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September 30, 2016 | December 31, 2015 | ||||||
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized | $ | 3.6 | $ | 1.6 | |||
Net unrealized gains on all other investments | 2,206.4 | 903.4 | |||||
Adjustment to present value of future profits (a) | (115.4 | ) | (121.2 | ) | |||
Adjustment to deferred acquisition costs | (351.8 | ) | (133.3 | ) | |||
Adjustment to insurance liabilities | (414.0 | ) | (14.6 | ) | |||
Unrecognized net loss related to deferred compensation plan | — | (8.6 | ) | ||||
Deferred income tax liabilities | (473.3 | ) | (224.5 | ) | |||
Accumulated other comprehensive income | $ | 855.5 | $ | 402.8 |
(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. |
Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | Other-than-temporary impairments included in accumulated other comprehensive income | |||||||||||||||
Corporate securities | $ | 12,235.6 | $ | 1,705.2 | $ | (63.7 | ) | $ | 13,877.1 | $ | — | ||||||||
United States Treasury securities and obligations of United States government corporations and agencies | 238.5 | 48.2 | — | 286.7 | — | ||||||||||||||
States and political subdivisions | 1,794.5 | 290.9 | (1.3 | ) | 2,084.1 | (3.0 | ) | ||||||||||||
Debt securities issued by foreign governments | 26.8 | 1.7 | — | 28.5 | — | ||||||||||||||
Asset-backed securities | 2,636.4 | 94.8 | (10.4 | ) | 2,720.8 | — | |||||||||||||
Collateralized debt obligations | 177.8 | .6 | (.7 | ) | 177.7 | — | |||||||||||||
Commercial mortgage-backed securities | 1,522.4 | 65.7 | (8.6 | ) | 1,579.5 | — | |||||||||||||
Mortgage pass-through securities | 2.4 | .3 | — | 2.7 | — | ||||||||||||||
Collateralized mortgage obligations | 1,000.8 | 66.0 | (1.7 | ) | 1,065.1 | (1.5 | ) | ||||||||||||
Total fixed maturities, available for sale | $ | 19,635.2 | $ | 2,273.4 | $ | (86.4 | ) | $ | 21,822.2 | $ | (4.5 | ) | |||||||
Equity securities | $ | 312.9 | $ | 19.3 | $ | (.9 | ) | $ | 331.3 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 421.0 | $ | 425.7 | |||
Due after one year through five years | 2,246.8 | 2,432.9 | |||||
Due after five years through ten years | 1,635.1 | 1,764.0 | |||||
Due after ten years | 9,992.5 | 11,653.8 | |||||
Subtotal | 14,295.4 | 16,276.4 | |||||
Structured securities | 5,339.8 | 5,545.8 | |||||
Total fixed maturities, available for sale | $ | 19,635.2 | $ | 21,822.2 |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Gross realized gains on sale | $ | 7.3 | $ | 21.7 | $ | 127.1 | $ | 47.9 | |||||||
Gross realized losses on sale | (2.8 | ) | (27.8 | ) | (84.4 | ) | (48.7 | ) | |||||||
Impairments: | |||||||||||||||
Total other-than-temporary impairment losses | — | (11.1 | ) | (6.3 | ) | (12.4 | ) | ||||||||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income | — | 3.0 | — | 3.0 | |||||||||||
Net impairment losses recognized | — | (8.1 | ) | (6.3 | ) | (9.4 | ) | ||||||||
Net realized investment gains (losses) from fixed maturities | 4.5 | (14.2 | ) | 36.4 | (10.2 | ) | |||||||||
Equity securities | 17.2 | — | 21.3 | 3.0 | |||||||||||
Commercial mortgage loans | — | — | — | (2.3 | ) | ||||||||||
Impairments of other investments | (1.2 | ) | (4.3 | ) | (18.5 | ) | (12.2 | ) | |||||||
Gain (loss) on dissolution of a variable interest entity | — | — | (7.3 | ) | 11.3 | ||||||||||
Other (a) | (8.9 | ) | (1.1 | ) | (8.6 | ) | (10.4 | ) | |||||||
Net realized investment gains (losses) | $ | 11.6 | $ | (19.6 | ) | $ | 23.3 | $ | (20.8 | ) |
(a) | Changes in the estimated fair value of trading securities that we have elected the fair value option (and are still held as of the end of the respective periods) was $.8 million and $(4.7) million for the nine months ended September 30, 2016 and 2015, respectively. |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Credit losses on fixed maturity securities, available for sale, beginning of period | $ | (2.6 | ) | $ | (1.0 | ) | $ | (2.6 | ) | $ | (1.0 | ) | |||
Add: credit losses on other-than-temporary impairments not previously recognized | — | (2.0 | ) | — | (2.0 | ) | |||||||||
Less: credit losses on securities sold | .1 | .1 | .1 | .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 | $ | (2.5 | ) | $ | (2.9 | ) | $ | (2.5 | ) | $ | (2.9 | ) |
(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. |
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 | $ | 69.9 | $ | — | $ | — | $ | — | $ | 69.9 | $ | — | ||||||||||||
States and political subdivisions | 12.7 | (.4 | ) | 17.6 | (.9 | ) | 30.3 | (1.3 | ) | |||||||||||||||
Corporate securities | 403.0 | (13.5 | ) | 607.0 | (50.2 | ) | 1,010.0 | (63.7 | ) | |||||||||||||||
Asset-backed securities | 333.0 | (5.1 | ) | 305.8 | (5.3 | ) | 638.8 | (10.4 | ) | |||||||||||||||
Collateralized debt obligations | 36.2 | (.6 | ) | 48.0 | (.1 | ) | 84.2 | (.7 | ) | |||||||||||||||
Commercial mortgage-backed securities | 219.6 | (2.0 | ) | 161.2 | (6.6 | ) | 380.8 | (8.6 | ) | |||||||||||||||
Collateralized mortgage obligations | 141.0 | (.7 | ) | 35.9 | (1.0 | ) | 176.9 | (1.7 | ) | |||||||||||||||
Total fixed maturities, available for sale | $ | 1,215.4 | $ | (22.3 | ) | $ | 1,175.5 | $ | (64.1 | ) | $ | 2,390.9 | $ | (86.4 | ) | |||||||||
Equity securities | $ | 20.6 | $ | (.8 | ) | $ | — | $ | — | $ | 20.6 | $ | (.8 | ) |
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 | $ | 43.6 | $ | (.3 | ) | $ | — | $ | — | $ | 43.6 | $ | (.3 | ) | ||||||||||
States and political subdivisions | 156.8 | (4.1 | ) | 14.8 | (3.5 | ) | 171.6 | (7.6 | ) | |||||||||||||||
Debt securities issued by foreign governments | 20.7 | (.6 | ) | — | — | 20.7 | (.6 | ) | ||||||||||||||||
Corporate securities | 2,913.6 | (255.7 | ) | 278.9 | (89.5 | ) | 3,192.5 | (345.2 | ) | |||||||||||||||
Asset-backed securities | 930.3 | (11.7 | ) | 98.4 | (1.7 | ) | 1,028.7 | (13.4 | ) | |||||||||||||||
Collateralized debt obligations | 96.2 | (1.8 | ) | 36.3 | (.4 | ) | 132.5 | (2.2 | ) | |||||||||||||||
Commercial mortgage-backed securities | 556.0 | (16.1 | ) | 25.7 | (1.5 | ) | 581.7 | (17.6 | ) | |||||||||||||||
Mortgage pass-through securities | — | — | .1 | — | .1 | — | ||||||||||||||||||
Collateralized mortgage obligations | 97.8 | (1.0 | ) | 40.8 | (.6 | ) | 138.6 | (1.6 | ) | |||||||||||||||
Total fixed maturities, available for sale | $ | 4,815.0 | $ | (291.3 | ) | $ | 495.0 | $ | (97.2 | ) | $ | 5,310.0 | $ | (388.5 | ) | |||||||||
Equity securities | $ | 140.1 | $ | (2.4 | ) | $ | 2.4 | $ | (.4 | ) | $ | 142.5 | $ | (2.8 | ) |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income for basic and diluted earnings per share | $ | 18.6 | $ | 33.8 | $ | 124.0 | $ | 133.4 | |||||||
Shares: | |||||||||||||||
Weighted average shares outstanding for basic earnings per share | 174,247 | 190,260 | 177,640 | 195,536 | |||||||||||
Effect of dilutive securities on weighted average shares: | |||||||||||||||
Stock options, restricted stock and performance units | 1,476 | 2,105 | 1,733 | 2,035 | |||||||||||
Weighted average shares outstanding for diluted earnings per share | 175,723 | 192,365 | 179,373 | 197,571 |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | $ | 6.8 | $ | 5.2 | $ | 17.4 | $ | 17.0 | |||||||
Health | 310.3 | 311.6 | 933.3 | 940.5 | |||||||||||
Life | 96.6 | 95.7 | 295.8 | 281.6 | |||||||||||
Net investment income (a) | 244.7 | 196.3 | 686.8 | 648.0 | |||||||||||
Fee revenue and other income (a) | 9.6 | 7.0 | 23.5 | 19.8 | |||||||||||
Total Bankers Life revenues | 668.0 | 615.8 | 1,956.8 | 1,906.9 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | 1.2 | .7 | 2.3 | 2.3 | |||||||||||
Health | 156.9 | 155.0 | 469.1 | 459.9 | |||||||||||
Life | 6.3 | 6.4 | 18.6 | 19.0 | |||||||||||
Net investment income (a) | 67.1 | 58.4 | 191.3 | 187.1 | |||||||||||
Fee revenue and other income (a) | .4 | .3 | 1.0 | 1.0 | |||||||||||
Total Washington National revenues | 231.9 | 220.8 | 682.3 | 669.3 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Health | .6 | .7 | 2.0 | 2.3 | |||||||||||
Life | 70.3 | 65.3 | 208.5 | 194.6 | |||||||||||
Net investment income (a) | 11.1 | 10.5 | 33.0 | 32.0 | |||||||||||
Fee revenue and other income (a) | .2 | .2 | .8 | .7 | |||||||||||
Total Colonial Penn revenues | 82.2 | 76.7 | 244.3 | 229.6 | |||||||||||
Corporate operations: | |||||||||||||||
Net investment income | 6.7 | (6.1 | ) | 16.6 | 3.4 | ||||||||||
Fee and other income | 2.5 | 2.1 | 7.6 | 6.2 | |||||||||||
Total corporate revenues | 9.2 | (4.0 | ) | 24.2 | 9.6 | ||||||||||
Total revenues | 991.3 | 909.3 | 2,907.6 | 2,815.4 |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Expenses: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy benefits | $ | 427.1 | $ | 386.1 | $ | 1,240.9 | $ | 1,202.1 | |||||||
Amortization | 43.8 | 44.1 | 135.3 | 143.4 | |||||||||||
Interest expense on investment borrowings | 3.5 | 2.2 | 9.4 | 6.4 | |||||||||||
Other operating costs and expenses | 105.5 | 103.6 | 312.2 | 306.6 | |||||||||||
Total Bankers Life expenses | 579.9 | 536.0 | 1,697.8 | 1,658.5 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy benefits | 144.5 | 129.8 | 422.0 | 408.8 | |||||||||||
Amortization | 14.3 | 13.5 | 44.5 | 42.5 | |||||||||||
Interest expense on investment borrowings | .9 | .5 | 2.5 | 1.4 | |||||||||||
Other operating costs and expenses | 47.0 | 46.4 | 140.3 | 137.4 | |||||||||||
Total Washington National expenses | 206.7 | 190.2 | 609.3 | 590.1 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy benefits | 50.3 | 45.7 | 151.3 | 142.1 | |||||||||||
Amortization | 3.7 | 3.6 | 11.3 | 10.9 | |||||||||||
