4. INVESTMENTS

A. FIXED MATURITIES AND EQUITY SECURITIES

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

DECEMBER 31, 2010

(In millions)

Gross Unrealized Losses

Amortized
Cost (1)

Gross
Unrealized
Gains

Unrealized
Losses

OTTI
Unrealized
Losses(2)

Fair Value

U.S. Treasury securities and U.S. government and agency securities

261.4

5.0

3.2

—

263.2

States and political subdivisions

963.4

21.5

19.4

—

965.5

Corporate fixed maturities

2,413.7

186.0

11.2

25.4

2,563.1

Residential mortgage-backed securities

725.4

41.9

3.7

8.3

755.3

Commercial mortgage-backed securities

350.7

18.4

1.0

—

368.1

Total fixed maturities, including assets of discontinued operations

4,714.6

272.8

38.5

33.7

4,915.2

Less: fixed maturities of discontinued operations

(115.8

)

(8.1

)

(0.7

)

(5.9

)

(117.3

)

Total fixed maturities, excluding discontinued operations

4,598.8

264.7

37.8

27.8

4,797.9

Equity securities, excluding discontinued operations

120.7

9.8

1.9

—

128.6


DECEMBER 31, 2009
(In millions)
							Gross Unrealized Losses
	Amortized Cost (1)			Gross Unrealized Gains			Unrealized Losses			OTTI Unrealized Losses(2)			Fair Value
U.S. Treasury securities and U.S. government and agency securities	$	355.2		$	3.2		$	3.7		$	—		$	354.7
States and political subdivisions		844.7			13.1			25.6			—			832.2
Corporate fixed maturities		2,246.7			131.4			14.3			29.9			2,333.9
Residential mortgage-backed securities		858.8			29.7			3.4			10.7			874.4
Commercial mortgage-backed securities		334.5			10.1			7.4			—			337.2

Total fixed maturities, including assets of discontinued operations		4,639.9			187.5			54.4			40.6			4,732.4
Less: fixed maturities of discontinued operations		(119.6	)		(6.0	)		(2.0	)		(6.8	)		(116.8	)

Total fixed maturities, excluding discontinued operations	$	4,520.3		$	181.5		$	52.4		$	33.8		$	4,615.6

Equity securities, excluding discontinued operations	$	57.3		$	12.2		$	0.3		$	—		$	69.2

(1)	Amortized cost for fixed maturities and cost for equity securities.

(2)

Represents other-than-temporary impairments recognized in accumulated other comprehensive income. Amount excludes net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date of $40.4 million and $30.1 million as of December 31, 2010 and December 31, 2009, respectively.

The Company participates in a security lending program for the purpose of enhancing income. Securities on loan to various counterparties had a fair value of $65.2 million and $72.8 million at December 31, 2010 and 2009, respectively, and were fully collateralized by cash. The fair value of the loaned securities is monitored on a daily basis, and the collateral is maintained at a level of at least 102% of the fair value of the loaned securities. Securities lending collateral is recorded by the Company in cash and cash equivalents, with an offsetting liability included in expenses and taxes payable.

At December 31, 2010 and 2009, fixed maturities with fair values of $87.3 million and $77.6 million, respectively, and amortized cost of $84.1 million and $76.2 million, respectively, were on deposit with various state and governmental authorities.

The Company enters into various agreements that may require its fixed maturities to be held as collateral by others. At December 31, 2010, fixed maturities with a fair value of $177.5 million were held as collateral for collateralized borrowings and other arrangements. At December 31, 2009, fixed maturities with a fair value of $181.8 million were held as collateral for collateralized borrowings, reinsurance and other arrangements. Of these amounts, $162.7 million and $142.0 million related to the FHLBB collateralized borrowing program at December 31, 2010 and 2009, respectively.

At December 31, 2010, there were contractual investment commitments of up to $77.5 million, consisting primarily of the Company's commitment to invest approximately $58 million in a real estate project. In addition to these investment commitments, the Company has contractual obligations to purchase tax credits of up to $18.8 million.

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. Mortgage-backed securities are included in the category representing their stated maturity.


DECEMBER 31	2010
(*In millions)*
	Amortized Cost			Fair Value
Due in one year or less	$	178.2		$	181.4
Due after one year through five years		1,211.1			1,287.9
Due after five years through ten years		1,636.7			1,720.0
Due after ten years		1,688.6			1,725.9

Total fixed maturities including assets of discontinued operations		4,714.6			4,915.2
Less: fixed maturities of discontinued operations		(115.8	)		(117.3	)

Total fixed maturities, excluding assets of discontinued operations	$	4,598.8		$	4,797.9

B. UNREALIZED GAINS AND LOSSES

Unrealized gains and losses on available-for-sale and other securities are summarized in the following table.


