Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Financial Instruments, Exposure (Table)

	June 30, 2016		December 31, 2015
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	24,000.2	$	21,704.2
Interest rate options	4,900.0		4,900.0
Interest rate futures	343.0		162.0
Swaptions	77.0		259.0
Foreign exchange contracts:
Currency swaps	1,683.0		1,751.0
Currency forwards	1,153.8		1,040.6
Equity contracts:
Equity options	3,887.3		3,604.8
Equity futures	635.1		514.2
Credit contracts:
Credit default swaps	1,013.9		1,084.5
Total return swaps	90.0		90.0
Futures	13.8		13.1
Other contracts:
Embedded derivatives	10,141.8		9,905.0

Total notional amounts at end of period	$	47,938.9	$	45,028.4


Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	1,089.3	$	505.5
Interest rate options	52.9		34.1
Foreign exchange contracts:
Currency swaps	94.1		105.6
Currency forwards	14.3		4.4
Equity contracts:
Equity options	83.4		39.9
Credit contracts:
Credit default swaps	8.6		13.4
Total return swaps	—		0.5

Total gross credit exposure	1,342.6		703.4
Less: collateral received	574.0		234.2

Net credit exposure	$	768.6	$	469.2

Derivative Financial Instruments, Fair Value Disclosures (Table)

	Derivative assets (1)				Derivative liabilities (2)
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	18.5	$	9.4	$	136.8	$	132.2
Foreign exchange contracts	78.5		94.1		136.1		164.2

Total derivatives designated as hedging instruments	$	97.0	$	103.5	$	272.9	$	296.4


Derivatives not designated as hedging instruments
Interest rate contracts	$	1,071.8	$	493.0	$	536.6	$	255.8
Foreign exchange contracts	30.8		16.4		61.6		68.1
Equity contracts	83.4		39.8		91.0		112.3
Credit contracts	8.6		13.9		22.8		39.7
Other contracts	—		—		551.7		407.8

Total derivatives not designated as hedging instruments	1,194.6		563.1		1,263.7		883.7


Total derivative instruments	$	1,291.6	$	666.6	$	1,536.6	$	1,180.1

(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 derivative liabilities with a fair value of $324.3 million and $177.4 million as of June 30, 2016 and December 31, 2015, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)

	June 30, 2016
							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	$	0.7	$	30.0	2.7
AA	94.0		1.0		94.0		1.7
A	175.0		1.6		175.0		1.7
BBB	300.0		(1.0)		300.0		2.5
BB	20.0		(2.7)		20.0		3.3
Near default	10.0		(2.5)		10.0		3.5
Government/municipalities
AA	30.0		0.5		30.0		2.8
Sovereign
AA	10.0		0.2		10.0		3.2
BBB	40.0		(0.1)		40.0		3.2

Total single name credit default swaps	709.0		(2.3)		709.0		2.3

Basket and index credit default swaps
Corporate debt
Near default (1)	82.3		(6.6)		82.3		0.7
Government/municipalities
AA	30.0		(0.8)		30.0		1.2
Structured finance
AAA	4.3		—		4.3		0.2

Total basket and index credit default swaps	116.6		(7.4)		116.6		0.8

Total credit default swap protection sold	$	825.6	$	(9.7)	$	825.6	2.1

	December 31, 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	$	0.8	$	30.0	3.2
AA	74.0		1.1		74.0		2.3
A	195.0		2.2		195.0		2.2
BBB	310.0		(0.9)		310.0		2.9
BB	30.0		(4.6)		30.0		3.1
CCC	10.0		(6.8)		10.0		4.0
Government/municipalities
AA	30.0		0.6		30.0		3.3
Sovereign
AA	10.0		—		10.0		3.7
BBB	40.0		(0.9)		40.0		3.7

Total single name credit default swaps	729.0		(8.5)		729.0		2.8

Basket and index credit default swaps
Corporate debt
Near default (1)	100.4		(17.7)		100.4		1.2
Government/municipalities
AA	30.0		(1.1)		30.0		1.7
Structured finance
AAA	11.9		—		11.9		0.6

Total basket and index credit default swaps	142.3		(18.8)		142.3		1.3

Total credit default swap protection sold	$	871.3	$	(27.3)	$	871.3	2.5

(1)

