Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Financial Instruments, Exposure (Table)

	June 30, 2015		December 31, 2014
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	20,358.6	$	19,182.6
Interest rate options	4,900.0		4,900.0
Swaptions	159.0		260.0
Interest rate futures	130.0		147.5
Foreign exchange contracts:
Currency swaps	1,841.8		1,975.5
Currency forwards	258.1		270.7
Equity contracts:
Equity options	3,558.1		3,293.4
Equity futures	552.8		498.1
Credit contracts:
Credit default swaps	1,147.5		1,234.5
Total return swaps	90.0		90.0
Futures	11.3		10.5
Other contracts:
Embedded derivatives	9,606.9		9,235.7

Total notional amounts at end of period	$	42,614.1	$	41,098.5


Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	429.3	$	510.8
Interest rate options	32.8		41.0
Foreign exchange contracts:
Currency swaps	111.7		97.1
Currency forwards	0.8		1.4
Equity contracts:
Equity options	31.8		30.2
Credit contracts:
Credit default swaps	13.0		13.3
Total return swaps	0.1		—

Total gross credit exposure	619.5		693.8
Less: collateral received	137.7		183.5

Net credit exposure	$	481.8	$	510.3

Derivative Financial Instruments, Fair Value Disclosures (Table)

	Derivative assets (1)				Derivative liabilities (2)
	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	6.6	$	8.8	$	161.2	$	193.9
Foreign exchange contracts	99.6		80.0		134.5		69.1

Total derivatives designated as hedging instruments	$	106.2	$	88.8	$	295.7	$	263.0


Derivatives not designated as hedging instruments
Interest rate contracts	$	422.3	$	508.7	$	290.2	$	321.4
Foreign exchange contracts	16.2		20.8		48.6		40.1
Equity contracts	31.8		30.2		129.2		131.7
Credit contracts	13.1		13.3		26.9		35.6
Other contracts	—		—		354.0		415.5

Total derivatives not designated as hedging instruments	483.4		573.0		848.9		944.3


Total derivative instruments	$	589.6	$	661.8	$	1,144.6	$	1,207.3

(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 $117.0 million and $176.4 million as of June 30, 2015 and December 31, 2014, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)

	June 30, 2015
								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	$	0.9		$	30.0	3.7
AA	74.0		1.3			74.0		2.8
A	209.5		3.4			209.5		2.7
BBB	335.0		2.5			335.0		3.4
BB	10.0		—			10.0		4.5
Government/municipalities
AA	30.0		0.6			30.0		3.8
Sovereign
AA	10.0		0.1			10.0		4.2
BBB	40.0		(0.4		)	40.0		4.2

Total single name credit default swaps	738.5		8.4			738.5		3.3

Basket and index credit default swaps
Corporate debt
Near default (1)	100.4		(17.6		)	100.4		1.7
Government/municipalities
AA	30.0		(1.3		)	30.0		2.2
Structured finance
AAA	14.9		0.1			14.9		1.1

Total basket and index credit default swaps	145.3		(18.8		)	145.3		1.8

Total credit default swap protection sold	$	883.8	$	(10.4	)	$	883.8	3.0

	December 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	$	30.0	$	1.0		$	30.0	4.2
AA	79.0		1.6			79.0		3.3
A	254.5		3.3			254.5		2.8
BBB	345.0		1.2			345.0		3.6
BB	10.0		0.9			10.0		5.0
Government/municipalities
AA	30.0		0.6			30.0		4.3
Sovereign
AA	10.0		0.1			10.0		4.7
BBB	40.0		(0.1		)	40.0		4.7

Total single name credit default swaps	798.5		8.6			798.5		3.5

Basket and index credit default swaps
Corporate debt
Near default (1)	100.4		(19.1		)	100.4		2.2
Government/municipalities
AA	30.0		(1.8		)	30.0		2.7
Structured finance
BBB	16.9		0.1			16.9		3.5

Total basket and index credit default swaps	147.3		(20.8		)	147.3		2.5

Total credit default swap protection sold	$	945.8	$	(12.2	)	$	945.8	3.3

(1)

Includes $78.0 million as of both June 30, 2015 and December 31, 2014, notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third party investors.

