	$	1,140.7	$	45.5	$	267.3	$	16.6	$	450.8	$	91.3	$	1,858.8	$	153.4

Of the unrealized capital losses aged more than twelve months, the average fair value of the related fixed maturities was 89.1% and 83.2% of the average book value as of December 31, 2012 and 2011, respectively.

Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows as of December 31, 2012 and 2011:



	Amortized Cost				Unrealized Capital Losses				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%	> 20%
2012
Six months or less below amortized cost	$	1,110.8	$	15.2	$	19.3	$	3.9	141	10
More than six months and twelve months or less below amortized cost	49.5		1.5		2.6		0.4		31	2
More than twelve months below amortized cost	198.1		61.6		6.2		20.6		99	28
Total	$	1,358.4	$	78.3	$	28.1	$	24.9	271	40

2011
Six months or less below amortized cost	$	1,197.2	$	60.1	$	46.9	$	16.9	256	31
More than six months and twelve months or less below amortized cost	270.3		25.1		13.9		9.1		52	9
More than twelve months below amortized cost	355.6		103.9		26.7		39.9		129	37
Total	$	1,823.1	$	189.1	$	87.5	$	65.9	437	77

Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive months as indicated in the tables below, were as follows as of December 31, 2012 and 2011:



	Amortized Cost				Unrealized Capital Losses				Number of Securities
	< 20%		> 20%		< 20%		> 20%		< 20%	> 20%
2012
U.S. Treasuries	$	300.5	$	—	$	0.5	$	—	2	—
U.S. corporate, state and municipalities	558.1		4.7		9.1		2.0		82	2
Foreign	242.7		36.0		5.7		10.7		38	8
Residential mortgage-backed	201.2		25.2		10.2		7.9		124	24
Commercial mortgage-backed	11.8		—		0.2		—		8	—
Other asset-backed	44.1		12.4		2.4		4.3		17	6
Total	$	1,358.4	$	78.3	$	28.1	$	24.9	271	40

2011
U.S. Treasuries	$	—	$	—	$	—	$	—	—	—
U.S. corporate, state and municipalities	717.7		7.9		28.8		2.3		119	3
Foreign	670.5		25.7		31.9		9.6		122	7
Residential mortgage-backed	276.5		98.2		19.0		33.9		119	47
Commercial mortgage-backed	110.1		1.9		5.4		0.4		16	1
Other asset-backed	48.3		55.4		2.4		19.7		61	19
Total	$	1,823.1	$	189.1	$	87.5	$	65.9	437	77

All investments with fair values less than amortized cost are included in the Company's other-than-temporary impairments analysis and impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for other-than-temporary impairments each quarter based on actual and projected cash flows after considering the quality and updated loan-to-value ratios of underlying collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on a particular security within the trust will be dependent upon the trust structure. Where the assessment continues to project full recovery of principal and interest on schedule, the Company has not recorded an impairment. Unrealized losses on below investment grade securities are principally related to RMBS (primarily Alt-A RMBS) and ABS (primarily subprime RMBS) largely due to economic and market uncertainties including concerns over unemployment levels, lower interest rate environment on floating rate securities requiring higher risk premiums since purchase and valuations of residential real estate supporting non-agency RMBS. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary.

Fixed Maturity Securities Credit Quality - Ratings

The Securities Valuation Office ("SVO") of the National Association of Insurance Commissioners ("NAIC") evaluates the fixed maturity securities investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called "NAIC designations." An internally developed rating is used if no rating is available as permitted by the NAIC. These designations are generally similar to the credit quality designations of the NAIC acceptable rating organization ("ARO") for marketable fixed maturities, called "rating agency designations," except for certain structured securities as described below. NAIC designations of "1," highest quality and "2," high quality, include fixed maturity securities generally considered investment grade. NAIC designations "3" through "6" include fixed maturity securities generally considered below investment grade.

