Derivative Instruments

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We use derivative financial instruments, including options, futures and swaps as a means of hedging exposure to interest rate, equity price change, equity volatility and foreign currency risk. This includes surplus hedging as well as hedging of our fixed indexed annuity (“FIA”) exposure. From time to time, the Company uses forward starting swaps to lock-in interest rates on future bond purchases. We also use derivative instruments to economically hedge our exposure on living benefits offered on certain of our variable annuity products as well as index credits on our FIA products.

The Company seeks to enter into derivative transactions pursuant to master agreements that provide for a netting of payments and receipts by counterparty. Counterparties or central clearinghouses may require cash to be posted as collateral or margin. As of June 30, 2015 and December 31, 2014, $32.1 million and $16.0 million, respectively, of cash and cash equivalents were held as collateral or margin by a third party related to our derivative transactions.

Our derivatives are not designated as hedges for accounting purposes.

Derivative Instruments:	Maturity	Notional Amount		Fair Value as of June 30, 2015
($ in millions)				Assets		Liabilities [1]
Interest rate swaps	2018 - 2035	$	239.5	$	1.8	$	2.9
Variance swaps	2015 - 2017	0.9		—		9.4
Put options	2015 - 2022	391.0		20.7		—
Call options	2015 - 2020	2,285.3		76.5		42.0
Equity futures	2015	9.6		0.1		—
Total derivative instruments		$	2,926.3	$	99.1	$	54.3

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[1] Derivative liabilities are included in other liabilities on the balance sheets.

Derivative Instruments:	Maturity	Notional Amount		Fair Value as of December 31, 2014
($ in millions)				Assets		Liabilities [1]
Interest rate swaps	2016 - 2029	$	114.0	$	9.7	$	1.9
Variance swaps	2015 - 2017	0.9		—		8.6
Swaptions	2024 - 2025	777.0		0.2		—
Put options	2015 - 2022	677.5		29.4		—
Call options	2015 - 2019	2,019.2		118.2		74.6
Equity futures	2015	2.9		—		0.5
Total derivative instruments		$	3,591.5	$	157.5	$	85.6

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[1] Derivative liabilities are included in other liabilities on the balance sheets.

Derivative Instrument Gains (Losses) Recognized in Realized Investment Gains (Losses):	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2015			2014			2015			2014
Interest rate swaps	$	(4.3	)	$	1.8		$	(1.6	)	$	6.8
Variance swaps	(0.4		)	(0.4		)	(0.8		)	(1.0		)
Swaptions	—			(7.6		)	(0.1		)	(25.9		)
Put options	(3.5		)	(4.1		)	(7.8		)	(8.2		)
Call options	(2.9		)	17.2			(4.3		)	14.2
Equity futures	—			(6.9		)	0.2			(9.5		)
Embedded derivatives	4.2			(2.3		)	(6.0		)	(15.2		)
Total derivative instrument gains (losses) recognized in   realized investment gains (losses)	$	(6.9	)	$	(2.3	)	$	(20.4	)	$	(38.8	)

Offsetting of Derivative Assets/Liabilities

The Company may enter into netting agreements with counterparties that permit the Company to offset receivables and payables with such counterparties. The following tables present the gross fair value amounts, the amounts offset and net position of derivative instruments eligible for offset in the Company’s balance sheets that are subject to an enforceable master netting arrangement upon certain termination events, irrespective of whether they are offset in the balance sheet.

Offsetting of Derivative Assets/Liabilities:	June 30, 2015
($ in millions)	Gross amounts recognized [1]			Gross amounts offset in the balance sheet		Net amounts presented in the balance sheet			Gross amounts not offset in the balance sheet					Net amount
									Financial instruments			Cash collateral pledged [2]
Total derivative assets	$	99.1		$	—	$	99.1		$	(49.6	)	$	—	$	49.5
Total derivative liabilities	$	(54.3	)	$	—	$	(54.3	)	$	49.6		$	4.7	$	—
Offsetting of Derivative Assets/Liabilities:	December 31, 2014
($ in millions)	Gross amounts recognized [1]			Gross amounts offset in the balance sheet		Net amounts presented in the balance sheet			Gross amounts not offset in the balance sheet					Net amount
									Financial instruments			Cash collateral pledged [2]
Total derivative assets	$	157.5		$	—	$	157.5		$	(82.6	)	$	—	$	74.9
Total derivative liabilities	$	(85.6	)	$	—	$	(85.6	)	$	82.6		$	3.0	$	—

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[1] Amounts include all derivative instruments, irrespective of whether there is a legally enforceable master netting arrangement in place.

[2] Cash collateral pledged with derivative counterparties is recorded within other assets on the balance sheets. The Company pledges cash collateral to offset certain individual derivative liability positions with certain counterparties. Cash collateral of $27.4 million and $13.0 million as of June 30, 2015 and December 31, 2014, respectively, that exceeds the net liability resulting from the aggregate derivative positions with a corresponding counterparty is excluded.

Contingent features

Derivative counterparty agreements may contain certain provisions that require our insurance companies’ financial strength rating to be above a certain threshold. If our financial strength ratings were to fall below a specified rating threshold, certain derivative counterparties could request immediate payment or demand immediate and ongoing full collateralization on derivative instruments in net liability positions, or trigger a termination of existing derivatives and/or future derivative transactions.

In certain derivative counterparty agreements, our financial strength ratings are below the specified threshold levels. However, the Company held no derivative instruments as of June 30, 2015 in a net aggregate liability position payable to any counterparty (i.e., such derivative instruments have fair values in a net asset position payable to the Company if such holdings were liquidated).