Includes $60.0 million and $78.0 million as of June 30, 2016 and December 31, 2015, respectively, 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, 2016
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
A	$	24.9	$	24.9	0.5

Total corporate debt	24.9		24.9		0.5

Structured finance
A	32.5		32.5		0.5
BBB	3.5		3.5		1.2
BB	2.3		2.3		1.2
CCC	4.7		4.7		2.3

Total structured finance	43.0		43.0		0.8

Total fixed maturities with credit derivatives	$	67.9	$	67.9	0.7

	December 31, 2015
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Corporate debt
A	$	24.6	$	24.6	1.0

Total corporate debt	24.6		24.6		1.0

Structured finance
A	52.2		52.2		1.1
BBB	3.4		3.4		1.6
BB	2.3		2.3		1.6
CCC	4.8		4.8		1.9

Total structured finance	62.7		62.7		1.2

Total fixed maturities with credit derivatives	$	87.3	$	87.3	1.1

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	2016		2015		hedging relationships	2016		2015
	(in millions)					(in millions)
Interest rate contracts	$	0.3	$	20.2	Fixed maturities, available-for-sale	$	(0.3)	$	(19.3)
Interest rate contracts	0.4		(1.0)		Investment contracts	(0.5)		1.0

Total	$	0.7	$	19.2	Total	$	(0.8)	$	(18.3)

						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 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	2016		2015		hedging relationships	2016		2015
	(in millions)					(in millions)
Interest rate contracts	$	(7.6)	$	18.1	Fixed maturities, available-for-sale	$	7.6	$	(17.7)
Interest rate contracts	3.3		1.5		Investment contracts	(3.3)		(1.4)
Foreign exchange contracts	—		3.8		Fixed maturities, available-for-sale	—		(3.8)

Total	$	(4.3)	$	23.4	Total	$	4.3	$	(22.9)

(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	2016		2015		2016		2015
	(in millions)
Fixed maturities, available-for-sale (1)	$	(11.9)	$	(19.2)	$	(25.0)	$	(39.3)
Investment contracts (2)	0.7		1.0		1.4		1.9

(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.

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	2016		2015		(effective portion)	2016		2015
		(in millions)					(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	(6.9)	$	(5.6)	Net investment income	$	4.8	$	4.1
Interest rate contracts	Investment contracts	0.5		1.4		Benefits, claims and settlement expenses	—		—
Interest rate contracts	Debt	—		—		Operating expense	(2.3)		(2.0)
Foreign exchange contracts	Fixed maturities, available-for-sale	10.9		(26.7)		Net realized capital gains	0.6		5.6
Foreign exchange contracts	Investment contracts	1.3		2.6		Benefits, claims and settlement expenses	—		—

Total		$	5.8	$	(28.3)	Total	$	3.1	$	7.7


		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	2016		2015		(effective portion)	2016		2015

		(in millions)					(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	21.7	$	11.1	Net investment income	$	9.4	$	7.9
Interest rate contracts	Investment contracts	1.6		2.3		Benefits, claims and settlement expenses	—		—
Interest rate contracts	Debt	—		—		Operating expense	(4.5)		(4.0)
Foreign exchange contracts	Fixed maturities, available-for-sale	5.5		13.5		Net realized capital gains	1.2		13.9
Foreign exchange contracts	Investment contracts	3.9		(1.2)		Benefits, claims and settlement expenses	—		—

Total		$	32.7	$	25.7	Total	$	6.1	$	17.8

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	2016		2015		2016		2015
	(in millions)
Fixed maturities, available-for-sale (1)	$	1.4	$	1.6	$	2.9	$	3.1
Investment contracts (2)	(4.3)		(4.8)		(9.3)		(8.7)

(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				Amount of gain (loss) recognized in
	net income on derivatives for the				net income on derivatives for the
	three months ended June 30,				six months ended June 30,
Derivatives not designated as hedging instruments	2016		2015		2016		2015
	(in millions)
Interest rate contracts	$	73.0	$	(151.0)	$	260.7	$	(66.1)
Foreign exchange contracts	(4.5)		4.3		23.1		(12.2)
Equity contracts	6.5		(44.3)		15.0		(32.2)
Credit contracts	5.7		8.8		24.5		13.4
Other contracts	(112.6)		109.3		(150.3)		58.9

Total	$	(31.9)	$	(72.9)	$	173.0	$	(38.2)