Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Derivative Financial Instruments

Derivative Financial Instruments, Exposure (Table)

	March 31, 2014		December 31, 2013
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	19,641.9	$	20,570.8
Interest rate options	4,100.0		4,100.0
Swaptions	260.0		325.0
Interest rate futures	120.5		92.5
Foreign exchange contracts:
Currency swaps	2,051.3		2,367.5
Currency forwards	261.8		247.4
Equity contracts:
Equity options	2,160.9		2,010.4
Equity futures	325.2		273.3
Credit contracts:
Credit default swaps	1,162.1		1,153.2
Total return swaps	90.0		90.0
Futures	11.0		9.1
Other contracts:
Embedded derivative financial instruments	7,736.2		7,601.1
Total notional amounts at end of period	$	37,920.9	$	38,840.3
Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	435.0	$	435.5
Interest rate options	34.9		42.5
Swaptions	0.4		1.0
Foreign exchange contracts:
Currency swaps	147.5		200.9
Currency forwards	—		0.6
Equity contracts:
Equity options	17.7		30.0
Credit contracts:
Credit default swaps	9.7		9.5
Total return swaps	—		0.1
Total gross credit exposure	645.2		720.1
Less: collateral received	92.2		115.9
Net credit exposure	$	553.0	$	604.2

Derivative Financial Instruments, Fair Value Disclosures (Table)

	Derivative assets (1)				Derivative liabilities (2)
	March 31, 2014		December 31, 2013		March 31, 2014		December 31, 2013
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	0.3	$	0.1	$	256.4	$	285.4
Foreign exchange contracts	97.5		121.6		47.2		51.2
Total derivatives designated as hedging instruments	$	97.8	$	121.7	$	303.6	$	336.6
Derivatives not designated as hedging instruments
Interest rate contracts	$	434.5	$	452.2	$	387.6	$	489.6
Foreign exchange contracts	48.3		51.6		25.1		17.9
Equity contracts	17.7		30.0		160.5		145.0
Credit contracts	9.7		9.6		30.1		35.5
Other contracts	—		—		254.7		224.1
Total derivatives not designated as hedging instruments	510.2		543.4		858.0		912.1
Total derivative instruments	$	608.0	$	665.1	$	1,161.6	$	1,248.7

(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 $25.8 million and $6.9 million as of March 31, 2014 and December 31, 2013, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)

	March 31, 2014
								Weighted
						Maximum		average
	Notional		Fair			future		expected life
	amount		value			payments		(in years)
	(in millions)
Single name credit default swaps
Corporate debt
AAA	$	20.0	$	0.6		$	20.0		4.1
AA	79.0		1.5			79.0		3.8
A	289.5		3.9			289.5		3.8
BBB	275.0		(0.2		)	275.0		3.7
Total single name credit default swaps	663.5		5.8			663.5		3.8
Basket and index credit default swaps
Corporate debt
Near default (1)	110.4		(17.8		)	110.4		3.0
Government/municipalities
AA	30.0		(2.9		)	30.0		3.5
Structured finance
BBB	25.0		(0.4		)	25.0		3.3
Total basket and index credit default swaps	165.4		(21.1		)	165.4		3.1
Total credit default swap protection sold	$	828.9	$	(15.3	)	$	828.9	3.6
	December 31, 2013
								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	$	0.3		$	10.0	4.7
AA	84.0		1.8			84.0		4.0
A	294.5		4.2			294.5		4.0
BBB	265.0		(1.2		)	265.0		3.9
Total single name credit default swaps	653.5		5.1			653.5		4.0
Basket and index credit default swaps
Corporate debt
Near default (1)	110.4		(19.9		)	110.4		3.2
Government/municipalities
AA	30.0		(3.5		)	30.0		3.7
Structured finance
BBB	25.0		(0.9		)	25.0		3.5
Total basket and index credit default swaps	165.4		(24.3		)	165.4		3.4
Total credit default swap protection sold	$	818.9	$	(19.2	)	$	818.9	3.9

(1) Includes $88.0 million notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third-party investors.

Hybrid Instruments (Table)

	March 31, 2014
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
A	$	23.4	$	23.4	2.8
Total corporate debt	23.4		23.4		2.8
Structured finance
A	30.6		29.4		5.1
BB	5.6		5.6		3.1
B	4.2		4.2		3.1
CCC	24.1		24.1		4.8
Total structured finance	64.5		63.3		4.7
Total fixed maturities with credit derivatives	$	87.9	$	86.7	4.2

	December 31, 2013
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
BBB	$	23.4	$	23.4	3.0
Total corporate debt	23.4		23.4		3.0
Structured finance
A	18.1		16.7		4.8
BB	5.5		5.5		3.3
B	4.1		4.1		3.1
CCC	23.5		23.5		4.8
Total structured finance	51.2		49.8		4.5
Total fixed maturities with credit derivatives	$	74.6	$	73.2	4.0

Fair Value Hedges (Table)

							Amount of gain (loss)
	Amount of gain (loss)						recognized in net income on
	recognized in net income on						related hedged item for the
	derivatives for the three months						three months ended
Derivatives in fair value hedging	ended March 31, (1)					Hedged items in fair value	March 31, (1)
relationships	2014		2013			hedging relationships	2014			2013
	(in millions)						(in millions)
Interest rate contracts	$	6.9	$	30.4		Fixed maturities, available- for-sale	$	(7.4	)	$	(28.6	)
Interest rate contracts	0.6		—			Investment-type insurance contracts	(0.6		)	—
Foreign exchange contracts	0.3		1.3			Fixed maturities, available- for-sale	(0.3		)	(1.3		)
Foreign exchange contracts	0.2		(64.1		)	Investment-type insurance contracts	(0.2		)	63.7
Total	$	8.0	$	(32.4	)	Total	$	(8.5	)	$	33.8

(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 three
	months ended March 31,
Hedged item	2014			2013
	(in millions)
Fixed maturities, available-for-sale (1)	$	(26.2	)	$	(31.5	)
Investment-type insurance contracts (2)	1.5			9.3

(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)
Derivatives in cash		for the three months ended					reclassified from AOCI	for the three months ended
flow hedging		March 31,					into net income	March 31,
relationships	Related hedged item	2014		2013			(effective portion)	2014			2013
		(in millions)						(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	3.7	$	(23.7	)	Net investment income	$	3.2		$	2.7
Interest rate contracts	Investment-type insurance contracts	0.9		1.0			Benefits, claims and settlement expenses	—			—
Interest rate contracts	Debt	—		—			Operating expense	(1.8		)	(1.6		)
Foreign exchange contracts	Fixed maturities, available-for-sale	4.0		41.0			Net realized capital losses	(11.1		)	(0.6		)
Foreign exchange contracts	Investment-type insurance contract	5.1		(3.6		)	Benefits, claims and settlement expenses	—			—
Total		$	13.7	$	14.7		Total	$	(9.7	)	$	0.5

Cash Flow Hedges, Periodic Settlements Disclosures (Table)

	Amount of gain (loss) for the three
	months ended March 31,
Hedged item	2014			2013
	(in millions)
Fixed maturities, available-for-sale (1)	$	1.5		$	2.4
Investment-type insurance contracts (2)	(2.9		)	(2.9		)

(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 three
	months ended March 31,
Derivatives not designated as hedging instruments	2014			2013
	(in millions)
Interest rate contracts	$	63.3		$	(29.6	)
Foreign exchange contracts	(13.3		)	4.3
Equity contracts	(25.0		)	(54.6		)
Credit contracts	(4.9		)	15.1
Other contracts	(26.7		)	57.2
Total	$	(6.6	)	$	(7.6	)