Investing Activities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Fair Value and Cost of Securities

We classify these investments into various sectors in line with industry conventions.

Fair Value and Cost of Securities:	September 30, 2013
($ in millions)	Amortized Cost		Gross Unrealized Gains [1]		Gross Unrealized Losses [1]			Fair Value		OTTI Recognized in AOCI [2]
U.S. government and agency	$	69.6	$	3.7	$	(0.8	)	$	72.5	$	—
State and political subdivision	143.3		5.8		(4.8		)	144.3		(0.2		)
Foreign government	56.4		3.0		(0.2		)	59.2		—
Corporate	2,096.6		78.4		(51.9		)	2,123.1		(1.5		)
Commercial mortgage-backed (“CMBS”)	241.9		13.9		(1.5		)	254.3		(0.5		)
Residential mortgage-backed (“RMBS”)	431.0		10.1		(8.5		)	432.6		(8.5		)
CDO/CLO	66.4		1.7		(1.4		)	66.7		(3.0		)
Other asset-backed	102.0		3.7		(6.3		)	99.4		—
Available-for-sale debt securities	$	3,207.2	$	120.3	$	(75.4	)	$	3,252.1	$	(13.7	)

———————

[1] Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our balance sheets as a component of AOCI.

[2] Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment. The table above presents the special category of AOCI for debt securities that are other-than-temporarily impaired when the impairment loss has been split between the credit loss component (in earnings) and the non-credit component.

Fair Value and Cost of Securities:	December 31, 2012
($ in millions)	Amortized Cost		Gross Unrealized Gains [1]		Gross Unrealized Losses [1]			Fair Value		OTTI Recognized in AOCI [2]
U.S. government and agency	$	35.8	$	4.8	$	(0.4	)	$	40.2	$	—
State and political subdivision	120.5		10.9		(0.5		)	130.9		(0.2		)
Foreign government	44.4		7.4		—			51.8		—
Corporate	1,776.9		144.6		(24.0		)	1,897.5		(1.5		)
CMBS	229.6		26.0		(1.6		)	254.0		(0.6		)
RMBS	412.6		17.5		(7.6		)	422.5		(9.0		)
CDO/CLO	59.2		1.8		(4.2		)	56.8		(3.3		)
Other asset-backed	119.1		6.0		(6.5		)	118.6		—
Available-for-sale debt securities	$	2,798.1	$	219.0	$	(44.8	)	$	2,972.3	$	(14.6	)

———————

[1] Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our balance sheets as a component of AOCI.

[2] Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment. The table above presents the special category of AOCI for debt securities that are other-than-temporarily impaired when the impairment loss has been split between the credit loss component (in earnings) and the non-credit component.

Maturities of debt securities

Maturities of Debt Securities:	September 30, 2013
($ in millions)	Amortized Cost		Fair Value
Due in one year or less	$	26.4	$	26.9
Due after one year through five years	164.8		175.2
Due after five years through ten years	316.0		325.8
Due after ten years	1,858.7		1,871.2
CMBS/RMBS/ABS/CDO/CLO [1]	841.3		853.0
Total	$	3,207.2	$	3,252.1

———————

[1] CMBS, RMBS, ABS, CDO and CLO are not listed separately in the table as each security does not have a single fixed maturity.

Sales of Available-for-Sale Securities

The following table depicts the sources of available-for-sale investment proceeds and related investment gains (losses).