The NAIC designations for structured securities, including subprime and Alt-A RMBS, are based upon a comparison of the bond's amortized cost to the NAIC's loss expectation for each security. Securities where modeling results in no expected loss in all scenarios are considered to have the highest designation of NAIC 1. A large percentage of the Company's RMBS securities carry a NAIC 1 designation while the ARO rating indicates below investment grade. This is primarily due to the credit and intent impairments recorded by the Company which reduced the amortized cost on these securities to a level resulting in no expected loss in all scenarios, which corresponds to a NAIC 1 designation. The revised methodology reduces regulatory reliance on rating agencies and allows for greater regulatory input into the assumptions used to estimate expected losses from such structured securities. In the tables below, the Company presents the rating of structured securities based on ratings from the NAIC rating methodologies described above (which may not correspond to rating agency designations). All NAIC designations (e.g., NAIC 1-6) are based on the revised NAIC methodologies.

As a result of time lags between the funding of investments, the finalization of legal documents and the completion of the SVO filing process, the fixed maturity portfolio generally includes securities that have not yet been rated by the SVO as of each balance sheet date, such as private placements. Pending receipt of SVO ratings, the categorization of these securities by NAIC designation is based on the expected ratings indicated by internal analysis.

Information about certain of the Company's fixed maturity securities holdings, by NAIC designations is set forth in the following tables. Corresponding rating agency designation does not directly translate into NAIC designation, but represents the Company's best estimate of comparable ratings from rating agencies, including Moody's Investors Service ("Moody's"), Standard & Poor's ("S&P") and Fitch Ratings Ltd. ("Fitch"). If no rating is available from a rating agency, then an internally developed rating is used.

The fixed maturities in the Company's portfolio are generally rated by external rating agencies and, if not externally rated, are rated by the Company on a basis similar to that used by the rating agencies. Ratings are derived from three ARO ratings and are applied as follows based on the number of agency ratings received:

• when three ratings are received then the middle rating is applied;

• when two ratings are received then the lower rating is applied;

• when a single rating is received, the ARO rating is applied; and

• when ratings are unavailable then an internal rating is applied.

Subprime and Alt-A Mortgage Exposure

The Company does not originate or purchase subprime or Alt-A whole-loan mortgages. Subprime lending is the origination of loans to customers with weaker credit profiles. The Company defines Alt-A Loans to include the following: residential mortgage loans to customers who have strong credit profiles but lack some elements, such as documentation to substantiate income; residential mortgage loans to borrowers that would otherwise be classified as prime but whose loan structure provides repayment options to the borrower that increase the risk of default; and any securities backed by residential mortgage collateral not clearly identifiable as prime or subprime.

The Company's exposure to subprime mortgage backed securities is primarily in the form of ABS structures collateralized by subprime residential mortgages and the majority of these holdings are included in Other ABS in the "Fixed Maturities and Equity Securities" section above. As of December 31, 2012, the fair value and gross unrealized losses related to the Company's exposure to subprime mortgage backed securities was $61.2 and $6.2, respectively, representing 0.3% of total fixed maturities, including securities pledged, based on fair value. As of December 31, 2011, the fair value and gross unrealized losses related to the Company's exposure to subprime mortgage backed securities were $59.1 and $21.7, respectively, representing 0.3% of total fixed maturities, including securities pledged, based on fair value.

The following tables summarize the Company's exposure to subprime mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of December 31, 2012 and 2011:



	% of Total Subprime Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2012
	1	67.8	%	AAA	3.2	%	2007	8.0	%
	2	3.2	%	AA	—	%	2006	6.0	%
	3	19.6	%	A	16.2	%	2005 and prior	86.0	%
	4	8.7	%	BBB	21.5	%		100.0	%
	5	0.5	%	BB and below	59.1	%
	6	0.2	%		100.0	%
		100.0	%
2011
	1	75.8	%	AAA	7.5	%	2007	9.1	%
	2	5.3	%	AA	—	%	2006	4.5	%
	3	9.3	%	A	13.0	%	2005 and prior	86.4	%
	4	9.4	%	BBB	33.7	%		100.0	%
	5	—	%	BB and below	45.8	%
	6	0.2	%		100.0	%
		100.0	%

