Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, 2015:



	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	748.8	$	61.8	$	—	$	810.6
U.S. Government agencies and authorities	—		46.2		—		46.2
State, municipalities and political subdivisions	—		325.1		—		325.1
U.S. corporate securities	—		11,264.4		386.5		11,650.9
Foreign⁽¹⁾	—		5,659.4		182.4		5,841.8
Residential mortgage-backed securities	—		2,028.4		23.0		2,051.4
Commercial mortgage-backed securities	—		1,146.2		—		1,146.2
Other asset-backed securities	—		347.8		2.1		349.9
Total fixed maturities, including securities pledged	748.8		20,879.3		594.0		22,222.1
Equity securities, available-for-sale	85.6		—		38.0		123.6
Derivatives:
Interest rate contracts	—		625.3		—		625.3
Foreign exchange contracts	—		26.0		—		26.0
Credit contracts	—		6.0		—		6.0
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	793.3		53.9		1.5		848.7
Assets held in separate accounts	58,952.1		5,266.0		0.7		64,218.8
Total assets	$	60,579.8	$	26,856.5	$	634.2	$	88,070.5
Liabilities:
Derivatives:
Annuity product guarantees:
FIA	$	—	$	—	$	27.5	$	27.5
Stabilizer and MCGs	—		—		148.1		148.1
Other derivatives:
Interest rate contracts	—		287.8		—		287.8
Foreign exchange contracts	—		10.9		—		10.9
Equity contracts	0.1		—		—		0.1
Embedded derivative on reinsurance	—		1.0		—		1.0
Total liabilities	$	0.1	$	299.7	$	175.6	$	475.4

⁽¹⁾Primarily U.S. dollar denominated.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:



	Level 1		Level 2			Level 3		Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	712.9	$	60.2		$	—	$	773.1
U.S. Government agencies and authorities	—		46.6			—		46.6
State, municipalities and political subdivisions	—		277.2			—		277.2
U.S. corporate securities	—		10,845.2			374.8		11,220.0
Foreign⁽¹⁾	—		5,612.2			165.7		5,777.9
Residential mortgage-backed securities	—		2,026.1			17.3		2,043.4
Commercial mortgage-backed securities	—		1,059.0			19.0		1,078.0
Other asset-backed securities	—		398.0			2.4		400.4
Total fixed maturities, including securities pledged	712.9		20,324.5			579.2		21,616.6
Equity securities, available-for-sale	85.3		—			36.6		121.9
Derivatives:
Interest rate contracts	—		537.2			—		537.2
Foreign exchange contracts	—		18.3			—		18.3
Credit contracts	—		6.5			—		6.5
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,046.6		—			1.5		1,048.1
Assets held in separate accounts	57,492.6		5,313.1			2.4		62,808.1
Total assets	$	59,337.4	$	26,199.6		$	619.7	$	86,156.7
Liabilities:
Derivatives:
Annuity product guarantees:
FIA	$	—	$	—		$	26.3	$	26.3
Stabilizer and MCGs	—		—			102.9		102.9
Other derivatives:
Interest rate contracts	—		209.2			—		209.2
Foreign exchange contracts	—		7.7			—		7.7
Equity contracts	0.1		—			—		0.1
Embedded derivative on reinsurance	—		(13.0		)	—		(13.0		)
Total liabilities	$	0.1	$	203.9		$	129.2	$	333.2

⁽¹⁾Primarily U.S. dollar denominated.

Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the three months ended March 31, 2015:



	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales		Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of March 31			Change in Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Government agencies and authorities	$	—		$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	—		$	—		$	—
U.S. corporate securities	374.8			—			2.5			47.1		—			—		(37.9		)	—		—			386.5			—
Foreign⁽¹⁾	165.7			0.2			1.4			3.0		—			—		(4.0		)	16.1		—			182.4			—
Residential mortgage-backed securities	17.3			(0.6		)	(0.4		)	—		—			—		—			6.7		—			23.0			(0.6		)
Commercial mortgage-backed securities	19.0			—			—			—		—			—		—			—		(19.0		)	—			—
Other asset-backed securities	2.4			—			—			—		—			—		(0.3		)	—		—			2.1			—
Total fixed maturities, including securities pledged	579.2			(0.4		)	3.5			50.1		—			—		(42.2		)	22.8		(19.0		)	594.0			(0.6		)
Equity securities, available-for-sale	36.6			—			1.4			—		—			—		—			—		—			38.0			—
Derivatives:
Product guarantees:
Stabilizer and MCGs⁽²⁾	(102.9		)	(44.1		)	—			—		(1.1		)	—		—			—		—			(148.1		)	—
FIA⁽²⁾	(26.3		)	(1.4		)	—			—		—			—		0.2			—		—			(27.5		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreement	1.5			—			—			—		—			—		—			—		—			1.5			—
Assets held in separate accounts⁽⁵⁾	2.4			—			—			—		—			—		—			—		(1.7		)	0.7			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of March 31, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

The following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the three months ended March 31, 2014:

