7. Investing Activities (Tables)

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

Fair Value and Cost of Securities

The following tables present the fixed maturity and equity securities available-for-sale by sector held at December 31, 2012 and 2011, respectively. The unrealized loss amounts presented below include the noncredit loss component of OTTI losses. We classify these investments into various sectors in line with industry conventions.

Fair Value and Cost of Securities:	December 31, 2012
($ in millions)			Gross		Gross					OTTI
	Amortized		Unrealized		Unrealized			Fair		Recognized
	Cost		Gains(1)		Losses(1)			Value		in AOCI(2)
U.S. government and agency	$	280.7	$	4.8	$	(0.4	)	$	285.1	$	—
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	)
Commercial mortgage-backed (“CMBS”)		229.6		26.0		(1.6	)		254.0		(0.6	)
Residential mortgage-backed (“RMBS”)		412.6		17.5		(7.6	)		422.5		(13.8	)
CDO/CLO		59.2		1.8		(4.2	)		56.8		(6.5	)
Other asset-backed		119.1		6.0		(6.5	)		118.6		1.2
Available-for-sale debt securities	$	3,043.0	$	219.0	$	(44.8	)	$	3,217.2	$	(21.4	)

Fair Value and Cost of Securities:	December 31, 2011
($ in millions)	As restated and amended
			Gross		Gross					OTTI
	Amortized		Unrealized		Unrealized			Fair		Recognized
	Cost		Gains(1)		Losses(1)			Value		in AOCI(2)
U.S. government and agency	$	162.2	$	12.4	$	(0.5	)	$	174.1	$	--
State and political subdivision		78.3		5.7		(0.5	)		83.5		--
Foreign government		30.5		1.8		(0.4	)		31.9		--
Corporate		1,157.4		84.8		(37.5	)		1,204.7		(1.5	)
Commercial mortgage-backed (“CMBS”)		273.3		12.1		(3.9	)		281.5		(5.1	)
Residential mortgage-backed (“RMBS”)		538.6		13.3		(20.4	)		531.5		(21.6	)
CDO/CLO		74.0		0.7		(12.2	)		62.5		(8.4	)
Other asset-backed		146.6		3.1		(7.3	)		142.4		0.7
Available-for-sale debt securities	$	2,460.9	$	133.9	$	(82.7	)	$	2,512.1	$	(35.9	)

———————

Maturities of Debt Securities

Maturities of Debt Securities:	December 31, 2012
($ in millions)	Amortized		Fair
	Cost		Value
Due in one year or less	$	292.3	$	293.3
Due after one year through five years		351.0		376.8
Due after five years through ten years		939.2		1,015.4
Due after ten years		640.1		679.9
CMBS/RMBS/ABS/CDO/CLO(1)		820.4		851.8
Total	$	3,043.0	$	3,217.2

Sales of Available-for-Sale Securities

Sales of Available-for-Sale Securities:	As of December 31,
($ in millions)	2012				2011				2010
					As restated				As restated
					and amended				and amended
Fixed maturities, available-for-sale
Proceeds from sales		$	501.4			$	325.8			$	359.1
Proceeds from maturities/repayments			380.4				213.8				222.8
Gross investment gains from sales, prepayments and maturities			22.8				2.5				3.4
Gross investment losses from sales and maturities			(0.7	)			(0.7	)			(4.1	)

Aging of Temporarily Impaired Debt Securities

Aging of Temporarily Impaired	As of December 31, 2012
Debt Securities:	Less than 12 months					Greater than 12 months					Total
($ in millions)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		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

Aging of Temporarily Impaired	As of December 31, 2011
Debt Securities:	As restated and amended
($ in millions)	Less than 12 months					Greater than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Debt Securities
U.S. government and agency	$	—	$	—		$	3.5	$	(0.5	)	$	3.5	$	(0.5	)
State and political subdivision		15.4		—			0.9		(0.5	)		16.3		(0.5	)
Foreign government		7.2		(0.4	)		—		—			7.2		(0.4	)
Corporate		113.4		(3.5	)		69.3		(34.0	)		182.7		(37.5	)
CMBS		50.3		(1.2	)		6.9		(2.7	)		57.2		(3.9	)
RMBS		78.0		(3.3	)		91.1		(17.1	)		169.1		(20.4	)
CDO/CLO		4.8		(0.4	)		40.6		(11.8	)		45.4		(12.2	)
Other asset-backed		24.4		(0.2	)		16.5		(7.1	)		40.9		(7.3	)
Total temporarily impaired securities	$	293.5	$	(9.0	)	$	228.8	$	(73.7	)	$	522.3	$	(82.7	)
Below investment grade	$	25.3	$	(1.6	)	$	74.8	$	(50.2	)	$	100.1	$	(51.8	)
Number of securities				129					139					268