Interest expense on investment borrowings | .1 | — | .4 | — | |||||||||||
Other operating costs and expenses | 27.2 | 26.8 | 84.2 | 77.7 | |||||||||||
Total Colonial Penn expenses | 81.3 | 76.1 | 247.2 | 230.7 | |||||||||||
Corporate operations: | |||||||||||||||
Interest expense on corporate debt | 11.5 | 11.3 | 34.3 | 33.7 | |||||||||||
Interest expense on investment borrowings | — | .1 | — | .2 | |||||||||||
Other operating costs and expenses | 13.6 | 7.8 | 43.7 | 27.6 | |||||||||||
Total corporate expenses | 25.1 | 19.2 | 78.0 | 61.5 | |||||||||||
Total expenses | 893.0 | 821.5 | 2,632.3 | 2,540.8 | |||||||||||
Pre-tax operating earnings by segment: | |||||||||||||||
Bankers Life | 88.1 | 79.8 | 259.0 | 248.4 | |||||||||||
Washington National | 25.2 | 30.6 | 73.0 | 79.2 | |||||||||||
Colonial Penn | .9 | .6 | (2.9 | ) | (1.1 | ) | |||||||||
Corporate operations | (15.9 | ) | (23.2 | ) | (53.8 | ) | (51.9 | ) | |||||||
Pre-tax operating earnings | $ | 98.3 | $ | 87.8 | $ | 275.3 | $ | 274.6 |
(a) | It is not practicable to provide additional components of revenue by product or services. |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Total segment revenues | $ | 991.3 | $ | 909.3 | $ | 2,907.6 | $ | 2,815.4 | |||||||
Net realized investment gains (losses) | 11.6 | (19.6 | ) | 23.3 | (20.8 | ) | |||||||||
Revenues related to certain non-strategic investments and earnings attributable to VIEs | 13.0 | 9.8 | 39.3 | 27.7 | |||||||||||
Fee revenue related to transition and support services agreements | — | 5.0 | 10.0 | 20.0 | |||||||||||
Consolidated revenues | 1,015.9 | 904.5 | 2,980.2 | 2,842.3 | |||||||||||
Total segment expenses | 893.0 | 821.5 | 2,632.3 | 2,540.8 | |||||||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | (12.1 | ) | 20.5 | 47.0 | 3.4 | ||||||||||
Amortization related to fair value changes in embedded derivative liabilities | 2.7 | (4.8 | ) | (10.4 | ) | (.7 | ) | ||||||||
Amortization related to net realized investment gains | .2 | (.6 | ) | .9 | (.5 | ) | |||||||||
Expenses related to certain non-strategic investments and expenses attributable to VIEs | 13.7 | 10.1 | 40.5 | 32.6 | |||||||||||
Fair value changes and amendment related to agent deferred compensation plan | (6.3 | ) | — | 12.0 | — | ||||||||||
Loss on extinguishment of debt | — | — | — | 32.8 | |||||||||||
Loss on reinsurance transaction | 75.4 | — | 75.4 | — | |||||||||||
Transition expenses | — | — | — | 9.0 | |||||||||||
Expenses related to transition and support services agreements | — | 5.4 | 10.0 | 17.5 | |||||||||||
Consolidated expenses | 966.6 | 852.1 | 2,807.7 | 2,634.9 | |||||||||||
Income before tax | 49.3 | 52.4 | 172.5 | 207.4 | |||||||||||
Income tax expense: | |||||||||||||||
Tax expense on period income | 16.9 | 18.6 | 61.7 | 74.0 | |||||||||||
Valuation allowance for deferred tax assets and other tax items | 13.8 | — | (13.2 | ) | — | ||||||||||
Net income | $ | 18.6 | $ | 33.8 | $ | 124.0 | $ | 133.4 |
|
Fair value | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
Assets: | ||||||||
Other invested assets: | ||||||||
Fixed index call options | $ | 84.7 | $ | 41.0 | ||||
Interest rate futures | — | .1 | ||||||
Reinsurance receivables | 1.7 | (5.0 | ) | |||||
Total assets | $ | 86.4 | $ | 36.1 | ||||
Liabilities: | ||||||||
Future policy benefits: | ||||||||
Fixed index products | $ | 1,145.7 | $ | 1,057.1 | ||||
Total liabilities | $ | 1,145.7 | $ | 1,057.1 |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net investment income from policyholder and other special-purpose portfolios: | ||||||||||||||||
Fixed index call options | $ | 17.0 | $ | (34.2 | ) | $ | 10.9 | $ | (42.2 | ) | ||||||
Net realized gains (losses): | ||||||||||||||||
Interest rate futures | — | (1.6 | ) | (1.1 | ) | (3.2 | ) | |||||||||
Embedded derivative related to modified coinsurance agreement | .1 | — | 6.7 | (4.3 | ) | |||||||||||
Total | .1 | (1.6 | ) | 5.6 | (7.5 | ) | ||||||||||
Insurance policy benefits: | ||||||||||||||||
Embedded derivative related to fixed index annuities | 18.3 | (21.2 | ) | (33.3 | ) | (3.7 | ) | |||||||||
Total | $ | 35.4 | $ | (57.0 | ) | $ | (16.8 | ) | $ | (53.4 | ) |
Gross amounts not offset in the balance sheet | |||||||||||||||||||||||||
Gross amounts recognized | Gross amounts offset in the balance sheet | Net amounts of assets presented in the balance sheet | Financial instruments | Cash collateral received | Net amount | ||||||||||||||||||||
September 30, 2016: | |||||||||||||||||||||||||
Fixed index call options | $ | 84.7 | $ | — | $ | 84.7 | $ | — | $ | — | $ | 84.7 | |||||||||||||
Interest rate futures | — | — | — | — | — | — | |||||||||||||||||||
December 31, 2015: | |||||||||||||||||||||||||
Fixed index call options | 41.0 | — | 41.0 | — | — | 41.0 | |||||||||||||||||||
Interest rate futures | .1 | 1.5 | 1.6 | — | — | 1.6 |
|
Market value of investments | $ | 504.7 | |
Insurance liabilities | (552.2 | ) | |
Write-off of reinsurance receivables | (17.9 | ) | |
Estimated transaction expenses | (10.0 | ) | |
Pre-tax loss | (75.4 | ) | |
Tax benefit | 26.4 | ||
Increase in valuation allowance for deferred tax assets | (4.1 | ) | |
After-tax loss | $ | (53.1 | ) |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Current tax expense | $ | 46.8 | $ | 3.5 | $ | 51.6 | $ | 9.7 | |||||||
Deferred tax expense (benefit) | (29.9 | ) | 17.2 | 10.1 | 66.2 | ||||||||||
Valuation allowance applicable to current year income | (10.5 | ) | — | (10.5 | ) | — | |||||||||
Income tax expense calculated based on estimated annual effective tax rate | 6.4 | 20.7 | 51.2 | 75.9 | |||||||||||
Income tax expense on discrete items: | |||||||||||||||
Change in valuation allowance | 16.0 | — | (11.0 | ) | — | ||||||||||
Other items | 8.3 | (2.1 | ) | 8.3 | (1.9 | ) | |||||||||
Total income tax expense | $ | 30.7 | $ | 18.6 | $ | 48.5 | $ | 74.0 |
Nine months ended | |||||
September 30, | |||||
2016 | 2015 | ||||
U.S. statutory corporate rate | 35.0 | % | 35.0 | % | |
Valuation allowance | (6.1 | ) | — | ||
Non-taxable income and nondeductible benefits, net | (1.0 | ) | (.2 | ) | |
State taxes | 1.8 | 1.8 | |||
Estimated annual effective tax rate | 29.7 | % | 36.6 | % |
September 30, 2016 | December 31, 2015 | ||||||
Deferred tax assets: | |||||||
Net federal operating loss carryforwards | $ | 808.1 | $ | 916.3 | |||
Net state operating loss carryforwards | 12.0 | 14.1 | |||||
Tax credits | 57.5 | 55.3 | |||||
Capital loss carryforwards | — | 13.8 | |||||
Investments | 14.9 | 26.5 | |||||
Insurance liabilities | 681.5 | 600.3 | |||||
Other | 76.8 | 63.0 | |||||
Gross deferred tax assets | 1,650.8 | 1,689.3 | |||||
Deferred tax liabilities: | |||||||
Present value of future profits and deferred acquisition costs | (285.3 | ) | (305.4 | ) | |||
Accumulated other comprehensive income | (472.7 | ) | (223.8 | ) | |||
Gross deferred tax liabilities | (758.0 | ) | (529.2 | ) | |||
Net deferred tax assets before valuation allowance | 892.8 | 1,160.1 | |||||
Valuation allowance | (192.0 | ) | (213.5 | ) | |||
Net deferred tax assets | 700.8 | 946.6 | |||||
Current income taxes accrued | (93.9 | ) | (47.8 | ) | |||
Income tax assets, net | $ | 606.9 | $ | 898.8 |
Year of expiration | Net operating loss carryforwards | Total loss | ||||||||||
Life | Non-life | carryforwards | ||||||||||
2023 | $ | 280.7 | $ | 1,919.7 | $ | 2,200.4 | ||||||
2025 | — | 85.2 | 85.2 | |||||||||
2026 | — | 149.9 | 149.9 | |||||||||
2027 | — | 10.8 | 10.8 | |||||||||
2028 | — | 80.3 | 80.3 | |||||||||
2029 | — | 213.2 | 213.2 | |||||||||
2030 | — | .3 | .3 | |||||||||
2031 | — | .2 | .2 | |||||||||
2032 | — | 44.4 | 44.4 | |||||||||
2033 | — | .6 | .6 | |||||||||
2034 | — | .9 | .9 | |||||||||
Total federal NOLs prior to adjustment for unrecognized tax benefits | 280.7 | 2,505.5 | 2,786.2 | |||||||||
Less: | ||||||||||||
Loss carryforward related to unrecognized tax benefits | (280.7 | ) | (196.7 | ) | (477.4 | ) | ||||||
Total federal NOLs excluding amounts related to unrecognized tax benefits | $ | — | $ | 2,308.8 | $ | 2,308.8 |
|
September 30, 2016 | December 31, 2015 | ||||||
4.500% Senior Notes due May 2020 | $ | 325.0 | $ | 325.0 | |||
5.250% Senior Notes due May 2025 | 500.0 | 500.0 | |||||
Revolving Credit Agreement (as defined below) | 100.0 | 100.0 | |||||
Unamortized debt issue costs | (12.5 | ) | (13.9 | ) | |||
Direct corporate obligations | $ | 912.5 | $ | 911.1 |
Year ending September 30, | |||
2017 | $ | — | |
2018 | — | ||
2019 | 100.0 | ||
2020 | 325.0 | ||
2021 | — | ||
Thereafter | 500.0 | ||
$ | 925.0 |
|
Amount | Maturity | Interest rate at | ||||
borrowed | date | September 30, 2016 | ||||
$ | 57.7 | June 2017 | Variable rate – 1.308% | |||
100.0 | October 2017 | Variable rate – 1.200% | ||||
50.0 | January 2018 | Variable rate – 1.015% | ||||
50.0 | January 2018 | Variable rate – 1.055% | ||||
50.0 | February 2018 | Variable rate – 1.098% | ||||
50.0 | February 2018 | Variable rate – 0.908% | ||||
22.0 | February 2018 | Variable rate – 1.159% | ||||
100.0 | May 2018 | Variable rate – 0.974% | ||||
50.0 | July 2018 | Variable rate – 1.213% | ||||
50.0 | August 2018 | Variable rate – 0.937% | ||||
10.0 | December 2018 | Variable rate – 0.972% | ||||
50.0 | January 2019 | Variable rate – 1.099% | ||||
50.0 | February 2019 | Variable rate – 0.908% | ||||
100.0 | March 2019 | Variable rate – 1.011% | ||||
21.8 | July 2019 | Variable rate – 1.026% | ||||
15.0 | October 2019 | Variable rate – 1.147% | ||||
50.0 | May 2020 | Variable rate – 1.044% | ||||
