Investing Activities (Tables)

3 Months Ended

Mar. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Fair Value and Cost of Securities

The following tables present the debt securities available-for-sale by sector held at March 31, 2014 and December 31, 2013, respectively. The unrealized loss amounts presented below include the non-credit loss component of OTTI losses. We classify these investments into various sectors in line with industry conventions.

Fair Value and Cost of Securities:	March 31, 2014
($ in millions)	Amortized Cost		Gross Unrealized Gains [1]		Gross Unrealized Losses [1]			Fair Value		OTTI Recognized in AOCI [2]
U.S. government and agency	$	71.3	$	4.1	$	(0.3	)	$	75.1	$	—
State and political subdivision	160.0		5.9		(3.4		)	162.5		(0.2		)
Foreign government	64.8		3.6		(0.1		)	68.3		—
Corporate	2,291.7		92.0		(34.8		)	2,348.9		(1.5		)
Commercial mortgage-backed (“CMBS”)	241.8		16.3		(0.5		)	257.6		(0.4		)
Residential mortgage-backed (“RMBS”)	500.5		10.8		(8.7		)	502.6		(8.6		)
Collateralized debt obligation (“CDO”) /   collateralized loan obligation (“CLO”)	85.5		1.9		(1.2		)	86.2		(2.7		)
Other asset-backed	87.6		3.9		(3.6		)	87.9		—
Available-for-sale debt securities	$	3,503.2	$	138.5	$	(52.6	)	$	3,589.1	$	(13.4	)

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[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 (separate category of AOCI).

Fair Value and Cost of Securities:	December 31, 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	$	66.1	$	3.3	$	(0.8	)	$	68.6	$	—
State and political subdivision	156.2		3.8		(5.4		)	154.6		(0.2		)
Foreign government	63.1		2.7		(0.3		)	65.5		—
Corporate	2,194.9		69.5		(57.1		)	2,207.3		(1.5		)
CMBS	241.9		13.0		(1.2		)	253.7		(0.4		)
RMBS	513.7		7.9		(11.8		)	509.8		(8.6		)
CDO/CLO	70.6		1.7		(1.4		)	70.9		(3.0		)
Other asset-backed	96.1		3.7		(3.9		)	95.9		—
Available-for-sale debt securities	$	3,402.6	$	105.6	$	(81.9	)	$	3,426.3	$	(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 (separate category of AOCI).

Maturities of debt securities

Maturities of Debt Securities:	March 31, 2014
($ in millions)	Amortized Cost		Fair Value
Due in one year or less	$	107.6	$	111.1
Due after one year through five years	437.2		465.2
Due after five years through ten years	1,306.5		1,330.7
Due after ten years	736.5		747.8
CMBS/RMBS/ABS/CDO/CLO [1]	915.4		934.3
Total	$	3,503.2	$	3,589.1

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[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)	Three Months Ended   March 31,
	2014			2013
Debt securities, available-for-sale
Proceeds from sales	$	5.4		$	0.2
Proceeds from maturities/repayments	54.1			57.1
Gross investment gains from sales, prepayments and maturities	2.1			5.2
Gross investment losses from sales and maturities	(0.7		)	(0.1		)

Aging of Temporarily Impaired	March 31, 2014
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	$	13.4	$	(0.3	)	$	—	$	—		$	13.4	$	(0.3	)
State and political subdivision	47.3		(2.5		)	4.1		(0.9		)	51.4		(3.4		)
Foreign government	12.6		(0.1		)	—		—			12.6		(0.1		)
Corporate	516.8		(15.3		)	192.9		(19.5		)	709.7		(34.8		)
CMBS	9.5		(0.5		)	0.7		—			10.2		(0.5		)
RMBS	135.0		(5.4		)	37.6		(3.3		)	172.6		(8.7		)
CDO/CLO	32.1		(0.3		)	25.4		(0.9		)	57.5		(1.2		)
Other asset-backed	—		—			8.2		(3.6		)	8.2		(3.6		)
Total temporarily impaired   securities	$	766.7	$	(24.4	)	$	268.9	$	(28.2	)	$	1,035.6	$	(52.6	)
Below investment grade	$	15.4	$	(0.6	)	$	10.4	$	(1.4	)	$	25.8	$	(2.0	)
Number of securities			206					94					300

