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Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Derivative Financial Instruments, Exposure (Table)


	December 31, 2018		December 31, 2017
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	34,393.7	$	23,543.4
Interest rate options		1,126.9		657.0
Interest rate futures		260.0		236.5
Swaptions		—		14.0
Foreign exchange contracts:
Currency swaps		898.6		888.6
Currency forwards		863.6		915.5
Currency options		525.2		583.6
Equity contracts:
Equity options		1,522.5		3,649.4
Equity futures		491.7		357.8
Credit contracts:
Credit default swaps		420.0		668.5
Other contracts:
Embedded derivatives		9,452.3		9,402.3
Total notional amounts at end of period	$	49,954.5	$	40,916.6
Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	95.4	$	163.4
Interest rate options		16.3		19.8
Foreign exchange contracts:
Currency swaps		71.2		79.1
Currency forwards		2.8		24.3
Currency options		1.9		1.6
Equity contracts:
Equity options		7.7		18.2
Credit contracts:
Credit default swaps		2.4		5.0
Total gross credit exposure		197.7		311.4
Less: collateral received		122.9		159.7
Net credit exposure	$	74.8	$	151.7

Derivative Financial Instruments, Fair Value Disclosures (Table)


	Derivative assets (1)				Derivative liabilities (2)
	December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	—	$	—	$	16.1	$	22.9
Foreign exchange contracts		37.6		39.6		13.5		36.3
Total derivatives designated as hedging instruments	$	37.6	$	39.6	$	29.6	$	59.2
Derivatives not designated as hedging instruments
Interest rate contracts	$	108.0	$	175.2	$	22.6	$	33.6
Foreign exchange contracts		38.4		66.2		72.9		26.3
Equity contracts		7.7		18.2		27.6		154.1
Credit contracts		2.3		4.8		4.4		1.5
Other contracts		—		—		134.6		413.4
Total derivatives not designated as hedging instruments		156.4		264.4		262.1		628.9
Total derivative instruments	$	194.0	$	304.0	$	291.7	$	688.1

(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 derivatives with a net liability fair value of $45.2 million and $160.3 million as of December 31, 2018 and December 31, 2017, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)


	December 31, 2018
							Weighted
					Maximum		average
	Notional		Fair		future		expected life
	amount		value		payments		(in years)
	(in millions)

Single name credit default swaps
Corporate debt
AAA	$	10.0	$	0.1	$	10.0	0.7
A		15.0		0.1		15.0	1.0
BBB		190.0		0.4		190.0	1.7
BB		10.0		—		10.0	0.5
CCC		15.0		(3.6)		15.0	0.9
Government/municipalities
AA		20.0		0.2		20.0	1.0
Sovereign
A		10.0		0.1		10.0	0.7
BBB		55.0		0.4		55.0	1.3
Total credit default swap protection sold	$	325.0	$	(2.3)	$	325.0	1.4


	December 31, 2017
							Weighted
					Maximum		average
	Notional		Fair		future		expected life
	amount		value		payments		(in years)
	(in millions)
Single name credit default swaps
Corporate debt
AAA	$	30.0	$	0.3	$	30.0	1.2
AA		30.0		0.1		30.0	0.5
A		105.0		0.5		105.0	0.6
BBB		255.0		2.5		255.0	1.3
B		20.0		(0.5)		20.0	1.8
Government/municipalities
AA		20.0		0.3		20.0	2.0
Sovereign
A		10.0		0.2		10.0	1.7
BBB		55.0		0.8		55.0	2.3
Total credit default swap protection sold	$	525.0	$	4.2	$	525.0	1.3

Fair Value Hedges (Table)


	Amount of gain (loss)							Amount of gain (loss)
	recognized in net income on							recognized in net income on
	derivatives for the year ended						Hedged items in fair	related hedged item for the year ended
Derivatives in fair value	December 31, (1)						value hedging	December 31, (1)
hedging relationships	2018		2017		2016		relationships	2018		2017		2016
	(in millions)							(in millions)
Interest rate contracts	$	6.2	$	4.7	$	19.5	Fixed maturities, available-for-sale	$	(6.6)	$	(5.2)	$	(19.2)
Interest rate contracts		—		(0.6)		(0.9)	Investment contracts		—		0.6		1.0
Total	$	6.2	$	4.1	$	18.6	Total	$	(6.6)	$	(4.6)	$	(18.2)

(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	2018		2017		2016
	(in millions)
Fixed maturities, available-for-sale (1)	$	(5.9)	$	(10.3)	$	(41.9)
Investment contracts (2)		—		0.9		2.6

(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)							Amount of gain (loss)
		recognized in AOCI on							reclassified from AOCI on
		derivatives (effective portion)						Location of gain (loss)	derivatives (effective portion)
		for the year ended						reclassified from	for the year ended
Derivatives in cash flow	Related	December 31,						AOCI into net income	December 31,
hedging relationships	hedged item	2018		2017		2016		(effective portion)	2018		2017		2016
		(in millions)							(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	36.7	$	(51.7)	$	(33.1)	Net investment income	$	20.9	$	21.0	$	19.3
								Net realized capital gains (losses)		17.0		(0.6)		11.2
Interest rate contracts	Investment contracts		—		—		1.6	Benefits, claims and settlement expenses		(0.1)		—		—
Interest rate contracts	Debt		—		—		—	Operating expense		(10.7)		(10.8)		(9.2)
Foreign exchange contracts	Fixed maturities, available-for-sale		20.8		(68.5)		4.0	Net realized capital gains		12.7		22.0		6.4
Foreign exchange contracts	Investment contracts		(0.1)		—		6.0	Benefits, claims and settlement expenses		—		—		—
Total		$	57.4	$	(120.2)	$	(21.5)	Total	$	39.8	$	31.6	$	27.7

Cash Flow Hedges, Periodic Settlements Disclosures (Table)


	Amount of gain (loss) for the
	year ended December 31,
Hedged item	2018		2017		2016
	(in millions)
Fixed maturities, available-for-sale (1)	$	6.0	$	7.1	$	5.8
Investment contracts (2)		(0.1)		(1.1)		(15.7)

(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	2018		2017		2016
	(in millions)
Interest rate contracts	$	(27.6)	$	(26.9)	$	243.3
Foreign exchange contracts		(64.2)		59.4		20.1
Equity contracts		(31.0)		(181.3)		(123.5)
Credit contracts		(1.6)		(15.9)		37.4
Other contracts		108.5		11.5		(4.8)
Total	$	(15.9)	$	(153.2)	$	172.5

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details