21.8 | June 2020 | Fixed rate – 1.960% | ||||
25.0 | September 2020 | Variable rate – 1.265% | ||||
100.0 | September 2020 | Variable rate – 1.185% | ||||
50.0 | September 2020 | Variable rate – 1.184% | ||||
75.0 | September 2020 | Variable rate – 0.958% | ||||
100.0 | October 2020 | Variable rate – 0.764% | ||||
50.0 | December 2020 | Variable rate – 1.223% | ||||
100.0 | July 2021 | Variable rate – 1.223% | ||||
28.2 | August 2021 | Fixed rate – 2.550% | ||||
125.0 | August 2021 | Variable rate – 1.005% | ||||
50.0 | September 2021 | Variable rate – 1.365% | ||||
25.6 | March 2023 | Fixed rate – 2.160% | ||||
20.5 | June 2025 | Fixed rate – 2.940% | ||||
$ | 1,647.6 |
|
Balance, December 31, 2015 | 184,029 | ||
Treasury stock purchased and retired | (11,688 | ) | |
Stock options exercised | 771 | ||
Restricted and performance stock vested | 432 | (a) | |
Balance, September 30, 2016 | 173,544 |
(a) | Such amount was reduced by 190 thousand shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock. |
|
|
(i) | Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. |
(ii) | Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. |
(iii) | Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. |
(iv) | Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. |
(v) | Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
(vi) | Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. |
(vii) | Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. |
|
|
Nine months ended | |||||||
September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 124.0 | $ | 133.4 | |||
Adjustments to reconcile net income to net cash from operating activities: | |||||||
Amortization and depreciation | 199.1 | 213.3 | |||||
Income taxes | 43.0 | 70.7 | |||||
Insurance liabilities | 310.2 | 237.9 | |||||
Accrual and amortization of investment income | (93.4 | ) | (15.8 | ) | |||
Deferral of policy acquisition costs | (179.4 | ) | (181.9 | ) | |||
Net realized investment (gains) losses | (23.3 | ) | 20.8 | ||||
Transition expenses | — | 9.0 | |||||
Loss on reinsurance transaction | 75.4 | — | |||||
Cash and cash equivalents received upon recapture of reinsurance | 73.6 | — | |||||
Loss on extinguishment of debt | — | 32.8 | |||||
Other | 52.3 | 15.1 | |||||
Net cash from operating activities | $ | 581.5 | $ | 535.3 |
Nine months ended | |||||||
September 30, | |||||||
2016 | 2015 | ||||||
Stock options, restricted stock and performance units | $ | 18.9 | $ | 12.9 | |||
Market value of investments recaptured in connection with the termination of reinsurance agreements with BRe | 431.1 | — |
|
September 30, 2016 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 1,794.4 | $ | — | $ | 1,794.4 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (194.2 | ) | (194.2 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 147.7 | — | 147.7 | ||||||||
Accrued investment income | 3.8 | (.1 | ) | 3.7 | |||||||
Income tax assets, net | 9.5 | (1.2 | ) | 8.3 | |||||||
Other assets | 3.9 | (3.0 | ) | .9 | |||||||
Total assets | $ | 1,959.3 | $ | (198.5 | ) | $ | 1,760.8 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 92.7 | $ | (6.8 | ) | $ | 85.9 | ||||
Borrowings related to variable interest entities | 1,690.2 | — | 1,690.2 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 193.9 | (193.9 | ) | — | |||||||
Total liabilities | $ | 1,976.8 | $ | (200.7 | ) | $ | 1,776.1 |
December 31, 2015 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 1,633.6 | $ | — | $ | 1,633.6 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (204.3 | ) | (204.3 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 364.4 | — | 364.4 | ||||||||
Accrued investment income | 3.3 | — | 3.3 | ||||||||
Income tax assets, net | 26.0 | (1.9 | ) | 24.1 | |||||||
Other assets | 1.4 | (1.5 | ) | (.1 | ) | ||||||
Total assets | $ | 2,028.7 | $ | (207.7 | ) | $ | 1,821.0 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 196.6 | $ | (7.2 | ) | $ | 189.4 | ||||
Borrowings related to variable interest entities | 1,676.4 | — | 1,676.4 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 204.0 | (204.0 | ) | — | |||||||
Total liabilities | $ | 2,077.0 | $ | (211.2 | ) | $ | 1,865.8 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 2.2 | $ | 2.2 | |||
Due after one year through five years | 976.4 | 977.3 | |||||
Due after five years through ten years | 809.6 | 814.9 | |||||
Total | $ | 1,788.2 | $ | 1,794.4 |
|
• | Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and cash equivalents and exchange traded securities. |
• | Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models consider various inputs such as credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund investments; most short-term investments; and non-exchange-traded derivatives such as call options. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs. |
• | Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions. Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on broker/dealer quotes, pricing services or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. Financial assets in this category include certain corporate securities (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage loans, and other less liquid securities. Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed index annuity products and to a modified coinsurance arrangement) since their values include significant unobservable inputs including actuarial assumptions. |
• | Investments held by VIEs |
• | Other invested assets - derivatives |
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 13,588.6 | $ | 288.5 | $ | 13,877.1 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 286.7 | — | 286.7 | |||||||||||
States and political subdivisions | — | 2,084.1 | — | 2,084.1 | |||||||||||
Debt securities issued by foreign governments | — | 24.4 | 4.1 | 28.5 | |||||||||||
Asset-backed securities | — | 2,664.3 | 56.5 | 2,720.8 | |||||||||||
Collateralized debt obligations | — | 175.2 | 2.5 | 177.7 | |||||||||||
Commercial mortgage-backed securities | — | 1,547.1 | 32.4 | 1,579.5 | |||||||||||
Mortgage pass-through securities | — | 2.7 | — | 2.7 | |||||||||||
Collateralized mortgage obligations | — | 1,053.1 | 12.0 | 1,065.1 | |||||||||||
Total fixed maturities, available for sale | — | 21,426.2 | 396.0 | 21,822.2 | |||||||||||
Equity securities - corporate securities | 126.9 | 180.5 | 23.9 | 331.3 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 18.7 | — | 18.7 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | .5 | — | .5 | |||||||||||
Asset-backed securities | — | 66.8 | — | 66.8 | |||||||||||
Collateralized debt obligations | — | 2.3 | — | 2.3 | |||||||||||
Commercial mortgage-backed securities | — | 142.0 | 8.3 | 150.3 | |||||||||||
Collateralized mortgage obligations | — | 64.1 | — | 64.1 | |||||||||||
Equity securities | 4.5 | — | — | 4.5 | |||||||||||
Total trading securities | 4.5 | 294.4 | 8.3 | 307.2 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 1,794.4 | — | 1,794.4 | |||||||||||
Other invested assets - derivatives | — | 84.7 | — | 84.7 | |||||||||||
Assets held in separate accounts | — | 4.7 | — | 4.7 | |||||||||||
Total assets carried at fair value by category | $ | 131.4 | $ | 23,784.9 | $ | 428.2 | $ | 24,344.5 | |||||||
Liabilities: | |||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 1,145.7 | $ | 1,145.7 |
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 12,698.1 | $ | 170.4 | $ | 12,868.5 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 194.5 | — | 194.5 | |||||||||||
States and political subdivisions | — | 2,104.2 | — | 2,104.2 | |||||||||||
Debt securities issued by foreign governments | — | 20.7 | — | 20.7 | |||||||||||
Asset-backed securities | — | 1,816.3 | 35.9 | 1,852.2 | |||||||||||
Collateralized debt obligations | — | 186.7 | — | 186.7 | |||||||||||
Commercial mortgage-backed securities | — | 1,604.2 | 1.1 | 1,605.3 | |||||||||||
Mortgage pass-through securities | — | 3.3 | .1 | 3.4 | |||||||||||
Collateralized mortgage obligations | — | 1,047.4 | — | 1,047.4 | |||||||||||
Total fixed maturities, available for sale | — | 19,675.4 | 207.5 | 19,882.9 | |||||||||||
Equity securities - corporate securities | 254.9 | 176.1 | 32.0 | 463.0 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 21.5 | — | 21.5 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 1.9 | — | 1.9 | |||||||||||
Asset-backed securities | — | 35.5 | — | 35.5 | |||||||||||
Collateralized debt obligations | — | 2.1 | — | 2.1 | |||||||||||
Commercial mortgage-backed securities | — | 118.1 | 39.9 | 158.0 | |||||||||||
Collateralized mortgage obligations | — | 38.2 | — | 38.2 | |||||||||||
Equity securities | 4.9 | — | — | 4.9 | |||||||||||
Total trading securities | 4.9 | 217.3 | 39.9 | 262.1 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 1,633.6 | — | 1,633.6 | |||||||||||
Other invested assets - derivatives | 1.6 | 41.0 | — | 42.6 | |||||||||||
Assets held in separate accounts | — | 4.7 | — | 4.7 | |||||||||||
Total assets carried at fair value by category | $ | 261.4 | $ | 21,748.1 | $ | 279.4 | $ | 22,288.9 | |||||||
Liabilities: | |||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 1,057.1 | $ | 1,057.1 |
September 30, 2016 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,867.3 | $ | 1,867.3 | $ | 1,749.5 | |||||||||
Policy loans | — | — | 110.8 | 110.8 | 110.8 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 165.5 | — | 165.5 | 165.5 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 631.1 | 74.9 | — | 706.0 | 706.0 | ||||||||||||||