The Company's exposure to Alt-A mortgages is included in Residential mortgage-backed securities in the "Fixed Maturities and Equity Securities" section above. As of December 31, 2012, the fair value and gross unrealized losses related to the Company's exposure to Alt-A RMBS aggregated to $106.0 and $9.5, respectively, representing 0.5% of total fixed maturities, including securities pledged, based on fair value. As of December 31, 2011, the fair value and gross unrealized losses related to the Company's exposure to Alt-A RMBS aggregated to $111.4 and $19.6, respectively, representing 0.6% of total fixed maturities, including securities pledged, based on fair value.

The following tables summarize the Company's exposure to Alt-A residential mortgage-backed securities by credit quality using NAIC designations, ARO ratings and vintage year as of December 31, 2012 and 2011:



	% of Total Alt-A Mortgage-backed Securities
	NAIC Designation			ARO Ratings			Vintage
2012
	1	33.4	%	AAA	0.2	%	2007	13.8	%
	2	12.4	%	AA	1.4	%	2006	29.3	%
	3	21.0	%	A	3.4	%	2005 and prior	56.9	%
	4	30.3	%	BBB	5.6	%		100.0	%
	5	2.3	%	BB and below	89.4	%
	6	0.6	%		100.0	%
		100.0	%
2011
	1	39.9	%	AAA	0.3	%	2007	12.0	%
	2	14.9	%	AA	3.1	%	2006	28.3	%
	3	14.7	%	A	13.1	%	2005 and prior	59.7	%
	4	21.1	%	BBB	4.6	%		100.0	%
	5	4.7	%	BB and below	78.9	%
	6	4.7	%		100.0	%
		100.0	%

Commercial Mortgage-backed and Other Asset-backed Securities

As of December 31, 2012 and 2011, the fair value of the Company's CMBS totaled $839.1 and $911.3, respectively and Other ABS, excluding subprime exposure, totaled $435.6 and $381.0, respectively. As of December 31, 2012 and 2011, the gross unrealized losses related to CMBS totaled $0.2 and $5.8, respectively and gross unrealized losses related to Other ABS, excluding subprime exposure, totaled $0.6 and $0.7, respectively. CMBS investments represent pools of commercial mortgages that are broadly diversified across property types and geographical areas.

The following tables summarize the Company's exposure to CMBS holdings by credit quality using NAIC designations, ARO ratings and vintage year as of December 31, 2012 and 2011:



	% of Total CMBS
	NAIC Designation			ARO Ratings			Vintage
2012
	1	99.9	%	AAA	54.1	%	2007	28.7	%
	2	—	%	AA	17.1	%	2006	20.4	%
	3	0.1	%	A	8.4	%	2005 and prior	50.9	%
	4	—	%	BBB	5.3	%		100.0	%
	5	—	%	BB and below	15.1	%
	6	—	%		100.0	%
		100.0	%
2011
	1	97.4	%	AAA	63.7	%	2007	23.4	%
	2	0.9	%	AA	1.4	%	2006	18.2	%
	3	0.7	%	A	21.1	%	2005 and prior	58.4	%
	4	1.0	%	BBB	4.0	%		100.0	%
	5	—	%	BB and below	9.8	%
	6	—	%		100.0	%
		100.0	%

As of December 31, 2012, Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated collateralized loan obligations and automobile receivables, comprising 47.0%, 5.6% and 26.9%, respectively, of total Other ABS, excluding subprime exposure. As of December 31, 2011, Other ABS was also broadly diversified both by type and issuer with credit card receivables, nonconsolidated collateralized loan obligations and automobile receivables, comprising 49.3%, 5.5% and 17.2%, respectively, of total Other ABS, excluding subprime exposure.