	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of March 31			Change in Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. government agencies and authorities	$	5.1		$	—		$	—		$	—	$	—		$	—		$	(0.1	)	$	—	$	(2.5	)	$	2.5		$	—
U.S. corporate securities	145.3			—			1.9			38.2		—			—			(2.0		)	—		—			183.4			—
Foreign⁽¹⁾	42.8			—			0.9			—		—			—			—			—		(8.9		)	34.8			—
Residential mortgage-backed securities	23.7			(0.4		)	(0.1		)	—		—			—			—			—		(0.1		)	23.1			(0.4		)
Commercial mortgage-backed securities	—			—			—			14.0		—			—			—			—		—			14.0			—
Other asset-backed securities	17.7			0.8			(0.5		)	—		—			—			(6.9		)	—		—			11.1			0.2
Total fixed maturities, including securities pledged	234.6			0.4			2.2			52.2		—			—			(9.0		)	—		(11.5		)	268.9			(0.2		)
Equity securities, available-for-sale	35.9			—			1.3			—		—			—			—			—		—			37.2			—
Derivatives:
Product guarantees:
Stabilizer and MCGs(2)	—			(16.8		)	—			—		(1.2		)	—			—			—		—			(18.0		)	—
FIA(2)	(23.1		)	(1.0		)	—			—		(0.2		)	—			—			—		—			(24.3		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreement	—			—			—			—		—			—			—			—		—			—			—
Assets held in separate accounts⁽⁵⁾	13.1			—			—			5.8		—			(1.0		)	—			—		—			17.9			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of March 31, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

Fair Value Inputs, Liabilities, Quantitative Information

The following table presents the unobservable inputs for Level 3 fair value measurements as of March 31, 2015:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.2% to 7.8%
Nonperformance risk	0.14% to 1.1%		0.14% to 1.1%
Actuarial Assumptions:
Partial Withdrawals	0.4% to 3.2%		—
Lapses	0% to 45%	⁽²⁾	0% to 50%	⁽³⁾
Policyholder Deposits⁽⁴⁾	—		0% to 65%	⁽³⁾

⁽¹⁾ Represents the range of reasonable assumptions that management has used in its fair value calculations.

⁽²⁾ Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period.

⁽³⁾ Stabilizer contracts with recordkeeping agreements have different range of lapse and policyholder deposit assumptions from Stabilizer (Investment only) and MCG contracts as shown below:



	Percentage of Plans		Overall Range of Lapse Rates	Range of Lapse Rates for 85% of Plans	Overall Range of Policyholder Deposits	Range of Policyholder Deposits for 85% of Plans
Stabilizer (Investment Only) and MCG Contracts	88	%	0-25%	0-15%	0-35%	0-15%
Stabilizer with Recordkeeping Agreements	12	%	0-50%	0-25%	0-65%	0-30%
Aggregate of all plans	100	%	0-50%	0-25%	0-65%	0-30%

⁽⁴⁾ Measured as a percentage of assets under management or assets under administration.

The following table presents the unobservable inputs for Level 3 fair value measurements as of December 31, 2014:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.2% to 7.6%
Nonperformance risk	0.13% to 1.1%		0.13% to 1.1%
Actuarial Assumptions:
Partial Withdrawals	0.4% to 3.2%		—
Lapses	0% to 45%	⁽²⁾	0% to 50%	⁽³⁾
Policyholder Deposits⁽⁴⁾	—		0% to 65%	⁽³⁾

⁽¹⁾ Represents the range of reasonable assumptions that management has used in its fair value calculations.

⁽³⁾ Stabilizer contracts with recordkeeping agreements have different range of lapse and policyholder deposit assumptions from Stabilizer (Investment only) and MCG contracts as shown below:



	Percentage of Plans		Overall Range of Lapse Rates	Range of Lapse Rates for 85% of Plans	Overall Range of Policyholder Deposits	Range of Policyholder Deposits for 85% of Plans
Stabilizer (Investment Only) and MCG Contracts	87	%	0-30%	0-15%	0-45%	0-15%
Stabilizer with Recordkeeping Agreements	13	%	0-50%	0-25%	0-65%	0-25%
Aggregate of all plans	100	%	0-50%	0-25%	0-65%	0-25%

⁽⁴⁾ Measured as a percentage of assets under management or assets under administration.

Fair Value, by Balance Sheet Grouping

The carrying values and estimated fair values of the Company’s financial instruments as of the dates indicated:



	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value			Fair Value
Assets:
Fixed maturities, including securities pledged	$	22,222.1	$	22,222.1	$	21,616.6		$	21,616.6
Equity securities, available-for-sale	123.6		123.6		121.9			121.9
Mortgage loans on real estate	3,665.1		3,818.4		3,513.0			3,680.6
Policy loans	234.8		234.8		239.1			239.1
Limited partnerships/corporations	256.4		256.4		248.4			248.4
Cash, cash equivalents, short-term investments and short-term investments under securities loan agreements	848.7		848.7		1,048.1			1,048.1
Derivatives	657.3		657.3		562.0			562.0
Notes receivable from affiliate	175.0		224.3		175.0			216.7
Short-term loan to affiliate	150.2		150.2		—			—
Assets held in separate accounts	64,218.8		64,218.8		62,808.1			62,808.1
Liabilities:
Investment contract liabilities:
Funding agreements without fixed maturities and deferred annuities⁽¹⁾	21,799.5		27,007.2		21,503.3			26,023.3
Supplementary contracts, immediate annuities and other	430.0		525.8		442.4			546.3
Derivatives:
Annuity product guarantees:
FIA	27.5		27.5		26.3			26.3
Stabilizer and MCGs	148.1		148.1		102.9			102.9
Other derivatives	298.8		298.8		217.0			217.0
Long-term debt	4.9		4.9		4.9			4.9
Embedded derivatives on reinsurance	1.0		1.0		(13.0		)	(13.0		)

⁽¹⁾ Certain amounts included in Funding agreements without fixed maturities and deferred annuities are also reflected within the Annuity product guarantees section of the table above.

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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