Held by variable interest entities | 147.7 | — | — | 147.7 | 147.7 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Policyholder account balances | — | — | 10,817.2 | 10,817.2 | 10,817.2 | ||||||||||||||
Investment borrowings | — | 1,654.1 | — | 1,654.1 | 1,647.6 | ||||||||||||||
Borrowings related to variable interest entities | — | 1,732.2 | — | 1,732.2 | 1,690.2 | ||||||||||||||
Notes payable – direct corporate obligations | — | 934.8 | — | 934.8 | 912.5 |
December 31, 2015 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,772.4 | $ | 1,772.4 | $ | 1,721.0 | |||||||||
Policy loans | — | — | 109.4 | 109.4 | 109.4 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 158.1 | — | 158.1 | 158.1 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 432.3 | — | — | 432.3 | 432.3 | ||||||||||||||
Held by variable interest entities | 364.4 | — | — | 364.4 | 364.4 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Policyholder account balances | — | — | 10,762.3 | 10,762.3 | 10,762.3 | ||||||||||||||
Investment borrowings | — | 1,549.8 | — | 1,549.8 | 1,548.1 | ||||||||||||||
Borrowings related to variable interest entities | — | 1,673.6 | — | 1,673.6 | 1,676.4 | ||||||||||||||
Notes payable – direct corporate obligations | — | 937.8 | — | 937.8 | 911.1 |
September 30, 2016 | ||||||||||||||||||||||||||||||||
Beginning balance as of June 30, 2016 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2016 | Amount of total gains (losses) for the three months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 174.6 | $ | 118.8 | $ | — | $ | (4.9 | ) | $ | — | $ | — | $ | 288.5 | $ | — | |||||||||||||||
Debt securities issued by foreign governments | 4.1 | — | — | — | — | — | 4.1 | — | ||||||||||||||||||||||||
Asset-backed securities | 39.1 | 5.7 | — | 2.1 | 24.6 | (15.0 | ) | 56.5 | — | |||||||||||||||||||||||
Collateralized debt obligations | — | 2.5 | — | — | — | — | 2.5 | — | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 1.1 | 17.0 | — | (.1 | ) | 14.4 | — | 32.4 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | — | 12.0 | — | ||||||||||||||||||||||||
Total fixed maturities, available for sale | 218.9 | 156.0 | — | (2.9 | ) | 39.0 | (15.0 | ) | 396.0 | — | ||||||||||||||||||||||
Equity securities - corporate securities | 21.4 | 3.3 | — | (.8 | ) | — | — | 23.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | — | — | — | (1.7 | ) | 10.0 | — | 8.3 | (1.7 | ) | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,127.0 | ) | (37.0 | ) | 18.3 | — | — | — | (1,145.7 | ) | 18.3 |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016. The following summarizes such activity for the three months ended September 30, 2016 (dollars in millions): |
Purchases | Received in reinsurance recapture | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||
Corporate securities | $ | 1.1 | $ | 118.6 | $ | (.9 | ) | $ | — | $ | — | $ | 118.8 | ||||||||||
Asset-backed securities | 7.0 | — | (1.3 | ) | — | — | 5.7 | ||||||||||||||||
Collateralized debt obligations | 2.5 | — | — | — | — | 2.5 | |||||||||||||||||
Commercial mortgage-backed securities | 17.0 | — | — | — | — | 17.0 | |||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | 12.0 | |||||||||||||||||
Total fixed maturities, available for sale | 27.6 | 130.6 | (2.2 | ) | — | — | 156.0 | ||||||||||||||||
Equity securities - corporate securities | 1.1 | 2.2 | — | — | — | 3.3 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (38.5 | ) | — | 3.1 | (14.6 | ) | 13.0 | (37.0 | ) |
September 30, 2016 | ||||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2015 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2016 | Amount of total gains (losses) for the nine months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 170.4 | $ | 104.4 | $ | (7.0 | ) | $ | 7.4 | $ | 20.3 | $ | (7.0 | ) | $ | 288.5 | $ | (5.6 | ) | |||||||||||||
Debt securities issued by foreign governments | — | 4.0 | — | .1 | — | — | 4.1 | — | ||||||||||||||||||||||||
Asset-backed securities | 35.9 | 1.7 | — | 4.0 | 28.6 | (13.7 | ) | 56.5 | — | |||||||||||||||||||||||
Collateralized debt obligations | — | 2.5 | — | — | — | — | 2.5 | — | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 1.1 | 17.0 | — | .4 | 13.9 | — | 32.4 | — | ||||||||||||||||||||||||
Mortgage pass-through securities | .1 | (.1 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | — | 12.0 | — | ||||||||||||||||||||||||
Total fixed maturities, available for sale | 207.5 | 141.5 | (7.0 | ) | 11.9 | 62.8 | (20.7 | ) | 396.0 | (5.6 | ) | |||||||||||||||||||||
Equity securities - corporate securities | 32.0 | 5.5 | (12.8 | ) | (.8 | ) | — | — | 23.9 | (12.8 | ) | |||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 39.9 | — | — | (1.4 | ) | — | (30.2 | ) | 8.3 | (1.4 | ) | |||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,057.1 | ) | (55.3 | ) | (33.3 | ) | — | — | — | (1,145.7 | ) | (33.3 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016. The following summarizes such activity for the nine months ended September 30, 2016 (dollars in millions): |
Purchases | Received in reinsurance recapture | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||
Corporate securities | $ | 1.1 | $ | 118.6 | $ | (15.3 | ) | $ | — | $ | — | $ | 104.4 | ||||||||||
Debt securities issued by foreign governments | 4.0 | — | — | — | — | 4.0 | |||||||||||||||||
Asset-backed securities | 7.0 | — | (5.3 | ) | — | — | 1.7 | ||||||||||||||||
Collateralized debt obligations | 2.5 | — | — | — | — | 2.5 | |||||||||||||||||
Commercial mortgage-backed securities | 17.0 | — | — | — | — | 17.0 | |||||||||||||||||
Mortgage pass-through securities | — | — | (.1 | ) | — | — | (.1 | ) | |||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | 12.0 | |||||||||||||||||
Total fixed maturities, available for sale | 31.6 | 130.6 | (20.7 | ) | — | — | 141.5 | ||||||||||||||||
Equity securities - corporate securities | 3.3 | 2.2 | — | — | — | 5.5 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (101.9 | ) | — | 19.2 | (17.5 | ) | 44.9 | (55.3 | ) |
September 30, 2015 | |||||||||||||||||||||||||||||||
Beginning balance as of June 30, 2015 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2015 | Amount of total gains (losses) for the three months ended September 30, 2015 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 133.7 | $ | 4.6 | $ | — | $ | (3.8 | ) | $ | 11.8 | $ | — | $ | 146.3 | $ | — | ||||||||||||||
Asset-backed securities | 53.3 | 10.4 | — | .2 | — | (23.9 | ) | 40.0 | — | ||||||||||||||||||||||
Commercial mortgage-backed securities | 1.2 | 14.6 | — | (.2 | ) | — | — | 15.6 | — | ||||||||||||||||||||||
Mortgage pass-through securities | .2 | (.1 | ) | — | — | — | — | .1 | — | ||||||||||||||||||||||
Total fixed maturities, available for sale | 188.4 | 29.5 | — | (3.8 | ) | 11.8 | (23.9 | ) | 202.0 | — | |||||||||||||||||||||
Equity securities - corporate securities | 29.9 | 1.0 | — | — | — | — | 30.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 39.9 | — | — | (.6 | ) | — | (9.2 | ) | 30.1 | (.6 | ) | ||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,074.0 | ) | 16.1 | (21.2 | ) | — | — | — | (1,079.1 | ) | (21.2 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2015 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 6.0 | $ | (1.4 | ) | $ | — | $ | — | $ | 4.6 | ||||||||
Asset-backed securities | 11.0 | (.6 | ) | — | — | 10.4 | |||||||||||||
Commercial mortgage-backed securities | 14.6 | — | — | — | 14.6 | ||||||||||||||
Mortgage pass-through securities | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Total fixed maturities, available for sale | 31.6 | (2.1 | ) | — | — | 29.5 | |||||||||||||
Equity securities - corporate securities | 1.0 | — | — | — | 1.0 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (38.0 | ) | 39.0 | — | 15.1 | 16.1 |
September 30, 2015 | |||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2014 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2015 | Amount of total gains (losses) for the nine months ended September 30, 2015 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 365.9 | $ | (21.7 | ) | $ | (2.2 | ) | $ | (10.0 | ) | $ | 21.0 | $ | (206.7 | ) | $ | 146.3 | $ | — | |||||||||||
States and political subdivisions | 35.5 | — | — | — | — | (35.5 | ) | — | — | ||||||||||||||||||||||
Asset-backed securities | 59.2 | 10.0 | — | (.6 | ) | — | (28.6 | ) | 40.0 | — | |||||||||||||||||||||
Commercial mortgage-backed securities | 1.2 | 14.5 | — | (.1 | ) | — | — | 15.6 | — | ||||||||||||||||||||||
Mortgage pass-through securities | .4 | (.3 | ) | — | — | — | — | .1 | — | ||||||||||||||||||||||
Total fixed maturities, available for sale | 462.2 | 2.5 | (2.2 | ) | (10.7 | ) | 21.0 | (270.8 | ) | 202.0 | — | ||||||||||||||||||||
Equity securities - corporate securities | 28.0 | 2.9 | — | — | — | — | 30.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 28.6 | — | — | 1.5 | — | — | 30.1 | 1.5 | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,081.5 | ) | 6.1 | (3.7 | ) | — | — | — | (1,079.1 | ) | (3.7 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2015 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 6.1 | $ | (27.8 | ) | $ | — | $ | — | $ | (21.7 | ) | |||||||
Asset-backed securities | 11.0 | (1.0 | ) | — | — | 10.0 | |||||||||||||
Commercial mortgage-backed securities | 14.5 | — | — | — | 14.5 | ||||||||||||||
Mortgage pass-through securities | — | (.3 | ) | — | — | (.3 | ) | ||||||||||||
Total fixed maturities, available for sale | 31.6 | (29.1 | ) | — | — | 2.5 | |||||||||||||
