INVESTMENTS

We classify our fixed maturity securities into one of two categories: (i) "available for sale" (which we carry at estimated fair value with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders' equity); or (ii) "trading" (which we carry at estimated fair value with changes in such value recognized as net investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios)).

Our trading securities include: (i) investments purchased with the intent of selling in the near term to generate income; and (ii) investments supporting certain insurance liabilities (including investments backing the market strategies of our multibucket annuity products) and certain reinsurance agreements. The change in fair value of these securities is recognized in income from policyholder and reinsurer accounts and other special-purpose portfolios (a component of net investment income). Investment income from trading securities backing certain insurance liabilities and certain reinsurance agreements is substantially offset by the change in insurance policy benefits related to certain products and agreements. The trading account also includes certain fixed maturity securities containing embedded derivatives for which we have elected the fair value option. The change in value of these securities is recognized in realized investment gains (losses). Our trading securities totaled $235.5 million and $247.6 million at March 31, 2014 and December 31, 2013, respectively.

Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments. These amounts, included in shareholders' equity as of March 31, 2014 and December 31, 2013, were as follows (dollars in millions):



	March 31, 2014			December 31, 2013
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized	$	(4.1	)	$	6.5
Net unrealized gains on all other investments	1,701.0			1,322.6
Adjustment to present value of future profits (a)	(162.0		)	(47.7		)
Adjustment to deferred acquisition costs	(337.2		)	(137.0		)
Unrecognized net loss related to deferred compensation plan	(6.8		)	(7.1		)
Deferred income tax liabilities	(424.7		)	(405.5		)
Accumulated other comprehensive income	$	766.2		$	731.8

________


(a)	The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003 (the date Conseco, Inc., an Indiana corporation (our "Predecessor"), emerged from bankruptcy.

At March 31, 2014, adjustments to the present value of future profits, deferred acquisition costs and deferred tax assets included $(138.8) million, $(126.5) million and $94.3 million, respectively, for premium deficiencies that would exist on certain long-term health products if unrealized gains on the assets backing such products had been realized and the proceeds from the sales of such assets were invested at then current yields.

At March 31, 2014, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, were as follows (dollars in millions):



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Other-than-temporary impairments included in accumulated other comprehensive income
Corporate securities	$	12,313.9	$	1,345.6	$	(52.2	)	$	13,607.3	$	—
United States Treasury securities and obligations of United States government corporations and agencies	143.9		2.7		(.4		)	146.2		—
States and political subdivisions	1,929.5		157.5		(16.2		)	2,070.8		—
Asset-backed securities	1,288.7		76.0		(3.7		)	1,361.0		—
Collateralized debt obligations	282.7		5.7		(.6		)	287.8		—
Commercial mortgage-backed securities	1,151.1		81.0		(2.2		)	1,229.9		—
Mortgage pass-through securities	8.4		.5		—			8.9		—
Collateralized mortgage obligations	1,347.4		85.5		(1.0		)	1,431.9		(3.8		)
Total fixed maturities, available for sale	$	18,465.6	$	1,754.5	$	(76.3	)	$	20,143.8	$	(3.8	)
Fixed maturities of CLIC being sold	$	3,456.0	$	—	$	—		$	3,456.0	$	—

The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at March 31, 2014, by contractual maturity. Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties. In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as "structured securities") frequently include provisions for periodic principal payments and permit periodic unscheduled payments.



	Amortized cost		Estimated fair value
	(Dollars in millions)
Due in one year or less	$	118.8	$	120.9
Due after one year through five years	1,719.2		1,889.3
Due after five years through ten years	3,042.5		3,307.6
Due after ten years	9,506.8		10,506.5
Subtotal	14,387.3		15,824.3
Structured securities	4,078.3		4,319.5
Total fixed maturities, available for sale	$	18,465.6	$	20,143.8

Net Realized Investment Gains (Losses)

The following table sets forth the net realized investment gains (losses) for the periods indicated (dollars in millions):



	Three months ended
	March 31,
	2014			2013
Fixed maturity securities, available for sale:
Gross realized gains on sale	$	41.5		$	16.6
Gross realized losses on sale	(5.5		)	(2.0		)
Impairments:
Total other-than-temporary impairment losses	—			—
Other-than-temporary impairment losses recognized in accumulated other comprehensive income	—			—
Net impairment losses recognized	—			—
Net realized investment gains from fixed maturities	36.0			14.6
Commercial mortgage loans	—			.7
Impairments of mortgage loans and other investments	(11.9		)	—
Other	(.7		)	—
Net realized investment gains	$	23.4		$	15.3

During the first three months of 2014, we recognized net realized investment gains of $23.4 million, which were comprised of $32.8 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $.8 billion, the increase in fair value of certain fixed maturity investments with embedded derivatives of $2.5 million and $11.9 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

During the first three months of 2013, we recognized net realized investment gains of $15.3 million, which were comprised of $19.8 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $.5 billion and the decrease in fair value of certain fixed maturity investments with embedded derivatives of $4.5 million.

At March 31, 2014, fixed maturity securities in default or considered nonperforming had an aggregate amortized cost and a carrying value of nil and $.5 million, respectively.

Our fixed maturity investments are generally purchased in the context of various long-term strategies, including funding insurance liabilities, so we do not generally seek to generate short-term realized gains through the purchase and sale of such securities. In certain circumstances, including those in which securities are selling at prices which exceed our view of their underlying economic value, or when it is possible to reinvest the proceeds to better meet our long-term asset-liability objectives, we may sell certain securities.

During the first three months of 2014, the $5.5 million of realized losses on sales of $86.9 million of fixed maturity securities, available for sale, included: (i) $.5 million of losses related to the sales of securities issued by state and political subdivisions; and (ii) $5.0 million of additional losses related to various corporate securities. Securities are generally sold at a loss following unforeseen issue-specific events or conditions or shifts in perceived risks. These reasons include but are not limited to: (i) changes in the investment environment; (ii) expectation that the market value could deteriorate further; (iii) desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; or (v) changes in expected cash flows.

During the first three months of 2014, we recognized $11.9 million of impairment losses recorded in earnings which included: (i) a $3.9 million writedown of a commercial mortgage loan related to a property which recently lost a major tenant; and (ii) an $8.0 million impairment related to two legacy private company investments where earnings and cash flows have not met the expectations assumed in our previous valuations.

We regularly evaluate all of our investments with unrealized losses for possible impairment. Our assessment of whether unrealized losses are "other than temporary" requires significant judgment. Factors considered include: (i) the extent to which fair value is less than the cost basis; (ii) the length of time that the fair value has been less than cost; (iii) whether the unrealized loss is event driven, credit-driven or a result of changes in market interest rates or risk premium; (iv) the near-term prospects for specific events, developments or circumstances likely to affect the value of the investment; (v) the investment's rating and whether the investment is investment-grade and/or has been downgraded since its purchase; (vi) whether the issuer is current on all payments in accordance with the contractual terms of the investment and is expected to meet all of its obligations under the terms of the investment; (vii) whether we intend to sell the investment or it is more likely than not that circumstances will require us to sell the investment before recovery occurs; (viii) the underlying current and prospective asset and enterprise values of the issuer and the extent to which the recoverability of the carrying value of our investment may be affected by changes in such values; (ix) projections of, and unfavorable changes in, cash flows on structured securities including mortgage-backed and asset-backed securities; (x) our best estimate of the value of any collateral; and (xi) other objective and subjective factors.

Future events may occur, or additional information may become available, which may necessitate future realized losses in our portfolio. Significant losses could have a material adverse effect on our consolidated financial statements in future periods.

Impairment losses on equity securities are recognized in net income. The manner in which impairment losses on fixed maturity securities, available for sale, are recognized in the financial statements is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, the security is other-than-temporarily impaired and the full amount of the impairment is recognized as a loss through earnings. If we do not expect to recover the amortized cost basis, we do not plan to sell the security, and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, less any current period credit loss, the recognition of the other-than-temporary impairment is bifurcated. We recognize the credit loss portion in net income and the noncredit loss portion in accumulated other comprehensive income.

We estimate the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate of future cash flows vary depending on the type of security.

For most structured securities, cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including excess spread, subordination and guarantees. For corporate bonds, cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances. The previous amortized cost basis less the impairment recognized in net income becomes the security's new cost basis. We accrete the new cost basis to the estimated future cash flows over the expected remaining life of the security, except when the security is in default or considered nonperforming.

The remaining noncredit impairment, which is recorded in accumulated other comprehensive income, is the difference between the security's estimated fair value and our best estimate of future cash flows discounted at the effective interest rate prior to impairment. The remaining noncredit impairment typically represents changes in the market interest rates, current market liquidity and risk premiums. As of March 31, 2014, other-than-temporary impairments included in accumulated other comprehensive income of $3.8 million (before taxes and related amortization) related to structured securities.

The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three months ended March 31, 2014, and 2013 (dollars in millions):



	Three months ended
	March 31,
	2014			2013
Credit losses on fixed maturity securities, available for sale, beginning of period	$	(1.3	)	$	(1.6	)
Add: credit losses on other-than-temporary impairments not previously recognized	—			—
Less: credit losses on securities sold	—			.1
Less: credit losses on securities impaired due to intent to sell (a)	—			—
Add: credit losses on previously impaired securities	—			—
Less: increases in cash flows expected on previously impaired securities	—			—
Credit losses on fixed maturity securities, available for sale, end of period	$	(1.3	)	$	(1.5	)

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(a)	Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.

Gross Unrealized Investment Losses

Our investment strategy is to maximize, over a sustained period and within acceptable parameters of quality and risk, investment income and total investment return through active investment management. Accordingly, we may sell securities at a gain or a loss to enhance the projected total return of the portfolio as market opportunities change, to reflect changing perceptions of risk, or to better match certain characteristics of our investment portfolio with the corresponding characteristics of our insurance liabilities.

The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at March 31, 2014 (dollars in millions):



	Less than 12 months					12 months or greater					Total
Description of securities	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
United States Treasury securities and obligations of United States government corporations and agencies	$	19.2	$	(.4	)	$	—	$	—		$	19.2	$	(.4	)
States and political subdivisions	186.2		(11.6		)	63.5		(4.6		)	249.7		(16.2		)
Corporate securities	980.5		(35.7		)	196.3		(16.5		)	1,176.8		(52.2		)
Asset-backed securities	229.7		(2.9		)	35.3		(.8		)	265.0		(3.7		)
Collateralized debt obligations	26.9		(.6		)	—		—			26.9		(.6		)
Commercial mortgage-backed securities	77.1		(2.2		)	—		—			77.1		(2.2		)
Mortgage pass-through securities	.9		—			.4		—			1.3		—
Collateralized mortgage obligations	102.2		(.6		)	5.2		(.4		)	107.4		(1.0		)
Total fixed maturities, available for sale	$	1,622.7	$	(54.0	)	$	300.7	$	(22.3	)	$	1,923.4	$	(76.3	)
Equity securities	$	41.0	$	(2.2	)	$	—	$	—		$	41.0	$	(2.2	)



	Less than 12 months					12 months or greater					Total
Description of securities	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
United States Treasury securities and obligations of United States government corporations and agencies	$	23.8	$	(.6	)	$	—	$	—		$	23.8	$	(.6	)
States and political subdivisions	473.6		(30.3		)	79.2		(8.7		)	552.8		(39.0		)
Corporate securities	2,406.1		(132.8		)	170.3		(20.8		)	2,576.4		(153.6		)
Asset-backed securities	308.4		(6.5		)	32.5		(.7		)	340.9		(7.2		)
Collateralized debt obligations	46.7		(.5		)	—		—			46.7		(.5		)
Commercial mortgage-backed securities	161.8		(5.8		)	—		—			161.8		(5.8		)
Mortgage pass-through securities	1.6		—			1.6		—			3.2		—
Collateralized mortgage obligations	121.8		(1.6		)	2.2		—			124.0		(1.6		)
Total fixed maturities, available for sale	$	3,543.8	$	(178.1	)	$	285.8	$	(30.2	)	$	3,829.6	$	(208.3	)
Equity securities	$	26.8	$	(4.9	)	$	—	$	—		$	26.8	$	(4.9	)

Based on management's current assessment of investments with unrealized losses at March 31, 2014, the Company believes the issuers of the securities will continue to meet their obligations (or with respect to equity-type securities, the investment value will recover to its cost basis). While we do not have the intent to sell securities with unrealized losses and it is not more likely than not that we will be required to sell securities with unrealized losses prior to their anticipated recovery, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, if a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we had the intent to sell the security before its anticipated recovery.