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	As of December 31,
which a Portion of the OTTI Loss was Recognized in OCI:	2012			2011			2010
($ in millions)				As restated			As restated
				and amended			and amended
Balance, beginning of period	$	(21.3	)	$	(19.9	)	$	(15.0	)
Add: Credit losses on securities not previously impaired(1)		(1.4	)		(1.0	)		(1.9	)
Add: Credit losses on securities previously impaired(1)		(1.2	)		(1.4	)		(7.7	)
Less: Credit losses on securities impaired due to intent to sell		—			—			—
Less: Credit losses on securities sold		6.1			1.0			1.9
Less: Credit losses upon adoption of new accounting guidance(2)		—			—			2.8
Less: Increases in cash flows expected on previously impaired securities		—			—			—
Balance, end of period	$	(17.8	)	$	(21.3	)	$	(19.9	)

Sources of Net Investment Income

Sources of Net Investment Income:	Years Ended December 31,
($ in millions)	2012		2011		2010
			As restated		As restated
			and amended		and amended
Debt securities	$	122.5	$	94.8	$	67.2
Policy loans		3.1		3.1		3.0
Limited partnerships and other investments		2.2		1.8		2.4
Fair value investments		4.0		2.8		3.0
Cash and cash equivalents		—		—		—
Total investment income		131.8		102.5		75.6
Less: Investment expenses		0.9		1.4		1.4
Net investment income	$	130.9	$	101.1	$	74.2

Sources and Types of Net Realized Investment Gains (Losses):

Sources and Types of Net Realized Investment Gains (Losses):	Years Ended December 31,
($ in millions)	2012			2011			2010
				As restated			As restated
				and amended			and amended
Total other-than-temporary debt impairments	$	(5.0	)	$	(9.7	)	$	(20.9	)
Portion of loss recognized in OCI		2.2			6.9			10.1
Net debt impairments recognized in earnings	$	(2.8	)	$	(2.8	)	$	(10.8	)
Debt security impairments:
U.S. government and agency	$	—		$	—		$	—
State and political subdivision		(0.1	)		—			—
Foreign government		—			—			—
Corporate		—			(0.4	)		(0.8	)
CMBS		(0.1	)		(0.4	)		(1.6	)
RMBS		(1.9	)		(1.5	)		(4.7	)
CDO/CLO		(0.4	)		(0.4	)		(3.6	)
Other asset-backed		(0.3	)		(0.1	)		(0.1	)
Net debt security impairments		(2.8	)		(2.8	)		(10.8	)
Equity security impairments		—			(0.4	)		—
Impairment losses		(2.8	)		(3.2	)		(10.8	)
Debt security transaction gains		22.8			2.5			3.4
Debt security transaction losses		(0.7	)		(0.7	)		(4.1	)
Limited partnerships and other investment gains		—			0.1			0.6
Limited partnerships and other investment losses		(0.3	)		(0.1	)		(0.8	)
Net transaction gains (losses)		21.8			1.8			(0.9	)
Derivative instruments		(49.0	)		6.2			(22.8	)
Embedded derivatives(1)		11.2			(33.2	)		12.2
Inter-company reinsurance derivatives		(3.5	)		9.0			(1.7)
Assets valued at fair value		—			—			1.6
Net realized investment losses, excluding impairment losses		(19.5	)		(16.2)			(11.6	)
Net realized investment losses, including impairment losses	$	(22.3	)	$	(19.4	)	$	(22.4	)

Sources of Changes in Net Unrealized Investment Gains

Sources of Changes in Net Unrealized Investment Gains (Losses):	Years Ended December 31,
($ in millions)	2012			2011			2010
				As restated			As restated
				and amended			and amended
Debt securities	$	123.0		$	77.2		$	101.5
Equity securities		—			0.1			(0.1	)
Other investments		(0.2	)		(0.1	)		0.5
Net unrealized investment gains	$	122.8		$	77.2		$	101.9
Net unrealized investment gains	$	122.8		$	77.2		$	101.9
Applicable deferred policy acquisition cost		29.2			37.4			64.2
Applicable other actuarial offsets		59.9			20.1			8.7
Applicable deferred income tax expense (benefit)		24.9			4.2			9.2
Offsets to net unrealized investment gains (losses)		114.0			61.7			82.1
Net unrealized investment gains included in OCI	$	8.8		$	15.5		$	19.8