Equity securities - corporate securities | 2.9 | — | — | — | 2.9 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (101.4 | ) | 61.4 | (2.3 | ) | 48.4 | 6.1 |
Fair value at September 30, 2016 | Valuation techniques | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 201.1 | Discounted cash flow analysis | Discount margins | 2.50% - 13.00% (4.51%) | ||||
Asset-backed securities (b) | 26.1 | Discounted cash flow analysis | Discount margins | 2.23% - 3.70% (2.90%) | |||||
Equity securities (c) | 23.9 | Market multiple | Projected cash flows | 0.4% - 6.2% (5.9%) | |||||
Other assets categorized as Level 3 (d) | 177.1 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 428.2 | ||||||||
Liabilities: | |||||||||
Future policy benefits (e) | 1,145.7 | Discounted projected embedded derivatives | Projected portfolio yields | 5.15% - 5.61% (5.42%) | |||||
Discount rates | 0.00% - 2.48% (1.26%) | ||||||||
Surrender rates | 1.67% - 46.56% (14.09%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is projected cash flows. Generally, increases (decreases) in the projected cash flows would result in higher (lower) fair value measurements. |
(d) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(e) | Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
Fair value at December 31, 2015 | Valuation techniques | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 76.9 | Discounted cash flow analysis | Discount margins | 1.65% - 9.74% (5.35%) | ||||
Asset-backed securities (b) | 22.2 | Discounted cash flow analysis | Discount margins | 2.83% - 4.45% (3.50%) | |||||
Equity security (c) | 32.0 | Market approach | Projected cash flows | Not applicable | |||||
Other assets categorized as Level 3 (d) | 148.3 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 279.4 | ||||||||
Liabilities: | |||||||||
Future policy benefits (e) | 1,057.1 | Discounted projected embedded derivatives | Projected portfolio yields | 5.15% - 5.61% (5.42%) | |||||
Discount rates | 0.00% - 3.18% (1.94%) | ||||||||
Surrender rates | 1.67% - 46.56% (14.09%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value. |
(d) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(e) | Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
|
(i) | Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. |
(ii) | Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. |
(iii) | Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. |
(iv) | Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. |
(v) | Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
(vi) | Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. |
(vii) | Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. |
• | Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets primarily include cash and cash equivalents and exchange traded securities. |
• | Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data. Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies. These models consider various inputs such as credit rating, maturity, corporate credit spreads, reported trades and other inputs that are observable or derived from observable information in the marketplace or are supported by transactions executed in the marketplace. Financial assets in this category primarily include: certain publicly registered and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund investments; most short-term investments; and non-exchange-traded derivatives such as call options. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs. |
• | Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions. Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on broker/dealer quotes, pricing services or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. Financial assets in this category include certain corporate securities (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage loans, and other less liquid securities. Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed index annuity products and to a modified coinsurance arrangement) since their values include significant unobservable inputs including actuarial assumptions. |
• | Investments held by VIEs |
• | Other invested assets - derivatives |
|
September 30, 2016 | December 31, 2015 | ||||||
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized | $ | 3.6 | $ | 1.6 | |||
Net unrealized gains on all other investments | 2,206.4 | 903.4 | |||||
Adjustment to present value of future profits (a) | (115.4 | ) | (121.2 | ) | |||
Adjustment to deferred acquisition costs | (351.8 | ) | (133.3 | ) | |||
Adjustment to insurance liabilities | (414.0 | ) | (14.6 | ) | |||
Unrecognized net loss related to deferred compensation plan | — | (8.6 | ) | ||||
Deferred income tax liabilities | (473.3 | ) | (224.5 | ) | |||
Accumulated other comprehensive income | $ | 855.5 | $ | 402.8 |
(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. |
Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | Other-than-temporary impairments included in accumulated other comprehensive income | |||||||||||||||
Corporate securities | $ | 12,235.6 | $ | 1,705.2 | $ | (63.7 | ) | $ | 13,877.1 | $ | — | ||||||||
United States Treasury securities and obligations of United States government corporations and agencies | 238.5 | 48.2 | — | 286.7 | — | ||||||||||||||
States and political subdivisions | 1,794.5 | 290.9 | (1.3 | ) | 2,084.1 | (3.0 | ) | ||||||||||||
Debt securities issued by foreign governments | 26.8 | 1.7 | — | 28.5 | — | ||||||||||||||
Asset-backed securities | 2,636.4 | 94.8 | (10.4 | ) | 2,720.8 | — | |||||||||||||
Collateralized debt obligations | 177.8 | .6 | (.7 | ) | 177.7 | — | |||||||||||||
Commercial mortgage-backed securities | 1,522.4 | 65.7 | (8.6 | ) | 1,579.5 | — | |||||||||||||
Mortgage pass-through securities | 2.4 | .3 | — | 2.7 | — | ||||||||||||||
Collateralized mortgage obligations | 1,000.8 | 66.0 | (1.7 | ) | 1,065.1 | (1.5 | ) | ||||||||||||
Total fixed maturities, available for sale | $ | 19,635.2 | $ | 2,273.4 | $ | (86.4 | ) | $ | 21,822.2 | $ | (4.5 | ) | |||||||
Equity securities | $ | 312.9 | $ | 19.3 | $ | (.9 | ) | $ | 331.3 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 421.0 | $ | 425.7 | |||
Due after one year through five years | 2,246.8 | 2,432.9 | |||||
Due after five years through ten years | 1,635.1 | 1,764.0 | |||||
Due after ten years | 9,992.5 | 11,653.8 | |||||
Subtotal | 14,295.4 | 16,276.4 | |||||
Structured securities | 5,339.8 | 5,545.8 | |||||
Total fixed maturities, available for sale | $ | 19,635.2 | $ | 21,822.2 |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Gross realized gains on sale | $ | 7.3 | $ | 21.7 | $ | 127.1 | $ | 47.9 | |||||||
Gross realized losses on sale | (2.8 | ) | (27.8 | ) | (84.4 | ) | (48.7 | ) | |||||||
Impairments: | |||||||||||||||
Total other-than-temporary impairment losses | — | (11.1 | ) | (6.3 | ) | (12.4 | ) | ||||||||
Other-than-temporary impairment losses recognized in accumulated other comprehensive income | — | 3.0 | — | 3.0 | |||||||||||
Net impairment losses recognized | — | (8.1 | ) | (6.3 | ) | (9.4 | ) | ||||||||
Net realized investment gains (losses) from fixed maturities | 4.5 | (14.2 | ) | 36.4 | (10.2 | ) | |||||||||
Equity securities | 17.2 | — | 21.3 | 3.0 | |||||||||||
Commercial mortgage loans | — | — | — | (2.3 | ) | ||||||||||
Impairments of other investments | (1.2 | ) | (4.3 | ) | (18.5 | ) | (12.2 | ) | |||||||
Gain (loss) on dissolution of a variable interest entity | — | — | (7.3 | ) | 11.3 | ||||||||||
Other (a) | (8.9 | ) | (1.1 | ) | (8.6 | ) | (10.4 | ) | |||||||
Net realized investment gains (losses) | $ | 11.6 | $ | (19.6 | ) | $ | 23.3 | $ | (20.8 | ) |
(a) | Changes in the estimated fair value of trading securities that we have elected the fair value option (and are still held as of the end of the respective periods) was $.8 million and $(4.7) million for the nine months ended September 30, 2016 and 2015, respectively. |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Credit losses on fixed maturity securities, available for sale, beginning of period | $ | (2.6 | ) | $ | (1.0 | ) | $ | (2.6 | ) | $ | (1.0 | ) | |||
Add: credit losses on other-than-temporary impairments not previously recognized | — | (2.0 | ) | — | (2.0 | ) | |||||||||
Less: credit losses on securities sold | .1 | .1 | .1 | .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 | $ | (2.5 | ) | $ | (2.9 | ) | $ | (2.5 | ) | $ | (2.9 | ) |
(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. |
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 | $ | 69.9 | $ | — | $ | — | $ | — | $ | 69.9 | $ | — | ||||||||||||
States and political subdivisions | 12.7 | (.4 | ) | 17.6 | (.9 | ) | 30.3 | (1.3 | ) | |||||||||||||||
Corporate securities | 403.0 | (13.5 | ) | 607.0 | (50.2 | ) | 1,010.0 | (63.7 | ) | |||||||||||||||
Asset-backed securities | 333.0 | (5.1 | ) | 305.8 | (5.3 | ) | 638.8 | (10.4 | ) | |||||||||||||||
Collateralized debt obligations | 36.2 | (.6 | ) | 48.0 | (.1 | ) | 84.2 | (.7 | ) | |||||||||||||||
Commercial mortgage-backed securities | 219.6 | (2.0 | ) | 161.2 | (6.6 | ) | 380.8 | (8.6 | ) | |||||||||||||||
Collateralized mortgage obligations | 141.0 | (.7 | ) | 35.9 | (1.0 | ) | 176.9 | (1.7 | ) | |||||||||||||||
Total fixed maturities, available for sale | $ | 1,215.4 | $ | (22.3 | ) | $ | 1,175.5 | $ | (64.1 | ) | $ | 2,390.9 | $ | (86.4 | ) | |||||||||
Equity securities | $ | 20.6 | $ | (.8 | ) | $ | — | $ | — | $ | 20.6 | $ | (.8 | ) |
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 | $ | 43.6 | $ | (.3 | ) | $ | — | $ | — | $ | 43.6 | $ | (.3 | ) | ||||||||||
