Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2011

Derivative Financial Instruments

Derivative Financial Instruments, Exposure (Table)

	December 31, 2011		December 31, 2010
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	19,498.3	$	19,803.0
Futures		522.0		0.8
Interest rate collars		500.0		500.0
Swaptions		68.5		68.5
Foreign exchange contracts:
Foreign currency swaps		3,919.8		4,615.2
Currency forwards		147.3		72.3
Equity contracts:
Options		1,608.4		997.5
Futures		270.3		—
Total return swaps		15.0		—
Credit contracts:
Credit default swaps		1,530.3		1,482.4
Other contracts:
Embedded derivative financial instruments		4,921.7		3,991.6
Total notional amounts at end of period	$	33,001.6	$	31,531.3
Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	752.2	$	607.1
Interest rate collars		38.5		1.7
Swaptions		—		0.1
Foreign exchange contracts:
Foreign currency swaps		318.6		493.2
Currency forwards		1.5		3.3
Equity contracts:
Options		120.3		64.9
Credit contracts:
Credit default swaps		14.0		6.7
Total gross credit exposure		1,245.1		1,177.0
Less: collateral received		237.0		249.2
Net credit exposure	$	1,008.1	$	927.8

Derivative Financial Instruments, Fair Value Disclosures (Table)

	Derivative assets (1)				Derivative liabilities (2)
	December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	0.2	$	66.6	$	500.9	$	405.4
Foreign exchange contracts		267.2		390.8		158.4		142.5
Total derivatives designated as hedging instruments	$	267.4	$	457.4	$	659.3	$	547.9
Derivatives not designated as hedging instruments
Interest rate contracts	$	730.9	$	488.4	$	651.5	$	459.5
Foreign exchange contracts		38.5		65.8		42.7		60.4
Equity contracts		120.3		64.9		1.0		31.7
Credit contracts		14.0		6.7		169.5		171.7
Other contracts		—		—		336.0		145.7
Total derivatives not designated as hedging instruments	$	903.7	$	625.8	$	1,200.7	$	869.0
Total derivative instruments	$	1,171.1	$	1,083.2	$	1,860.0	$	1,416.9

(1)

The fair value of derivative assets is reported with other investments on the consolidated statements of financial position.

(2)

The fair value of derivative liabilities is reported with other liabilities on the consolidated statements of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative liabilities with a fair value of $195.8 million and $6.6 million as of December 31, 2011 and December 31, 2010, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)

	December 31, 2011
	Notional amount		Fair value			Maximum future payments		Weighted average expected life (in years)
	(in millions)
Single name credit default swaps
Corporate debt
AA	$	85.0	$	(1.0	)	$	85.0		4.0
A		483.0		(1.4	)		483.0		2.5
BBB		110.0		(0.3	)		110.0		1.7
CCC		10.0		(0.1	)		10.0		0.2
Structured finance
C		10.0		(8.9	)		10.0		10.1
Near default		12.9		(12.8	)		12.9		1.2
Total single name credit default swaps		710.9		(24.5	)		710.9		2.6
Basket and index credit default swaps
Corporate debt
CCC		132.4		(104.7	)		132.4		5.2
CC		15.0		(14.8	)		15.0		1.0
Government/municipalities
A		40.0		(10.5	)		40.0		4.4
Structured finance
BBB		25.0		(11.0	)		25.0		5.5
Total basket and index credit default swaps		212.4		(141.0	)		212.4		4.8
Total credit default swap protection sold	$	923.3	$	(165.5	)	$	923.3		3.1

	December 31, 2010
	Notional amount		Fair value			Maximum future payments		Weighted average expected life (in years)
	(in millions)
Single name credit default swaps
Corporate debt
AA	$	135.0	$	(0.5	)	$	135.0		3.9
A		564.0		0.9			564.0		2.9
BBB		150.0		0.3			150.0		1.1
Structured finance
B		25.9		(20.0	)		25.9		5.9
CCC		22.0		(18.4	)		22.0		9.4
Total single name credit default swaps		896.9		(37.7	)		896.9		3.0
Basket and index credit default swaps
Corporate debt
A		6.0		—			6.0		1.0
CCC		125.0		(103.0	)		125.0		6.2
CC		15.0		(8.5	)		15.0		2.0
Government/municipalities
A		40.0		(11.2	)		40.0		5.4
Structured finance
AA		20.0		(2.0	)		20.0		4.4
BBB		5.0		(0.3	)		5.0		14.9
Total basket and index credit default swaps		211.0		(125.0	)		211.0		5.6
Total credit default swap protection sold	$	1,107.9	$	(162.7	)	$	1,107.9		3.5

Hybrid Instruments (Table)

	December 31, 2011
	Amortized cost		Carrying value		Weighted average expected life (in years)
	(in millions)
Corporate debt
BB	$	14.7	$	14.7		5.0
CCC		25.0		20.8		1.5
CC		3.7		0.7		4.0
Total corporate debt		43.4		36.2		2.9
Structured finance
AA		9.3		9.3		6.4
BBB		27.4		24.5		4.5
BB		15.0		13.9		2.5
B		11.2		11.2		5.4
CCC		3.5		3.6		4.8
CC		0.7		0.7		5.3
C		0.2		0.1		8.2
Near default		0.2		0.2		4.7
Total structured finance		67.5		63.5		4.5
Total fixed maturities with credit derivatives	$	110.9	$	99.7		3.9

