Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Financial Instruments

Derivative Financial Instruments, Exposure (Table)

	September 30, 2017		December 31, 2016
	(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
Interest rate swaps	$	24,048.9	$	23,520.4
Interest rate options	4,028.2		4,950.5
Interest rate futures	64.0		96.0
Swaptions	14.0		77.0
Foreign exchange contracts:
Currency swaps	959.0		1,552.0
Currency forwards	819.9		851.3
Currency options	484.1		—
Equity contracts:
Equity options	3,456.3		3,505.8
Equity futures	325.4		545.1
Credit contracts:
Credit default swaps	750.5		961.3
Total return swaps	—		90.0
Futures	—		11.9
Other contracts:
Embedded derivatives	10,380.1		10,209.5
Total notional amounts at end of period	$	45,330.4	$	46,370.8
Credit exposure of derivative instruments
Interest rate contracts:
Interest rate swaps	$	189.6	$	733.1
Interest rate options	24.1		27.3
Foreign exchange contracts:
Currency swaps	82.9		106.2
Currency forwards	17.0		6.4
Currency options	0.5		—
Equity contracts:
Equity options	15.4		28.2
Credit contracts:
Credit default swaps	5.8		7.0
Total return swaps	—		0.7
Total gross credit exposure	335.3		908.9
Less: collateral received	200.2		586.8
Net credit exposure	$	135.1	$	322.1

Derivative Financial Instruments, Fair Value Disclosures (Table)

	Derivative assets (1)				Derivative liabilities (2)
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	0.9	$	4.4	$	27.4	$	71.3
Foreign exchange contracts	50.9		86.8		26.1		143.4
Total derivatives designated as hedging instruments	$	51.8	$	91.2	$	53.5	$	214.7
Derivatives not designated as hedging instruments
Interest rate contracts	$	196.9	$	739.3	$	42.1	$	200.6
Foreign exchange contracts	51.5		27.2		32.3		56.2
Equity contracts	15.4		28.2		135.0		95.9
Credit contracts	5.6		7.7		1.5		5.7
Other contracts	—		—		380.7		388.7
Total derivatives not designated as hedging instruments	269.4		802.4		591.6		747.1
Total derivative instruments	$	321.2	$	893.6	$	645.1	$	961.8

(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 $138.2 million and $176.5 million as of September 30, 2017 and December 31, 2016, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold (Table)

	September 30, 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	$	0.4	$	30.0	1.5
AA	55.0		0.2		55.0		0.5
A	95.0		0.6		95.0		0.9
BBB	310.0		2.9		310.0		1.3
B	20.0		(0.3)		20.0		2.1
Government/municipalities
AA	30.0		0.4		30.0		1.6
Sovereign
A	10.0		0.1		10.0		2.0
BBB	55.0		0.8		55.0		2.6
Total single name credit default swaps	605.0		5.1		605.0		1.4
Total credit default swap protection sold	$	605.0	$	5.1	$	605.0	1.4

	December 31, 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	$	0.6	$	30.0	2.2
AA	94.0		0.8		94.0		1.2
A	145.0		1.2		145.0		1.3
BBB	290.0		2.3		290.0		2.1
B	20.0		(1.8)		20.0		2.8
Near default	10.0		0.2		10.0		3.0
Government/municipalities
AA	30.0		0.4		30.0		2.3
Sovereign
AA	10.0		0.1		10.0		2.7
BBB	40.0		0.3		40.0		2.7
Total single name credit default swaps	669.0		4.1		669.0		1.9
Basket and index credit default swaps
Corporate debt
Near default (1)	82.3		(1.6)		82.3		0.2
Government/municipalities
AA	30.0		(0.4)		30.0		0.7
Structured finance
AA	3.5		—		3.5		0.8
Total basket and index credit default swaps	115.8		(2.0)		115.8		0.4
Total credit default swap protection sold	$	784.8	$	2.1	$	784.8	1.7

(1) Includes $60.0 million as of December 31, 2016, notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third party investors.

