The amortized cost and fair value of available-for-sale fixed maturities and the cost and fair value of equity securities were as follows:

June 30, 2011

(In millions)

Amortized
Cost or
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

OTTI
Unrealized
Losses

Fixed maturities:

U.S. Treasury and government agencies

212.2

4.3

2.1

214.4

—

Municipal

944.2

34.1

9.2

969.1

—

Corporate

2,260.3

179.5

22.7

2,417.1

16.1

Residential mortgage-backed

669.5

39.3

9.2

699.6

6.7

Commercial mortgage-backed

339.9

14.7

0.5

354.1

—

Asset-backed

40.2

3.4

—

43.6

—

Total fixed maturities

4,466.3

275.3

43.7

4,697.9

22.8

Equity securities

147.8

17.0

0.6

164.2

—


	December 31, 2010
	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI Unrealized Losses
Fixed maturities:
U.S. Treasury and government agencies	$	259.4	$	5.0	$	3.2	$	261.2	$	—
Municipal		952.7		21.3		19.3		954.7		—
Corporate		2,276.0		174.6		30.2		2,420.4		19.5
Residential mortgage-backed		704.2		41.8		11.9		734.1		8.3
Commercial mortgage-backed		349.3		18.3		1.0		366.6		—
Asset-backed		57.2		3.7		—		60.9		—

Total fixed maturities	$	4,598.8	$	264.7	$	65.6	$	4,797.9	$	27.8

Equity securities	$	120.7	$	9.8	$	1.9	$	128.6	$	—

Other-than-temporary impairments ("OTTI") unrealized losses in the tables above represent OTTI recognized in accumulated other comprehensive income. This amount excludes net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date of $32.3 million and $36.1 million as of June 30, 2011 and December 31, 2010, respectively.

The amortized cost and fair value by maturity periods for fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, or the Company may have the right to put or sell the obligations back to the issuers.

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to manage significant unplanned fluctuations in earnings that may be caused by foreign currency exchange and interest rate volatility.

In April 2011, the Company entered into a foreign currency forward contract as an economic hedge of the foreign currency exchange risk embedded in the purchase price of Chaucer, which was denominated in UK Pounds Sterling ("GBP"). For the quarter and six months ended June 30, 2011, the Company recorded a loss of $4.7 million, reflected in other operating expenses in the Consolidated Statements of Income. At June 30, 2011, the fair value of the derivative liability of $4.7 million was included in Expenses and taxes payable in the Consolidated Balance Sheets. This contract had a notional amount of £297.9 million and was settled on July 14, 2011. An additional loss of $6.6 million from this contract will be recognized during the third quarter of 2011. Since a foreign currency hedge in which the hedged item is a forecasted transaction relating to a business combination does not qualify for hedge accounting under ASC 815, Derivatives and Hedging ("ASC 815"), the Company did not apply hedge accounting to this transaction. The foreign currency forward was in a loss position at June 30, 2011, therefore, the Company paid collateral, in the form of cash and cash equivalents, with a fair value of $5.1 million to its counterparty. See Note 3 – "Acquisitions" for additional information.

In May 2011, the Company entered into a treasury lock forward agreement to hedge the interest rate risk associated with the planned issuance of senior debt, which was completed on June 17, 2011. This hedge qualified as a cash flow hedge under ASC 815. It matured in June 2011 and resulted in a loss of $1.9 million, which was recorded in accumulated other comprehensive income and will be recognized as an expense over the term of the senior notes. All components of the derivative's loss were included in the assessment of hedge effectiveness. There was no ineffectiveness on this hedge. The Company expects $0.2 million to be reclassified into expense over the next 12 months.

The following tables provide information about the Company's fixed maturities and equity securities that were in an unrealized loss position at June 30, 2011 and December 31, 2010.