The following tables summarize the Company's exposure to Other ABS holdings, excluding subprime exposure, by credit quality using NAIC designations, ARO ratings and vintage year as of December 31, 2012 and 2011:



	% of Total Other ABS
	NAIC Designation			ARO Ratings			Vintage
2012
	1	98.3	%	AAA	88.4	%	2012	21.4	%
	2	1.6	%	AA	1.9	%	2011	12.2	%
	3	0.1	%	A	8.0	%	2010	5.7	%
	4	—	%	BBB	1.6	%	2009	0.3	%
	5	—	%	BB and below	0.1	%	2008	9.5	%
	6	—	%		100.0	%	2007	22.9	%
		100.0	%				2006	6.1	%
							2005 and prior	21.9	%
								100.0	%
2011
	1	95.0	%	AAA	82.7	%	2011	14.3	%
	2	4.7	%	AA	1.2	%	2010	7.3	%
	3	—	%	A	8.4	%	2009	0.4	%
	4	0.3	%	BBB	7.4	%	2008	11.7	%
	5	—	%	BB and below	0.3	%	2007	30.3	%
	6	—	%		100.0	%	2006	6.8	%
		100.0	%				2005 and prior	29.2	%
								100.0	%

Troubled Debt Restructuring

The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructure when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of December 31, 2012, the Company did not have any troubled debt restructurings. For the year ended December 31, 2011, the Company had one private placement troubled debt restructuring with a pre-modification and post-modification carrying value of $13.0 and $12.9, respectively.

As of December 31, 2012 and 2011, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default.

Mortgage Loans on Real Estate

The Company's mortgage loans on real estate are all commercial mortgage loans, which are reported at amortized cost, less impairment write-downs and allowance for losses.

The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates all mortgage loans based on relevant current information including an appraisal of loan-specific credit quality, property characteristics and market trends. Loan performance is monitored on a loan-specific basis through the review of submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt.

The following table summarizes the Company’s investment in mortgage loans as of December 31, 2012 and 2011:



	2012			2011
Commercial mortgage loans	$	2,874.0		$	2,374.8
Collective valuation allowance	(1.3		)	(1.3		)
Total net commercial mortgage loans	$	2,872.7		$	2,373.5

There were no impairments taken on the mortgage loan portfolio for the years ended December 31, 2012 and 2011.

The following table summarizes the activity in the allowance for losses for all commercial mortgage loans as of December 31, 2012 and 2011:



	2012		2011
Collective valuation allowance for losses, beginning of period	$	1.3	$	1.3
Addition to (reduction of) allowance for losses	—		—
Collective valuation allowance for losses, end of period	$	1.3	$	1.3

The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of December 31, 2012 and 2011:



	2012		2011
Impaired loans with allowances for losses	$	—	$	—
Impaired loans without allowances for losses	5.6		5.8
Subtotal	5.6		5.8
Less: Allowances for losses on impaired loans	—		—
Impaired loans, net	$	5.6	$	5.8
Unpaid principal balance of impaired loans	$	7.1	$	7.3

The following table presents information on impaired loans as of December 31, 2012 and 2011:



	2012		2011
Impaired loans, average investment during the period	$	5.7	$	7.7

There were no mortgage loans in the Company's portfolio in process of foreclosure as of December 31, 2012 and 2011. There were no other loans in arrears with respect to principal and interest as of December 31, 2012 and 2011.

The following table presents information on interest income recognized on impaired and restructured loans for the years ended December 31, 2012, 2011 and 2010:



	2012		2011		2010
Interest income recognized on impaired loans, on an accrual basis	$	0.4	$	0.6	$	0.9
Interest income recognized on impaired loans, on a cash basis	0.4		0.6		1.0

Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.0 indicates that property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above.

The following table presents the LTV ratios as of December 31, 2012 and 2011:



	2012⁽¹⁾		2011⁽¹⁾
Loan-to-Value Ratio:
0% - 50%	$	501.3	$	552.4
50% - 60%	768.9		771.5
60% - 70%	1,491.6		908.2
70% - 80%	96.4		125.2
80% and above	15.8		17.5
Total Commercial mortgage loans	$	2,874.0	$	2,374.8