	December 31, 2010
	Amortized cost		Carrying value		Weighted average expected life (in years)
	(in millions)
Corporate debt
BB	$	18.1	$	18.1		6.0
CCC		50.0		46.2		2.1
CC		12.1		1.6		4.9
Total corporate debt		80.2		65.9		3.4
Structured finance
AA		5.2		5.2		5.8
BBB		26.8		23.1		5.5
BB		15.5		15.0		3.7
B		10.5		10.5		6.4
CCC		9.2		8.7		5.9
C		13.5		5.8		12.8
Total structured finance		80.7		68.3		6.6
Total fixed maturities with credit derivatives	$	160.9	$	134.2		5.0

Fair Value Hedges (Table)

	Amount of gain (loss) recognized in net income on derivatives for the year ended December 31, (1)
											Amount of gain (loss) recognized in net income on related hedged item for the year ended December 31, (1)
Derivatives in fair value hedging relationships										Hedged items in fair value hedging relationships
	2011			2010			2009				2011			2010			2009
	(in millions)										(in millions)
Interest rate contracts	$	(108.5	)	$	(100.2	)	$	308.6		Fixed maturities, available-for-sale	$	105.4		$	106.4		$	(264.0	)
Interest rate contracts		(2.2	)		(19.2	)		(30.8	)	Investment-type insurance contracts		2.4			20.6			46.9
Foreign exchange contracts		1.1			6.9			4.8		Fixed maturities, available-for-sale		(1.3	)		(5.6	)		(6.0	)
Foreign exchange contracts		(25.6	)		(23.3	)		82.4		Investment-type insurance contracts		25.7			18.1			(86.2	)
Total	$	(135.2	)	$	(135.8	)	$	365.0		Total	$	132.2		$	139.5		$	(309.3	)

(1)

The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges.

Fair Value Hedges, Periodic Settlements Disclosures (Table)

	Amount of gain (loss) for the year ended December 31,
Hedged Item	2011			2010			2009
	(in millions)
Fixed maturities, available-for-sale (1)	$	(158.9	)	$	(161.9	)	$	(143.5	)
Investment-type insurance contracts (2)		44.0			76.3			106.2

(1)

Reported in net investment income on the consolidated statements of operations.

(2)

Reported in benefits, claims and settlement expenses on the consolidated statements of operations.

Cash Flow Hedges (Table)

		Amount of gain (loss) recognized in AOCI on derivatives (effective portion) for the year ended December 31,										Amount of gain (loss) reclassified from AOCI on derivatives (effective portion) for the year ended December 31,
											Location of gain (loss) reclassified from AOCI into net income (effective portion)
Derivatives in cash flow hedging relationships	Related hedged item	2011			2010			2009				2011			2010			2009
		(in millions)										(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	107.1		$	(18.1	)	$	(124.4	)	Net investment income	$	7.2		$	7.1		$	4.8
											Net realized capital gains (losses)		(0.2	)		8.0			—
Interest rate contracts	Investment-type insurance contracts		(1.0	)		18.4			112.3		Benefits, claims and settlement expenses		(0.8	)		(0.8	)		(0.8	)
Interest rate contracts	Debt		—			—			30.6		Operating expense		(5.3	)		(4.7	)		(2.5	)
Foreign exchange contracts	Fixed maturities, available-for-sale		29.9			136.7			(216.8	)	Net realized capital gains (losses)		(20.4	)		(41.6	)		(15.5	)
Foreign exchange contracts	Investment-type insurance contracts		12.8			(24.0	)		126.7		Benefits, claims and settlement expenses		(1.7	)		(6.1	)		(5.6	)
											Net realized capital gains (losses)		—			(0.7	)		(4.3	)
Total		$	148.8		$	113.0		$	(71.6	)	Total	$	(21.2	)	$	(38.8	)	$	(23.9	)

Cash Flow Hedges, Periodic Settlements Disclosures (Table)

	Amount of gain (loss) for the year ended December 31,
Hedged Item	2011			2010			2009
	(in millions)
Fixed maturities, available-for-sale (1)	$	9.3		$	11.1		$	16.9
Investment-type insurance contracts (2)		(13.1	)		(12.5	)		(20.0	)

(1)

Reported in net investment income on the consolidated statements of operations.

(2)

Reported in benefits, claims and settlement expenses on the consolidated statements of operations.

Derivatives Not Designated as Hedging Instruments (Table)

	Amount of gain (loss) recognized in net income on derivatives for the year ended December 31,
Derivatives not designated as hedging instruments	2011			2010			2009
	(in millions)
Interest rate contracts	$	93.3		$	24.8		$	(58.7	)
Foreign exchange contracts		(34.1	)		(73.5	)		87.9
Equity contracts		55.2			(24.0	)		(107.7	)
Credit contracts		(9.9	)		5.1			61.7
Other contracts (1)		(200.4	)		(8.8	)		21.6
Total	$	(95.9	)	$	(76.4	)	$	4.8

(1)

The increase in the loss recognized in net income primarily relates to the change in fair value of the GMWB embedded derivative that is primarily related to market risk impacts (including spread reflecting improvement in our own creditworthiness).