States and political subdivisions | 156.8 | (4.1 | ) | 14.8 | (3.5 | ) | 171.6 | (7.6 | ) | |||||||||||||||
Debt securities issued by foreign governments | 20.7 | (.6 | ) | — | — | 20.7 | (.6 | ) | ||||||||||||||||
Corporate securities | 2,913.6 | (255.7 | ) | 278.9 | (89.5 | ) | 3,192.5 | (345.2 | ) | |||||||||||||||
Asset-backed securities | 930.3 | (11.7 | ) | 98.4 | (1.7 | ) | 1,028.7 | (13.4 | ) | |||||||||||||||
Collateralized debt obligations | 96.2 | (1.8 | ) | 36.3 | (.4 | ) | 132.5 | (2.2 | ) | |||||||||||||||
Commercial mortgage-backed securities | 556.0 | (16.1 | ) | 25.7 | (1.5 | ) | 581.7 | (17.6 | ) | |||||||||||||||
Mortgage pass-through securities | — | — | .1 | — | .1 | — | ||||||||||||||||||
Collateralized mortgage obligations | 97.8 | (1.0 | ) | 40.8 | (.6 | ) | 138.6 | (1.6 | ) | |||||||||||||||
Total fixed maturities, available for sale | $ | 4,815.0 | $ | (291.3 | ) | $ | 495.0 | $ | (97.2 | ) | $ | 5,310.0 | $ | (388.5 | ) | |||||||||
Equity securities | $ | 140.1 | $ | (2.4 | ) | $ | 2.4 | $ | (.4 | ) | $ | 142.5 | $ | (2.8 | ) |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income for basic and diluted earnings per share | $ | 18.6 | $ | 33.8 | $ | 124.0 | $ | 133.4 | |||||||
Shares: | |||||||||||||||
Weighted average shares outstanding for basic earnings per share | 174,247 | 190,260 | 177,640 | 195,536 | |||||||||||
Effect of dilutive securities on weighted average shares: | |||||||||||||||
Stock options, restricted stock and performance units | 1,476 | 2,105 | 1,733 | 2,035 | |||||||||||
Weighted average shares outstanding for diluted earnings per share | 175,723 | 192,365 | 179,373 | 197,571 |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | $ | 6.8 | $ | 5.2 | $ | 17.4 | $ | 17.0 | |||||||
Health | 310.3 | 311.6 | 933.3 | 940.5 | |||||||||||
Life | 96.6 | 95.7 | 295.8 | 281.6 | |||||||||||
Net investment income (a) | 244.7 | 196.3 | 686.8 | 648.0 | |||||||||||
Fee revenue and other income (a) | 9.6 | 7.0 | 23.5 | 19.8 | |||||||||||
Total Bankers Life revenues | 668.0 | 615.8 | 1,956.8 | 1,906.9 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Annuities | 1.2 | .7 | 2.3 | 2.3 | |||||||||||
Health | 156.9 | 155.0 | 469.1 | 459.9 | |||||||||||
Life | 6.3 | 6.4 | 18.6 | 19.0 | |||||||||||
Net investment income (a) | 67.1 | 58.4 | 191.3 | 187.1 | |||||||||||
Fee revenue and other income (a) | .4 | .3 | 1.0 | 1.0 | |||||||||||
Total Washington National revenues | 231.9 | 220.8 | 682.3 | 669.3 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy income: | |||||||||||||||
Health | .6 | .7 | 2.0 | 2.3 | |||||||||||
Life | 70.3 | 65.3 | 208.5 | 194.6 | |||||||||||
Net investment income (a) | 11.1 | 10.5 | 33.0 | 32.0 | |||||||||||
Fee revenue and other income (a) | .2 | .2 | .8 | .7 | |||||||||||
Total Colonial Penn revenues | 82.2 | 76.7 | 244.3 | 229.6 | |||||||||||
Corporate operations: | |||||||||||||||
Net investment income | 6.7 | (6.1 | ) | 16.6 | 3.4 | ||||||||||
Fee and other income | 2.5 | 2.1 | 7.6 | 6.2 | |||||||||||
Total corporate revenues | 9.2 | (4.0 | ) | 24.2 | 9.6 | ||||||||||
Total revenues | 991.3 | 909.3 | 2,907.6 | 2,815.4 |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Expenses: | |||||||||||||||
Bankers Life: | |||||||||||||||
Insurance policy benefits | $ | 427.1 | $ | 386.1 | $ | 1,240.9 | $ | 1,202.1 | |||||||
Amortization | 43.8 | 44.1 | 135.3 | 143.4 | |||||||||||
Interest expense on investment borrowings | 3.5 | 2.2 | 9.4 | 6.4 | |||||||||||
Other operating costs and expenses | 105.5 | 103.6 | 312.2 | 306.6 | |||||||||||
Total Bankers Life expenses | 579.9 | 536.0 | 1,697.8 | 1,658.5 | |||||||||||
Washington National: | |||||||||||||||
Insurance policy benefits | 144.5 | 129.8 | 422.0 | 408.8 | |||||||||||
Amortization | 14.3 | 13.5 | 44.5 | 42.5 | |||||||||||
Interest expense on investment borrowings | .9 | .5 | 2.5 | 1.4 | |||||||||||
Other operating costs and expenses | 47.0 | 46.4 | 140.3 | 137.4 | |||||||||||
Total Washington National expenses | 206.7 | 190.2 | 609.3 | 590.1 | |||||||||||
Colonial Penn: | |||||||||||||||
Insurance policy benefits | 50.3 | 45.7 | 151.3 | 142.1 | |||||||||||
Amortization | 3.7 | 3.6 | 11.3 | 10.9 | |||||||||||
Interest expense on investment borrowings | .1 | — | .4 | — | |||||||||||
Other operating costs and expenses | 27.2 | 26.8 | 84.2 | 77.7 | |||||||||||
Total Colonial Penn expenses | 81.3 | 76.1 | 247.2 | 230.7 | |||||||||||
Corporate operations: | |||||||||||||||
Interest expense on corporate debt | 11.5 | 11.3 | 34.3 | 33.7 | |||||||||||
Interest expense on investment borrowings | — | .1 | — | .2 | |||||||||||
Other operating costs and expenses | 13.6 | 7.8 | 43.7 | 27.6 | |||||||||||
Total corporate expenses | 25.1 | 19.2 | 78.0 | 61.5 | |||||||||||
Total expenses | 893.0 | 821.5 | 2,632.3 | 2,540.8 | |||||||||||
Pre-tax operating earnings by segment: | |||||||||||||||
Bankers Life | 88.1 | 79.8 | 259.0 | 248.4 | |||||||||||
Washington National | 25.2 | 30.6 | 73.0 | 79.2 | |||||||||||
Colonial Penn | .9 | .6 | (2.9 | ) | (1.1 | ) | |||||||||
Corporate operations | (15.9 | ) | (23.2 | ) | (53.8 | ) | (51.9 | ) | |||||||
Pre-tax operating earnings | $ | 98.3 | $ | 87.8 | $ | 275.3 | $ | 274.6 |
(a) | It is not practicable to provide additional components of revenue by product or services. |
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Total segment revenues | $ | 991.3 | $ | 909.3 | $ | 2,907.6 | $ | 2,815.4 | |||||||
Net realized investment gains (losses) | 11.6 | (19.6 | ) | 23.3 | (20.8 | ) | |||||||||
Revenues related to certain non-strategic investments and earnings attributable to VIEs | 13.0 | 9.8 | 39.3 | 27.7 | |||||||||||
Fee revenue related to transition and support services agreements | — | 5.0 | 10.0 | 20.0 | |||||||||||
Consolidated revenues | 1,015.9 | 904.5 | 2,980.2 | 2,842.3 | |||||||||||
Total segment expenses | 893.0 | 821.5 | 2,632.3 | 2,540.8 | |||||||||||
Insurance policy benefits - fair value changes in embedded derivative liabilities | (12.1 | ) | 20.5 | 47.0 | 3.4 | ||||||||||
Amortization related to fair value changes in embedded derivative liabilities | 2.7 | (4.8 | ) | (10.4 | ) | (.7 | ) | ||||||||
Amortization related to net realized investment gains | .2 | (.6 | ) | .9 | (.5 | ) | |||||||||
Expenses related to certain non-strategic investments and expenses attributable to VIEs | 13.7 | 10.1 | 40.5 | 32.6 | |||||||||||
Fair value changes and amendment related to agent deferred compensation plan | (6.3 | ) | — | 12.0 | — | ||||||||||
Loss on extinguishment of debt | — | — | — | 32.8 | |||||||||||
Loss on reinsurance transaction | 75.4 | — | 75.4 | — | |||||||||||
Transition expenses | — | — | — | 9.0 | |||||||||||
Expenses related to transition and support services agreements | — | 5.4 | 10.0 | 17.5 | |||||||||||
Consolidated expenses | 966.6 | 852.1 | 2,807.7 | 2,634.9 | |||||||||||
Income before tax | 49.3 | 52.4 | 172.5 | 207.4 | |||||||||||
Income tax expense: | |||||||||||||||
Tax expense on period income | 16.9 | 18.6 | 61.7 | 74.0 | |||||||||||
Valuation allowance for deferred tax assets and other tax items | 13.8 | — | (13.2 | ) | — | ||||||||||
Net income | $ | 18.6 | $ | 33.8 | $ | 124.0 | $ | 133.4 |
|
Fair value | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
Assets: | ||||||||
Other invested assets: | ||||||||
Fixed index call options | $ | 84.7 | $ | 41.0 | ||||
Interest rate futures | — | .1 | ||||||
Reinsurance receivables | 1.7 | (5.0 | ) | |||||
Total assets | $ | 86.4 | $ | 36.1 | ||||
Liabilities: | ||||||||
Future policy benefits: | ||||||||
Fixed index products | $ | 1,145.7 | $ | 1,057.1 | ||||
Total liabilities | $ | 1,145.7 | $ | 1,057.1 |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net investment income from policyholder and other special-purpose portfolios: | ||||||||||||||||
Fixed index call options | $ | 17.0 | $ | (34.2 | ) | $ | 10.9 | $ | (42.2 | ) | ||||||
Net realized gains (losses): | ||||||||||||||||
Interest rate futures | — | (1.6 | ) | (1.1 | ) | (3.2 | ) | |||||||||
Embedded derivative related to modified coinsurance agreement | .1 | — | 6.7 | (4.3 | ) | |||||||||||
Total | .1 | (1.6 | ) | 5.6 | (7.5 | ) | ||||||||||
Insurance policy benefits: | ||||||||||||||||
Embedded derivative related to fixed index annuities | 18.3 | (21.2 | ) | (33.3 | ) | (3.7 | ) | |||||||||
Total | $ | 35.4 | $ | (57.0 | ) | $ | (16.8 | ) | $ | (53.4 | ) |
Gross amounts not offset in the balance sheet | |||||||||||||||||||||||||
Gross amounts recognized | Gross amounts offset in the balance sheet | Net amounts of assets presented in the balance sheet | Financial instruments | Cash collateral received | Net amount | ||||||||||||||||||||
September 30, 2016: | |||||||||||||||||||||||||
Fixed index call options | $ | 84.7 | $ | — | $ | 84.7 | $ | — | $ | — | $ | 84.7 | |||||||||||||
Interest rate futures | — | — | — | — | — | — | |||||||||||||||||||
December 31, 2015: | |||||||||||||||||||||||||
Fixed index call options | 41.0 | — | 41.0 | — | — | 41.0 | |||||||||||||||||||
Interest rate futures | .1 | 1.5 | 1.6 | — | — | 1.6 |
|
Market value of investments | $ | 504.7 | |
Insurance liabilities | (552.2 | ) | |
Write-off of reinsurance receivables | (17.9 | ) | |
Estimated transaction expenses | (10.0 | ) | |
Pre-tax loss | (75.4 | ) | |
Tax benefit | 26.4 | ||
Increase in valuation allowance for deferred tax assets | (4.1 | ) | |
After-tax loss | $ | (53.1 | ) |
|
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Current tax expense | $ | 46.8 | $ | 3.5 | $ | 51.6 | $ | 9.7 | |||||||