FOR THE YEARS ENDED DECEMBER 31
*(In millions)*
2010	Fixed Maturities			Equity Securities And Other ⁽¹⁾			Total
Net appreciation, beginning of year	$	97.8		$	9.9		$	107.7
Net appreciation (depreciation) on available-for-sale securities		101.1			(3.3	)		97.8
Portion of OTTI losses transferred from other comprehensive income		6.9			—			6.9
Benefit for deferred federal income taxes		4.5			1.4			5.9

		112.5			(1.9	)		110.6

Net appreciation, end of year	$	210.3		$	8.0		$	218.3


2009
Net depreciation, beginning of year	$	(266.0	)	$	(10.1	)	$	(276.1	)
Cumulative effect of change in accounting principle		(33.3	)		—			(33.3	)

Balance at beginning of year, as adjusted		(299.3	)		(10.1	)		(309.4	)
Net appreciation on available-for-sale securities		403.2			19.9			423.1
Portion of OTTI losses transferred to other comprehensive income		(7.3	)		—			(7.3	)
Benefit for deferred federal income taxes		1.2			0.1			1.3

		397.1			20.0			417.1

Net appreciation, end of year	$	97.8		$	9.9		$	107.7


2008
Net (depreciation) appreciation, beginning of year	$	(3.1	)	$	8.6		$	5.5
Net depreciation on available-for-sale securities		(267.9	)		(19.1	)		(287.0	)
Net appreciation from the effect on policy liabilities		2.7			—			2.7
Benefit for deferred federal income taxes		2.3			0.4			2.7

		(262.9	)		(18.7	)		(281.6	)

Net depreciation, end of year	$	(266.0	)	$	(10.1	)	$	(276.1	)

⁽¹⁾	Equity securities and other balances at December 31, 2010, 2009 and 2008 include after-tax net appreciation on other invested assets of $0.7 million, $1.3 million and $1.4 million, respectively.

C. SECURITIES IN AN UNREALIZED LOSS POSITION

The following tables provide information about the Company's fixed maturities and equity securities that are in an unrealized loss position at December 31, 2010 and 2009:

DECEMBER 31, 2010

(In millions)

12 months or less

Greater than 12
months

Total

Gross
Unrealized
Losses and
OTTI

Fair
Value

Gross
Unrealized
Losses and
OTTI

Fair
Value

Gross
Unrealized
Losses and
OTTI (1)

Fair
Value

Fixed maturities:

Investment grade:

U.S. Treasury securities and U.S. government and agency securities

2.7

85.1

0.5

16.4

3.2

101.5

States and political subdivisions

10.4

292.3

9.0

86.7

19.4

379.0

Corporate fixed maturities

6.7

256.9

14.0

78.3

20.7

335.2

Residential mortgage-backed securities

3.2

103.8

8.8

31.0

12.0

134.8

Commercial mortgage-backed securities

0.1

13.1

0.9

7.3

1.0

20.4

Total investment grade

23.1

751.2

33.2

219.7

56.3

970.9

Below investment grade (2):

Corporate fixed maturities

1.1

56.8

14.8

102.5

15.9

159.3

Total fixed maturities

24.2

808.0

48.0

322.2

72.2

1,130.2

Equity securities:

Common equity securities

1.9

45.8

—

1.9

45.8

Total (3)

26.1

853.8

48.0

322.2

74.1

1,176.0

(1)	Includes $33.7 million unrealized loss related to other-than-temporary impairment losses recognized in other comprehensive income, of which $14.8 million are below investment grade aged greater than 12 months.

(2)	Substantially all below investment grade securities with an unrealized loss had been rated by the National Association of Insurance Commissioners ("NAIC"), Standard & Poor's or Moody's at December 31, 2010.

(3)	Includes discontinued accident and health business of $6.6 million in gross unrealized losses with $48.6 million in fair value at December 31, 2010.


DECEMBER 31, 2009
(In millions)
	12 months or less				Greater than 12 months				Total
	Gross Unrealized Losses and OTTI		Fair Value		Gross Unrealized Losses and OTTI		Fair Value		Gross Unrealized Losses and OTTI (1)		Fair Value
Fixed maturities:
Investment grade:
U.S. Treasury securities and U.S. government and agency securities	$	3.7	$	170.8	$	—	$	—	$	3.7	$	170.8
States and political subdivisions		9.0		275.2		15.6		176.5		24.6		451.7
Corporate fixed maturities		3.4		115.8		13.3		152.7		16.7		268.5
Residential mortgage-backed securities		6.6		89.1		7.5		62.6		14.1		151.7
Commercial mortgage-backed securities		0.4		13.5		7.0		30.0		7.4		43.5