Aging of Temporarily Impaired Securities

Aging of Temporarily Impaired	December 31, 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	$	14.5	$	(0.8	)	$	—	$	—		$	14.5	$	(0.8	)
State and political subdivision	65.3		(4.4		)	4.0		(1.0		)	69.3		(5.4		)
Foreign government	17.0		(0.3		)	—		—			17.0		(0.3		)
Corporate	806.5		(38.3		)	120.5		(18.8		)	927.0		(57.1		)
CMBS	39.4		(1.1		)	3.0		(0.1		)	42.4		(1.2		)
RMBS	243.5		(8.5		)	40.3		(3.3		)	283.8		(11.8		)
CDO/CLO	30.5		(0.3		)	24.1		(1.1		)	54.6		(1.4		)
Other asset-backed	7.9		(0.1		)	8.0		(3.8		)	15.9		(3.9		)
Total temporarily impaired   securities	$	1,224.6	$	(53.8	)	$	199.9	$	(28.1	)	$	1,424.5	$	(81.9	)
Below investment grade	$	33.7	$	(1.9	)	$	12.1	$	(1.7	)	$	45.8	$	(3.6	)
Number of securities			325					79					404

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 available-for-sale debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Available-for-Sale Debt Securities	Three Months Ended
for which a Portion of the OTTI Loss was Recognized in OCI:	March 31,
($ in millions)	2014			2013
Balance, beginning of period	$	(18.6	)	$	(17.8	)
Add: Credit losses on securities not previously impaired [1]	—			—
Add: Credit losses on securities previously impaired [1]	—			(0.6		)
Less: Credit losses on securities impaired due to intent to sell	—			—
Less: Credit losses on securities sold	0.7			—
Less: Increases in cash flows expected on previously impaired securities	—			—
Balance, end of period	$	(17.9	)	$	(18.4	)

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[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
($ in millions)	March 31,
	2014		2013
Debt securities [1]	$	37.8	$	31.9
Limited partnerships and other investments	1.2		0.7
Policy loans	0.8		0.7
Fair value investments	0.8		0.3
Total investment income	40.6		33.6
Less: Investment expenses	0.6		0.6
Net investment income	$	40.0	$	33.0

———————

[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
Net Realized Investment Gains (Losses):	March 31,
($ in millions)	2014			2013
Total other-than-temporary debt impairments	$	—		$	(0.3	)
Portion of gains (losses) recognized in OCI	—			(0.7		)
Net debt impairments recognized in earnings	$	—		$	(1.0	)
Debt security impairments:
U.S. government and agency	$	—		$	—
State and political subdivision	—			—
Foreign government	—			—
Corporate	—			—
CMBS	—			(0.1		)
RMBS	—			(0.7		)
CDO/CLO	—			(0.2		)
Other asset-backed	—			—
Net debt security impairments	—			(1.0		)
Limited partnerships and other investment impairments	—			—
Impairment losses	—			(1.0		)
Debt security transaction gains	2.1			5.2
Debt security transaction losses	(0.7		)	(0.1		)
Limited partnerships and other investment transaction gains	—			—
Limited partnerships and other investment transaction losses	—			—
Net transaction gains (losses)	1.4			5.1
Derivative instruments	(23.6		)	(20.9		)
Embedded derivatives [1]	(11.7		)	(0.6		)
Net realized investment gains (losses), excluding impairment losses	$	(33.9	)	$	(16.4	)
Net realized investment gains (losses), including impairment losses	$	(33.9	)	$	(17.4	)

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

Sources of Changes in Net Unrealized Investment Gains (Losses)

Sources of Changes in	Three Months Ended
Net Unrealized Investment Gains (Losses):	March 31,
($ in millions)	2014			2013
Debt securities	$	62.2		$	(1.9	)
Other investments	0.1			—
Net unrealized investment gains (losses)	$	62.3		$	(1.9	)
Net unrealized investment gains (losses)	$	62.3		$	(1.9	)
Applicable to DAC	16.7			(4.2		)
Applicable to other actuarial offsets	34.5			15.6
Applicable to deferred income tax expense (benefit)	14.0			2.7
Offsets to net unrealized investment gains (losses)	65.2			14.1
Net unrealized investment gains (losses) included in OCI	$	(2.9	)	$	(16.0	)