Hybrid Instruments (Table)

	June 30, 2015
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
A	$	24.4	$	24.4	1.5

Total corporate debt	24.4		24.4		1.5

Structured finance
A	74.0		74.0		1.1
BB	5.8		5.8		2.1
CCC	9.2		9.2		4.6

Total structured finance	89.0		89.0		1.6

Total fixed maturities with credit derivatives	$	113.4	$	113.4	1.5

	December 31, 2014
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
A	$	24.1	$	24.1	2.0

Total corporate debt	24.1		24.1		2.0

Structured finance
A	56.1		56.1		1.5
BB	5.8		5.8		2.7
CCC	9.5		9.5		4.7

Total structured finance	71.4		71.4		2.1

Total fixed maturities with credit derivatives	$	95.5	$	95.5	2.0

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 June 30, (1)					Hedged items in fair value	June 30, (1)
relationships	2015			2014		hedging relationships	2015			2014
	(in millions)						(in millions)
Interest rate contracts	$	20.2		$	1.8	Fixed maturities, available-for-sale	$	(19.3	)	$	(2.7	)
Interest rate contracts	(1.0		)	2.0		Investment-type insurance contracts	1.0			(1.9		)
Foreign exchange contracts	—			0.5		Fixed maturities, available-for-sale	—			(0.4		)

Total	$	19.2		$	4.3	Total	$	(18.3	)	$	(5.0	)

						Amount of loss
	Amount of gain					recognized in net income on
	recognized in net income on					related hedged item for the
	derivatives for the six months					for the six months
Derivatives in fair value hedging	ended June 30, (1)				Hedged items in fair value	ended June 30, (1)

relationships	2015		2014		hedging relationships	2015			2014

	(in millions)					(in millions)
Interest rate contracts	$	18.1	$	8.7	Fixed maturities, available-for-sale	$	(17.7	)	$	(10.1	)
Interest rate contracts	1.5		2.6		Investment-type insurance contracts	(1.4		)	(2.5		)
Foreign exchange contracts	3.8		0.8		Fixed maturities, available-for-sale	(3.8		)	(0.7		)
Foreign exchange contracts	—		0.2		Investment-type insurance contracts	—			(0.2		)

Total	$	23.4	$	12.3	Total	$	(22.9	)	$	(13.5	)

(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						Amount of gain (loss) for the
	months ended June 30,						six months ended June 30,
Hedged item	2015			2014			2015			2014
	(in millions)
Fixed maturities, available-for-sale (1)	$	(19.2	)	$	(23.1	)	$	(39.3	)	$	(49.3	)
Investment-type insurance contracts (2)	1.0			0.9			1.9			2.4

(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		June 30,						into net income	June 30,
relationships	Related hedged item	2015			2014			(effective portion)	2015			2014
		(in millions)							(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	(5.6	)	$	(1.7	)	Net investment income	$	4.1		$	3.4
Interest rate contracts	Investment-type insurance contracts	1.4			1.5			Benefits, claims and settlement expenses	—			—
Interest rate contracts	Debt	—			—			Operating expense	(2.0		)	(1.8		)
Foreign exchange contracts	Fixed maturities, available-for-sale	(26.7		)	(4.2		)	Net realized capital gains	5.6			—
Foreign exchange contracts	Investment-type insurance contracts	2.6			3.4			Benefits, claims and settlement expenses	—			—

Total		$	(28.3	)	$	(1.0	)	Total	$	7.7		$	1.6

		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 six months ended						reclassified from AOCI	for the six months ended
flow hedging		June 30,						into net income	June 30,
relationships	Related hedged item	2015			2014			(effective portion)	2015			2014
		(in millions)							(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	11.1		$	2.0		Net investment income	$	7.9		$	6.6
Interest rate contracts	Investment-type insurance contracts	2.3			2.4			Benefits, claims and settlement expenses	—			—
Interest rate contracts	Debt	—			—			Operating expense	(4.0		)	(3.6		)
Foreign exchange contracts	Fixed maturities, available-for-sale	13.5			(0.2		)	Net realized capital gains (losses)	13.9			(11.1		)
Foreign exchange contracts	Investment-type insurance contracts	(1.2		)	8.5			Benefits, claims and settlement expenses	—			—

Total		$	25.7		$	12.7		Total	$	17.8		$	(8.1	)

Cash Flow Hedges, Periodic Settlements Disclosures (Table)

	Amount of gain (loss) for the						Amount of gain (loss) for the
	three months ended June 30,						six months ended June 30,
Hedged item	2015			2014			2015			2014
	(in millions)
Fixed maturities, available-for-sale (1)	$	1.6		$	1.3		$	3.1		$	2.8
Investment-type insurance contracts (2)	(4.8		)	(2.9		)	(8.7		)	(5.8		)

(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 June 30,						Amount of gain (loss) recognized in net income on derivatives for the six months ended June 30,
Derivatives not designated as hedging instruments	2015			2014			2015			2014
	(in millions)
Interest rate contracts	$	(151.0	)	$	33.1		$	(66.1	)	$	96.4
Foreign exchange contracts	4.3			0.4			(12.2		)	(12.9		)
Equity contracts	(44.3		)	(12.6		)	(32.2		)	(37.6		)
Credit contracts	8.8			15.8			13.4			10.9
Other contracts	109.3			(19.8		)	58.9			(46.5		)

Total	$	(72.9	)	$	16.9		$	(38.2	)	$	10.3