Sales of Available-for-Sale Securities:
($ in millions)	September 30, 2013			December 31, 2012
Debt securities, available-for-sale
Proceeds from sales	$	50.4		$	160.0
Proceeds from maturities/repayments	213.7			285.3
Gross investment gains from sales, prepayments and maturities	8.6			22.8
Gross investment losses from sales and maturities	(0.3		)	(0.7		)

	As of
Aging of Temporarily Impaired	September 30, 2013
Debt Securities:	Less than 12 months					Greater than 12 months					Total
($ in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Debt Securities
U.S. government and agency	$	13.6	$	(0.4	)	$	3.5	$	(0.4	)	$	17.1	$	(0.8	)
State and political subdivision	48.9		(3.9		)	4.2		(0.9		)	53.1		(4.8		)
Foreign government	17.3		(0.2		)	—		—			17.3		(0.2		)
Corporate	773.8		(33.6		)	71.7		(18.3		)	845.5		(51.9		)
CMBS	31.2		(1.1		)	5.4		(0.4		)	36.6		(1.5		)
RMBS	121.1		(5.1		)	39.9		(3.4		)	161.0		(8.5		)
CDO/CLO	16.1		(0.2		)	24.7		(1.2		)	40.8		(1.4		)
Other asset-backed	12.5		(0.6		)	6.2		(5.7		)	18.7		(6.3		)
Total temporarily impaired   securities	$	1,034.5	$	(45.1	)	$	155.6	$	(30.3	)	$	1,190.1	$	(75.4	)
Below investment grade	$	40.8	$	(2.2	)	$	27.5	$	(9.1	)	$	68.3	$	(11.3	)
Number of securities			284					69					353

Aging of Temporarily Impaired Securities

Aging of Temporarily Impaired	December 31, 2012
Debt Securities:	Less than 12 months					Greater than 12 months					Total
($ in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Debt Securities
U.S. government and agency	$	—	$	—		$	3.5	(0.4		)	$	3.5	$	(0.4	)
State and political subdivision	4.8		(0.3		)	1.0		(0.2		)	5.8		(0.5		)
Foreign government	—		—			—		—			—		—
Corporate	114.5		(1.7		)	64.7		(22.3		)	179.2		(24.0		)
CMBS	0.7		(0.1		)	10.6		(1.5		)	11.3		(1.6		)
RMBS	24.1		(0.2		)	52.6		(7.4		)	76.7		(7.6		)
CDO/CLO	—		—			39.0		(4.2		)	39.0		(4.2		)
Other asset-backed	0.9		—			10.7		(6.5		)	11.6		(6.5		)
Total temporarily impaired   securities	$	145.0	$	(2.3	)	$	182.1	$	(42.5	)	$	327.1	$	(44.8	)
Below investment grade	$	7.8	$	(0.5	)	$	63.4	$	(25.4	)	$	71.2	$	(25.9	)
Number of securities			48					89					137

Credit Losses Recognized in Earnings on Debt Securities

The following table presents a roll-forward of pre-tax credit losses recognized in earnings related to debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Debt Securities for	Three Months Ended						Nine Months Ended
which a Portion of the OTTI Loss was Recognized in OCI:	September 30,						September 30,
($ in millions)	2013			2012			2013			2012
Balance, beginning of period	$	(18.5	)	$	(20.0	)	$	(17.8	)	$	(21.3	)
Add: Credit losses on securities not previously impaired [1]	—			(0.2		)	—			(0.5		)
Add: Credit losses on securities previously impaired [1]	—			(0.4		)	(0.7		)	(1.4		)
Less: Credit losses on securities impaired due to intent to sell	—			—			—			—
Less: Credit losses on securities sold	0.3			1.0			0.3			3.6
Less: Increases in cash flows expected on     previously impaired securities	—			—			—			—
Balance, end of period	$	(18.2	)	$	(19.6	)	$	(18.2	)	$	(19.6	)

———————

[1] Additional credit losses on securities for which a portion of the OTTI loss was recognized in AOCI are included within net OTTI losses recognized in earnings on the statements of income and comprehensive income.