Deferred tax expense (benefit) | (29.9 | ) | 17.2 | 10.1 | 66.2 | ||||||||||
Valuation allowance applicable to current year income | (10.5 | ) | — | (10.5 | ) | — | |||||||||
Income tax expense calculated based on estimated annual effective tax rate | 6.4 | 20.7 | 51.2 | 75.9 | |||||||||||
Income tax expense on discrete items: | |||||||||||||||
Change in valuation allowance | 16.0 | — | (11.0 | ) | — | ||||||||||
Other items | 8.3 | (2.1 | ) | 8.3 | (1.9 | ) | |||||||||
Total income tax expense | $ | 30.7 | $ | 18.6 | $ | 48.5 | $ | 74.0 |
Nine months ended | |||||
September 30, | |||||
2016 | 2015 | ||||
U.S. statutory corporate rate | 35.0 | % | 35.0 | % | |
Valuation allowance | (6.1 | ) | — | ||
Non-taxable income and nondeductible benefits, net | (1.0 | ) | (.2 | ) | |
State taxes | 1.8 | 1.8 | |||
Estimated annual effective tax rate | 29.7 | % | 36.6 | % |
September 30, 2016 | December 31, 2015 | ||||||
Deferred tax assets: | |||||||
Net federal operating loss carryforwards | $ | 808.1 | $ | 916.3 | |||
Net state operating loss carryforwards | 12.0 | 14.1 | |||||
Tax credits | 57.5 | 55.3 | |||||
Capital loss carryforwards | — | 13.8 | |||||
Investments | 14.9 | 26.5 | |||||
Insurance liabilities | 681.5 | 600.3 | |||||
Other | 76.8 | 63.0 | |||||
Gross deferred tax assets | 1,650.8 | 1,689.3 | |||||
Deferred tax liabilities: | |||||||
Present value of future profits and deferred acquisition costs | (285.3 | ) | (305.4 | ) | |||
Accumulated other comprehensive income | (472.7 | ) | (223.8 | ) | |||
Gross deferred tax liabilities | (758.0 | ) | (529.2 | ) | |||
Net deferred tax assets before valuation allowance | 892.8 | 1,160.1 | |||||
Valuation allowance | (192.0 | ) | (213.5 | ) | |||
Net deferred tax assets | 700.8 | 946.6 | |||||
Current income taxes accrued | (93.9 | ) | (47.8 | ) | |||
Income tax assets, net | $ | 606.9 | $ | 898.8 |
Year of expiration | Net operating loss carryforwards | Total loss | ||||||||||
Life | Non-life | carryforwards | ||||||||||
2023 | $ | 280.7 | $ | 1,919.7 | $ | 2,200.4 | ||||||
2025 | — | 85.2 | 85.2 | |||||||||
2026 | — | 149.9 | 149.9 | |||||||||
2027 | — | 10.8 | 10.8 | |||||||||
2028 | — | 80.3 | 80.3 | |||||||||
2029 | — | 213.2 | 213.2 | |||||||||
2030 | — | .3 | .3 | |||||||||
2031 | — | .2 | .2 | |||||||||
2032 | — | 44.4 | 44.4 | |||||||||
2033 | — | .6 | .6 | |||||||||
2034 | — | .9 | .9 | |||||||||
Total federal NOLs prior to adjustment for unrecognized tax benefits | 280.7 | 2,505.5 | 2,786.2 | |||||||||
Less: | ||||||||||||
Loss carryforward related to unrecognized tax benefits | (280.7 | ) | (196.7 | ) | (477.4 | ) | ||||||
Total federal NOLs excluding amounts related to unrecognized tax benefits | $ | — | $ | 2,308.8 | $ | 2,308.8 |
|
September 30, 2016 | December 31, 2015 | ||||||
4.500% Senior Notes due May 2020 | $ | 325.0 | $ | 325.0 | |||
5.250% Senior Notes due May 2025 | 500.0 | 500.0 | |||||
Revolving Credit Agreement (as defined below) | 100.0 | 100.0 | |||||
Unamortized debt issue costs | (12.5 | ) | (13.9 | ) | |||
Direct corporate obligations | $ | 912.5 | $ | 911.1 |
Year ending September 30, | |||
2017 | $ | — | |
2018 | — | ||
2019 | 100.0 | ||
2020 | 325.0 | ||
2021 | — | ||
Thereafter | 500.0 | ||
$ | 925.0 |
|
Amount | Maturity | Interest rate at | ||||
borrowed | date | September 30, 2016 | ||||
$ | 57.7 | June 2017 | Variable rate – 1.308% | |||
100.0 | October 2017 | Variable rate – 1.200% | ||||
50.0 | January 2018 | Variable rate – 1.015% | ||||
50.0 | January 2018 | Variable rate – 1.055% | ||||
50.0 | February 2018 | Variable rate – 1.098% | ||||
50.0 | February 2018 | Variable rate – 0.908% | ||||
22.0 | February 2018 | Variable rate – 1.159% | ||||
100.0 | May 2018 | Variable rate – 0.974% | ||||
50.0 | July 2018 | Variable rate – 1.213% | ||||
50.0 | August 2018 | Variable rate – 0.937% | ||||
10.0 | December 2018 | Variable rate – 0.972% | ||||
50.0 | January 2019 | Variable rate – 1.099% | ||||
50.0 | February 2019 | Variable rate – 0.908% | ||||
100.0 | March 2019 | Variable rate – 1.011% | ||||
21.8 | July 2019 | Variable rate – 1.026% | ||||
15.0 | October 2019 | Variable rate – 1.147% | ||||
50.0 | May 2020 | Variable rate – 1.044% | ||||
21.8 | June 2020 | Fixed rate – 1.960% | ||||
25.0 | September 2020 | Variable rate – 1.265% | ||||
100.0 | September 2020 | Variable rate – 1.185% | ||||
50.0 | September 2020 | Variable rate – 1.184% | ||||
75.0 | September 2020 | Variable rate – 0.958% | ||||
100.0 | October 2020 | Variable rate – 0.764% | ||||
50.0 | December 2020 | Variable rate – 1.223% | ||||
100.0 | July 2021 | Variable rate – 1.223% | ||||
28.2 | August 2021 | Fixed rate – 2.550% | ||||
125.0 | August 2021 | Variable rate – 1.005% | ||||
50.0 | September 2021 | Variable rate – 1.365% | ||||
25.6 | March 2023 | Fixed rate – 2.160% | ||||
20.5 | June 2025 | Fixed rate – 2.940% | ||||
$ | 1,647.6 |
|
Balance, December 31, 2015 | 184,029 | ||
Treasury stock purchased and retired | (11,688 | ) | |
Stock options exercised | 771 | ||
Restricted and performance stock vested | 432 | (a) | |
Balance, September 30, 2016 | 173,544 |
(a) | Such amount was reduced by 190 thousand shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock. |
|
Nine months ended | |||||||
September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 124.0 | $ | 133.4 | |||
Adjustments to reconcile net income to net cash from operating activities: | |||||||
Amortization and depreciation | 199.1 | 213.3 | |||||
Income taxes | 43.0 | 70.7 | |||||
Insurance liabilities | 310.2 | 237.9 | |||||
Accrual and amortization of investment income | (93.4 | ) | (15.8 | ) | |||
Deferral of policy acquisition costs | (179.4 | ) | (181.9 | ) | |||
Net realized investment (gains) losses | (23.3 | ) | 20.8 | ||||
Transition expenses | — | 9.0 | |||||
Loss on reinsurance transaction | 75.4 | — | |||||
Cash and cash equivalents received upon recapture of reinsurance | 73.6 | — | |||||
Loss on extinguishment of debt | — | 32.8 | |||||
Other | 52.3 | 15.1 | |||||
Net cash from operating activities | $ | 581.5 | $ | 535.3 |
Nine months ended | |||||||
September 30, | |||||||
2016 | 2015 | ||||||
Stock options, restricted stock and performance units | $ | 18.9 | $ | 12.9 | |||
Market value of investments recaptured in connection with the termination of reinsurance agreements with BRe | 431.1 | — |
|
September 30, 2016 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 1,794.4 | $ | — | $ | 1,794.4 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (194.2 | ) | (194.2 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 147.7 | — | 147.7 | ||||||||
Accrued investment income | 3.8 | (.1 | ) | 3.7 | |||||||
Income tax assets, net | 9.5 | (1.2 | ) | 8.3 | |||||||
Other assets | 3.9 | (3.0 | ) | .9 | |||||||
Total assets | $ | 1,959.3 | $ | (198.5 | ) | $ | 1,760.8 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 92.7 | $ | (6.8 | ) | $ | 85.9 | ||||
Borrowings related to variable interest entities | 1,690.2 | — | 1,690.2 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 193.9 | (193.9 | ) | — | |||||||
Total liabilities | $ | 1,976.8 | $ | (200.7 | ) | $ | 1,776.1 |
December 31, 2015 | |||||||||||
VIEs | Eliminations | Net effect on consolidated balance sheet | |||||||||
Assets: | |||||||||||
Investments held by variable interest entities | $ | 1,633.6 | $ | — | $ | 1,633.6 | |||||
Notes receivable of VIEs held by insurance subsidiaries | — | (204.3 | ) | (204.3 | ) | ||||||
Cash and cash equivalents held by variable interest entities | 364.4 | — | 364.4 | ||||||||
Accrued investment income | 3.3 | — | 3.3 | ||||||||
Income tax assets, net | 26.0 | (1.9 | ) | 24.1 | |||||||
Other assets | 1.4 | (1.5 | ) | (.1 | ) | ||||||
Total assets | $ | 2,028.7 | $ | (207.7 | ) | $ | 1,821.0 | ||||
Liabilities: | |||||||||||
Other liabilities | $ | 196.6 | $ | (7.2 | ) | $ | 189.4 | ||||
Borrowings related to variable interest entities | 1,676.4 | — | 1,676.4 | ||||||||
Notes payable of VIEs held by insurance subsidiaries | 204.0 | (204.0 | ) | — | |||||||
Total liabilities | $ | 2,077.0 | $ | (211.2 | ) | $ | 1,865.8 |
Amortized cost | Estimated fair value | ||||||
(Dollars in millions) | |||||||
Due in one year or less | $ | 2.2 | $ | 2.2 | |||
Due after one year through five years | 976.4 | 977.3 | |||||
Due after five years through ten years | 809.6 | 814.9 | |||||
Total | $ | 1,788.2 | $ | 1,794.4 |
|
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 13,588.6 | $ | 288.5 | $ | 13,877.1 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 286.7 | — | 286.7 | |||||||||||
States and political subdivisions | — | 2,084.1 | — | 2,084.1 | |||||||||||
Debt securities issued by foreign governments | — | 24.4 | 4.1 | 28.5 | |||||||||||
Asset-backed securities | — | 2,664.3 | 56.5 | 2,720.8 | |||||||||||
Collateralized debt obligations | — | 175.2 | 2.5 | 177.7 | |||||||||||
Commercial mortgage-backed securities | — | 1,547.1 | 32.4 | 1,579.5 | |||||||||||
Mortgage pass-through securities | — | 2.7 | — | 2.7 | |||||||||||
Collateralized mortgage obligations | — | 1,053.1 | 12.0 | 1,065.1 | |||||||||||
Total fixed maturities, available for sale | — | 21,426.2 | 396.0 | 21,822.2 | |||||||||||
Equity securities - corporate securities | 126.9 | 180.5 | 23.9 | 331.3 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 18.7 | — | 18.7 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | .5 | — | .5 | |||||||||||
Asset-backed securities | — | 66.8 | — | 66.8 | |||||||||||
Collateralized debt obligations | — | 2.3 | — | 2.3 | |||||||||||