Total investment grade		23.1		664.4		43.4		421.8		66.5		1,086.2

Below investment grade (2):
States and political subdivisions		0.2		8.7		0.8		8.2		1.0		16.9
Corporate fixed maturities		10.6		84.1		16.9		150.1		27.5		234.2

Total below investment grade		10.8		92.8		17.7		158.3		28.5		251.1

Total fixed maturities		33.9		757.2		61.1		580.1		95.0		1,337.3

Equity securities:
Common equity securities		—		—		0.3		1.4		0.3		1.4

Total (3)	$	33.9	$	757.2	$	61.4	$	581.5	$	95.3	$	1,338.7

(1)	Includes $40.6 million unrealized loss related to other-than-temporary impairment losses recognized in other comprehensive income, of which $14.8 million are below investment grade aged greater than 12 months.

(2)	Substantially all below investment grade securities with an unrealized loss had been rated by the NAIC, Standard & Poor's or Moody's at December 31, 2009.

(3)	Includes discontinued accident and health business of $8.8 million in gross unrealized losses with $55.0 million in fair value at December 31, 2009.

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 other-than-temporary impairments 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.

The following tables provide information on the Company's gross unrealized losses of fixed maturity securities by credit ratings, including ratings of securities with third party guarantees, as of December 31, 2010 and 2009.


DECEMBER 31	2010
(In millions)
	AAA			AA			A			BBB			Total investment grade			BB			B			CCC and below			Total below investment grade			Total
U.S. Treasury securities and U.S government and agency securities	$	3.2		$	—		$	—		$	—		$	3.2		$	—		$	—		$	—		$	—		$	3.2
States and political subdivisions		4.0			6.2			1.5			7.7			19.4			—			—			—			—			19.4
Corporate fixed maturities		0.3			1.1			6.5			12.8			20.7			5.6			5.7			4.6			15.9			36.6
Residential mortgage-backed securities		3.7			0.6			—			7.7			12.0			—			—			—			—			12.0
Commercial mortgage-backed securities		—			—			1.0			—			1.0			—			—			—			—			1.0

Total fixed maturities, including discontinued operations		11.2			7.9			9.0			28.2			56.3			5.6			5.7			4.6			15.9			72.2
Less: losses included in discontinued operations		(0.2	)		—			(0.4	)		(3.1	)		(3.7	)		(2.3	)		(0.2	)		(0.4	)		(2.9	)		(6.6	)

Total fixed maturities, excluding discontinued operations	$	11.0		$	7.9		$	8.6		$	25.1		$	52.6		$	3.3		$	5.5		$	4.2		$	13.0		$	65.6


DECEMBER 31	2009
(In millions)
	AAA			AA			A			BBB			Total investment grade			BB			B			CCC and below			Total below investment grade			Total
U.S. Treasury securities and U.S government and agency securities	$	3.7		$	—		$	—		$	—		$	3.7		$	—		$	—		$	—		$	—		$	3.7
States and political subdivisions		4.1			7.3			4.8			8.4			24.6			0.8			—			0.2			1.0			25.6
Corporate fixed maturities		—			1.4			7.1			8.2			16.7			11.8			9.7			6.0			27.5			44.2
Residential mortgage-backed securities		2.4			1.4			7.9			2.4			14.1			—			—			—			—			14.1
Commercial mortgage-backed securities		0.5			0.8			6.1			—			7.4			—			—			—			—			7.4

Total fixed maturities, including discontinued operations		10.7			10.9			25.9			19.0			66.5			12.6			9.7			6.2			28.5			95.0
Less: losses included in discontinued operations		—			(0.2	)		(1.4	)		(3.2	)		(4.8	)		(0.5	)		(2.8	)		(0.7	)		(4.0	)		(8.8	)

Total fixed maturities, excluding discontinued operations	$	10.7		$	10.7		$	24.5		$	15.8		$	61.7		$	12.1		$	6.9		$	5.5		$	24.5		$	86.2

D. OTHER

The Company had no concentration of investments in a single investee that exceeded 10% of shareholders' equity except as follows:


DECEMBER 31	2010		2009
(in millions)
	Fair Value
Fixed maturities:
Federal Home Loan Mortgage Corp. (1)	$	445.5	$	574.0

Federal National Mortgage Association (2)	$	205.4	$	260.3

(1)	Includes securities of discontinued operations of $6.4 million and $27.7 million at December 31, 2010 and 2009, respectively.

(2)	Holdings in Federal National Mortgage Association at December 31, 2010 were less than 10% of shareholders' equity but are included for comparative purposes.