June 30, 2011

12 months or less

Greater than 12 months

Total

(In millions)

Gross
Unrealized
Losses

Fair Value

Gross
Unrealized
Losses

Fair Value

Gross
Unrealized
Losses

Fair Value

Fixed maturities:

Investment grade:

U.S. Treasury and government agencies

1.8

70.0

0.3

15.7

2.1

85.7

Municipal

3.0

147.9

6.2

79.9

9.2

227.8

Corporate

3.5

167.5

8.3

58.6

11.8

226.1

Residential mortgage-backed

2.1

81.0

7.1

25.1

9.2

106.1

Commercial mortgage-backed

0.2

18.6

0.3

4.7

0.5

23.3

Total investment grade

10.6

485.0

22.2

184.0

32.8

669.0

Below investment grade:

Corporate

1.1

53.6

9.8

89.2

10.9

142.8

Total fixed maturities

11.7

538.6

32.0

273.2

43.7

811.8

Equity securities

0.6

14.9

—

0.6

14.9

Total

12.3

553.5

32.0

273.2

44.3

826.7


	December 31, 2010
	12 months or less				Greater than 12 months				Total
(In millions)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Fixed maturities:
Investment grade:
U.S. Treasury and government agencies	$	2.7	$	84.9	$	0.5	$	16.4	$	3.2	$	101.3
Municipal		10.3		289.1		9.0		86.7		19.3		375.8
Corporate		6.7		256.1		10.5		66.8		17.2		322.9
Residential mortgage-backed		3.1		89.1		8.8		31.0		11.9		120.1
Commercial mortgage-backed		0.1		13.1		0.9		7.3		1.0		20.4

Total investment grade		22.9		732.3		29.7		208.2		52.6		940.5

Below investment grade:
Corporate		1.0		51.1		12.0		90.0		13.0		141.1

Total fixed maturities		23.9		783.4		41.7		298.2		65.6		1,081.6

Equity securities		1.9		45.8		—		—		1.9		45.8

Total	$	25.8	$	829.2	$	41.7	$	298.2	$	67.5	$	1,127.4

The Company employs a systematic methodology to evaluate declines in fair value below amortized cost for fixed maturity securities or cost for equity securities. In determining OTTI of fixed maturity and equity securities, the Company evaluates several factors and circumstances, including the issuer's overall financial condition; the issuer's credit and financial strength ratings; the issuer's financial performance, including earnings trends, dividend payments and asset quality; any specific events which may influence the operations of the issuer; the general outlook for market conditions in the industry or geographic region in which the issuer operates; and the length of time and the degree to which the fair value of an issuer's securities remains below the Company's cost. With respect to fixed maturity investments, the Company considers any factors that might raise doubt about the issuer's ability to pay all amounts due according to the contractual terms and whether the Company expects to recover the entire amortized cost basis of the security. With respect to equity securities, the Company considers its ability and intent to hold the investment for a period of time to allow for a recovery in value. The Company applies these factors to all securities.

For the three months ended June 30, 2011, total OTTI of fixed maturities were $0.5 million. Of this amount, $0.8 million was recognized in earnings, including $0.3 million that was transferred from unrealized losses in accumulated other comprehensive income. For the first six months of 2011, total OTTI of fixed maturities and equity securities were $1.7 million. Of this amount, $2.2 million was recognized in earnings, including $0.5 million that was transferred from unrealized losses in accumulated other comprehensive income.

For the three months ended June 30, 2010, total OTTI of fixed maturities and equity securities was $2.8 million. Of this amount, $3.4 million was recognized in earnings, including $0.6 million that was transferred from unrealized losses in accumulated other comprehensive income. For the first six months of 2010, total OTTI of fixed maturities and equity securities was $3.3 million. Of this amount, $6.1 million was recognized in earnings, including $2.8 million that was transferred from unrealized losses in accumulated other comprehensive income.

The methodology and significant inputs used to measure the amount of credit losses on fixed maturities in 2011 and 2010 were as follows:

Asset-backed securities, including commercial and residential mortgage-backed securities - the Company utilized cash flow estimates based on bond specific facts and circumstances that include collateral characteristics, expectations of delinquency and default rates, loss severity, prepayment speeds and structural support, including subordination and guarantees.

Corporate bonds – the Company utilized a financial model that derives expected cash flows based on probability-of-default factors by credit rating and asset duration and loss-given-default factors based on security type. These factors are based on historical data provided by an independent third-party rating agency.

The following table provides rollforwards of the cumulative amounts related to the Company's credit loss portion of the OTTI losses on fixed maturity securities for which the non-credit portion of the loss is included in other comprehensive income.

Proceeds from sales of available-for-sale securities and the gross realized gains and losses on those sales were as follows: