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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

———————
[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

———————
[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

 
$
—

———————
[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).