Hybrid Instruments (Table)

	September 30, 2017
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Structured finance
AA	$	1.8	$	1.8	0.1
Total structured finance	1.8		1.8		0.1
Total fixed maturities with credit derivatives	$	1.8	$	1.8	0.1

	December 31, 2016
					Weighted
					average
	Amortized		Carrying		expected life
	cost		value		(in years)
	(in millions)
Structured finance
AA	$	14.1	$	14.1	0.6
BBB	3.5		3.5		0.8
BB	2.3		2.3		0.8
CCC	4.7		4.7		1.2
Total structured finance	24.6		24.6		0.8
Total fixed maturities with credit derivatives	$	24.6	$	24.6	0.8

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 September 30, (1)				Hedged items in fair value	September 30, (1)
relationships	2017		2016		hedging relationships	2017		2016
	(in millions)					(in millions)
Interest rate contracts	$	1.1	$	8.9	Fixed maturities, available-for-sale	$	(1.1)	$	(8.5)
Interest rate contracts	0.1		(1.9)		Investment contracts	(0.1)		2.0
Total	$	1.2	$	7.0	Total	$	(1.2)	$	(6.5)

						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 nine months					for the nine months
Derivatives in fair value hedging	ended September 30, (1)				Hedged items in fair value	ended September 30, (1)
relationships	2017		2016		hedging relationships	2017		2016
	(in millions)					(in millions)
Interest rate contracts	$	2.1	$	1.3	Fixed maturities, available-for-sale	$	(2.4)	$	(0.9)
Interest rate contracts	(0.6)		1.4		Investment contracts	0.6		(1.3)
Total	$	1.5	$	2.7	Total	$	(1.8)	$	(2.2)

(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 three				Amount of gain (loss) for the
	months ended September 30,				nine months ended September 30,
Hedged item	2017		2016		2017		2016
	(in millions)
Fixed maturities, available-for-sale (1)	$	(2.4)	$	(9.6)	$	(8.1)	$	(34.6)
Investment contracts (2)	0.1		0.6		0.9		2.0

(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.

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		September 30,				into net income	September 30,
relationships	Related hedged item	2017		2016		(effective portion)	2017		2016
		(in millions)					(in millions)
Interest rate contracts	Fixed maturities, available-for-sale	$	(5.1)	$	(35.3)	Net investment income	$	5.4	$	4.9
Interest rate contracts	Debt	—		—		Operating expense	(2.8)		(2.3)
Foreign exchange contracts	Fixed maturities, available-for-sale	(17.1)		(2.0)		Net realized capital losses	(0.1)		—
Foreign exchange contracts	Investment contracts	—		1.3		Benefits, claims and settlement expenses	—		—
Total		$	(22.2)	$	(36.0)	Total	$	2.5	$	2.6

		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 nine months ended				reclassified from AOCI	for the nine months ended
flow hedging		September 30,				into net income	September 30,
relationships	Related hedged item	2017		2016		(effective portion)	2017		2016
		(in millions)					(in millions)
Interest rate contracts	Fixed maturities,available-for-sale	$	(44.2)	$	(13.6)	Net investment income	$	15.7	$	14.3
						Net realized capital losses	(0.7)		—
Interest rate contracts	Investment contracts	—		1.6		Benefits, claims and settlement expenses	—		—
Interest rate contracts	Debt	—		—		Operating expense	(8.0)		(6.8)
Foreign exchange contracts	Fixed maturities, available-for-sale	(46.7)		3.5		Net realized capital gains	14.0		1.2
Foreign exchange contracts	Investment contracts	0.1		5.2		Benefits, claims and settlement expenses	—		—
Total		$	(90.8)	$	(3.3)	Total	$	21.0	$	8.7

Cash Flow Hedges, Periodic Settlements Disclosures (Table)

	Amount of gain (loss) for the				Amount of gain (loss) for the
	three months ended September 30,				nine months ended September 30,
Hedged item	2017		2016		2017		2016
	(in millions)
Fixed maturities, available-for-sale (1)	$	1.9	$	1.4	$	5.3	$	4.3
Investment contracts (2)	(0.1)		(3.5)		(1.0)		(12.8)

(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				Amount of gain (loss) recognized in
	net income on derivatives for the				net income on derivatives for the
	three months ended September 30,				nine months ended September 30,
Derivatives not designated as hedging instruments	2017		2016		2017		2016
	(in millions)
Interest rate contracts	$	(2.0)	$	29.0	$	(46.2)	$	289.7
Foreign exchange contracts	28.7		9.1		47.0		32.2
Equity contracts	(63.8)		(61.6)		(162.5)		(46.6)
Credit contracts	(3.7)		14.6		(16.1)		39.1
Other contracts	8.1		(2.3)		33.9		(152.6)
Total	$	(32.7)	$	(11.2)	$	(143.9)	$	161.8