Sources of Net Investment Income

Sources of Net Investment Income:	Three Months Ended				Nine Months Ended
($ in millions)	September 30,				September 30,
	2013		2012		2013		2012
Debt securities [1]	$	34.7	$	31.7	$	99.3	$	92.7
Policy loans	0.7		0.7		2.2		2.3
Limited partnerships and other investments	0.3		0.8		1.6		1.8
Fair value investments	0.9		0.4		1.5		0.6
Total investment income	36.6		33.6		104.6		97.4
Less: Investment expenses	0.3		0.3		1.2		0.9
Net investment income	$	36.3	$	33.3	$	103.4	$	96.5

———————

[1] Includes net investment income on short-term investments.

Sources and Types of Net Realized Investment Gains (Losses)

Sources and Types of	Three Months Ended						Nine Months Ended
Net Realized Investment Gains (Losses):	September 30,						September 30,
($ in millions)	2013			2012			2013			2012
Total other-than-temporary debt impairments	$	(0.2	)	$	(0.7	)	$	(0.5	)	$	(4.4	)
Portion of loss recognized in OCI	—			(0.3		)	(0.9		)	1.8
Net debt impairments recognized in earnings	$	(0.2	)	$	(1.0	)	$	(1.4	)	$	(2.6	)
Debt security impairments:
U.S. government and agency	$	—		$	—		$	—		$	—
State and political subdivision	—			—			—			—
Foreign government	—			—			—			—
Corporate	—			—			—			—
CMBS	—			—			(0.2		)	(0.1		)
RMBS	(0.2		)	(0.8		)	(1.0		)	(2.1		)
CDO/CLO	—			(0.1		)	(0.2		)	(0.1		)
Other asset-backed	—			(0.1		)	—			(0.3		)
Net debt security impairments	(0.2		)	(1.0		)	(1.4		)	(2.6		)
Equity security impairments	—			—			—			—
Impairment losses	(0.2		)	(1.0		)	(1.4		)	(2.6		)
Debt security transaction gains	3.0			20.8			8.6			21.4
Debt security transaction losses	—			(0.1		)	(0.3		)	(0.2		)
Limited partnerships and other investment gains	—			—			—			—
Limited partnerships and other investment losses	—			(0.3		)	—			(0.4		)
Net transaction gains (losses)	3.0			20.4			8.3			20.8
Derivative instruments	(14.0		)	(18.0		)	(30.1		)	(33.5		)
Embedded derivatives [1]	8.4			6.6			13.7			6.1
Related party reinsurance derivatives	—			(4.2		)	—			(3.5		)
Net realized investment gains (losses),   excluding impairment losses	$	(2.6	)	$	4.8		$	(8.1	)	$	(10.1	)
Net realized investment gains (losses),   including impairment losses	$	(2.8	)	$	3.8		$	(9.5	)	$	(12.7	)

———————

[1] Includes the change in fair value of embedded derivatives associated with fixed index annuity indexed crediting feature and variable annuity GMWB, GMAB and COMBO riders. See Note 7 to these financial statements for additional disclosures.

Sources of Changes in Net Unrealized Investment Gains (Losses)

Sources of Changes in	Three Months Ended						Nine Months Ended
Net Unrealized Investment Gains (Losses):	September 30,						September 30,
($ in millions)	2013			2012			2013			2012
Debt securities	$	(3.1	)	$	51.0		$	(129.3	)	$	112.5
Equity securities	—			—			—			—
Other investments	(0.2		)	—			(0.1		)	—
Net unrealized investment gains (losses)	$	(3.3	)	$	51.0		$	(129.4	)	$	112.5
Net unrealized investment gains (losses)	$	(3.3	)	$	51.0		$	(129.4	)	$	112.5
Applicable to DAC	(1.6		)	(5.8		)	(45.5		)	25.6
Applicable to other actuarial offsets	(11.6		)	54.8			(68.4		)	68.2
Applicable to deferred income tax expense (benefit)	(0.3		)	7.1			(9.7		)	17.1
Offsets to net unrealized investment gains (losses)	(13.5		)	56.1			(123.6		)	110.9
Net unrealized investment gains (losses) included in OCI	$	10.2		$	(5.1	)	$	(5.8	)	$	1.6