Commercial mortgage-backed securities | — | 142.0 | 8.3 | 150.3 | |||||||||||
Collateralized mortgage obligations | — | 64.1 | — | 64.1 | |||||||||||
Equity securities | 4.5 | — | — | 4.5 | |||||||||||
Total trading securities | 4.5 | 294.4 | 8.3 | 307.2 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 1,794.4 | — | 1,794.4 | |||||||||||
Other invested assets - derivatives | — | 84.7 | — | 84.7 | |||||||||||
Assets held in separate accounts | — | 4.7 | — | 4.7 | |||||||||||
Total assets carried at fair value by category | $ | 131.4 | $ | 23,784.9 | $ | 428.2 | $ | 24,344.5 | |||||||
Liabilities: | |||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 1,145.7 | $ | 1,145.7 |
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
Assets: | |||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||
Corporate securities | $ | — | $ | 12,698.1 | $ | 170.4 | $ | 12,868.5 | |||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 194.5 | — | 194.5 | |||||||||||
States and political subdivisions | — | 2,104.2 | — | 2,104.2 | |||||||||||
Debt securities issued by foreign governments | — | 20.7 | — | 20.7 | |||||||||||
Asset-backed securities | — | 1,816.3 | 35.9 | 1,852.2 | |||||||||||
Collateralized debt obligations | — | 186.7 | — | 186.7 | |||||||||||
Commercial mortgage-backed securities | — | 1,604.2 | 1.1 | 1,605.3 | |||||||||||
Mortgage pass-through securities | — | 3.3 | .1 | 3.4 | |||||||||||
Collateralized mortgage obligations | — | 1,047.4 | — | 1,047.4 | |||||||||||
Total fixed maturities, available for sale | — | 19,675.4 | 207.5 | 19,882.9 | |||||||||||
Equity securities - corporate securities | 254.9 | 176.1 | 32.0 | 463.0 | |||||||||||
Trading securities: | |||||||||||||||
Corporate securities | — | 21.5 | — | 21.5 | |||||||||||
United States Treasury securities and obligations of United States government corporations and agencies | — | 1.9 | — | 1.9 | |||||||||||
Asset-backed securities | — | 35.5 | — | 35.5 | |||||||||||
Collateralized debt obligations | — | 2.1 | — | 2.1 | |||||||||||
Commercial mortgage-backed securities | — | 118.1 | 39.9 | 158.0 | |||||||||||
Collateralized mortgage obligations | — | 38.2 | — | 38.2 | |||||||||||
Equity securities | 4.9 | — | — | 4.9 | |||||||||||
Total trading securities | 4.9 | 217.3 | 39.9 | 262.1 | |||||||||||
Investments held by variable interest entities - corporate securities | — | 1,633.6 | — | 1,633.6 | |||||||||||
Other invested assets - derivatives | 1.6 | 41.0 | — | 42.6 | |||||||||||
Assets held in separate accounts | — | 4.7 | — | 4.7 | |||||||||||
Total assets carried at fair value by category | $ | 261.4 | $ | 21,748.1 | $ | 279.4 | $ | 22,288.9 | |||||||
Liabilities: | |||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | $ | — | $ | — | $ | 1,057.1 | $ | 1,057.1 |
September 30, 2016 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,867.3 | $ | 1,867.3 | $ | 1,749.5 | |||||||||
Policy loans | — | — | 110.8 | 110.8 | 110.8 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 165.5 | — | 165.5 | 165.5 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 631.1 | 74.9 | — | 706.0 | 706.0 | ||||||||||||||
Held by variable interest entities | 147.7 | — | — | 147.7 | 147.7 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Policyholder account balances | — | — | 10,817.2 | 10,817.2 | 10,817.2 | ||||||||||||||
Investment borrowings | — | 1,654.1 | — | 1,654.1 | 1,647.6 | ||||||||||||||
Borrowings related to variable interest entities | — | 1,732.2 | — | 1,732.2 | 1,690.2 | ||||||||||||||
Notes payable – direct corporate obligations | — | 934.8 | — | 934.8 | 912.5 |
December 31, 2015 | |||||||||||||||||||
Quoted prices in active markets for identical assets or liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total estimated fair value | Total carrying amount | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage loans | $ | — | $ | — | $ | 1,772.4 | $ | 1,772.4 | $ | 1,721.0 | |||||||||
Policy loans | — | — | 109.4 | 109.4 | 109.4 | ||||||||||||||
Other invested assets: | |||||||||||||||||||
Company-owned life insurance | — | 158.1 | — | 158.1 | 158.1 | ||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Unrestricted | 432.3 | — | — | 432.3 | 432.3 | ||||||||||||||
Held by variable interest entities | 364.4 | — | — | 364.4 | 364.4 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Policyholder account balances | — | — | 10,762.3 | 10,762.3 | 10,762.3 | ||||||||||||||
Investment borrowings | — | 1,549.8 | — | 1,549.8 | 1,548.1 | ||||||||||||||
Borrowings related to variable interest entities | — | 1,673.6 | — | 1,673.6 | 1,676.4 | ||||||||||||||
Notes payable – direct corporate obligations | — | 937.8 | — | 937.8 | 911.1 |
September 30, 2016 | ||||||||||||||||||||||||||||||||
Beginning balance as of June 30, 2016 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2016 | Amount of total gains (losses) for the three months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 174.6 | $ | 118.8 | $ | — | $ | (4.9 | ) | $ | — | $ | — | $ | 288.5 | $ | — | |||||||||||||||
Debt securities issued by foreign governments | 4.1 | — | — | — | — | — | 4.1 | — | ||||||||||||||||||||||||
Asset-backed securities | 39.1 | 5.7 | — | 2.1 | 24.6 | (15.0 | ) | 56.5 | — | |||||||||||||||||||||||
Collateralized debt obligations | — | 2.5 | — | — | — | — | 2.5 | — | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 1.1 | 17.0 | — | (.1 | ) | 14.4 | — | 32.4 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | — | 12.0 | — | ||||||||||||||||||||||||
Total fixed maturities, available for sale | 218.9 | 156.0 | — | (2.9 | ) | 39.0 | (15.0 | ) | 396.0 | — | ||||||||||||||||||||||
Equity securities - corporate securities | 21.4 | 3.3 | — | (.8 | ) | — | — | 23.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | — | — | — | (1.7 | ) | 10.0 | — | 8.3 | (1.7 | ) | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,127.0 | ) | (37.0 | ) | 18.3 | — | — | — | (1,145.7 | ) | 18.3 |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016. The following summarizes such activity for the three months ended September 30, 2016 (dollars in millions): |
Purchases | Received in reinsurance recapture | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||
Corporate securities | $ | 1.1 | $ | 118.6 | $ | (.9 | ) | $ | — | $ | — | $ | 118.8 | ||||||||||
Asset-backed securities | 7.0 | — | (1.3 | ) | — | — | 5.7 | ||||||||||||||||
Collateralized debt obligations | 2.5 | — | — | — | — | 2.5 | |||||||||||||||||
Commercial mortgage-backed securities | 17.0 | — | — | — | — | 17.0 | |||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | 12.0 | |||||||||||||||||
Total fixed maturities, available for sale | 27.6 | 130.6 | (2.2 | ) | — | — | 156.0 | ||||||||||||||||
Equity securities - corporate securities | 1.1 | 2.2 | — | — | — | 3.3 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (38.5 | ) | — | 3.1 | (14.6 | ) | 13.0 | (37.0 | ) |
September 30, 2016 | ||||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2015 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2016 | Amount of total gains (losses) for the nine months ended September 30, 2016 included in our net income relating to assets and liabilities still held as of the reporting date | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | ||||||||||||||||||||||||||||||||
Corporate securities | $ | 170.4 | $ | 104.4 | $ | (7.0 | ) | $ | 7.4 | $ | 20.3 | $ | (7.0 | ) | $ | 288.5 | $ | (5.6 | ) | |||||||||||||
Debt securities issued by foreign governments | — | 4.0 | — | .1 | — | — | 4.1 | — | ||||||||||||||||||||||||
Asset-backed securities | 35.9 | 1.7 | — | 4.0 | 28.6 | (13.7 | ) | 56.5 | — | |||||||||||||||||||||||
Collateralized debt obligations | — | 2.5 | — | — | — | — | 2.5 | — | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 1.1 | 17.0 | — | .4 | 13.9 | — | 32.4 | — | ||||||||||||||||||||||||
Mortgage pass-through securities | .1 | (.1 | ) | — | — | — | — | — | — | |||||||||||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | — | 12.0 | — | ||||||||||||||||||||||||
Total fixed maturities, available for sale | 207.5 | 141.5 | (7.0 | ) | 11.9 | 62.8 | (20.7 | ) | 396.0 | (5.6 | ) | |||||||||||||||||||||
Equity securities - corporate securities | 32.0 | 5.5 | (12.8 | ) | (.8 | ) | — | — | 23.9 | (12.8 | ) | |||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 39.9 | — | — | (1.4 | ) | — | (30.2 | ) | 8.3 | (1.4 | ) | |||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,057.1 | ) | (55.3 | ) | (33.3 | ) | — | — | — | (1,145.7 | ) | (33.3 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. In addition, such activity includes the investments received upon the recapture of reinsurance agreements with BRe on September 29, 2016. The following summarizes such activity for the nine months ended September 30, 2016 (dollars in millions): |
Purchases | Received in reinsurance recapture | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | ||||||||||||||||||
Assets: | |||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||
Corporate securities | $ | 1.1 | $ | 118.6 | $ | (15.3 | ) | $ | — | $ | — | $ | 104.4 | ||||||||||
Debt securities issued by foreign governments | 4.0 | — | — | — | — | 4.0 | |||||||||||||||||
Asset-backed securities | 7.0 | — | (5.3 | ) | — | — | 1.7 | ||||||||||||||||
Collateralized debt obligations | 2.5 | — | — | — | — | 2.5 | |||||||||||||||||
Commercial mortgage-backed securities | 17.0 | — | — | — | — | 17.0 | |||||||||||||||||
Mortgage pass-through securities | — | — | (.1 | ) | — | — | (.1 | ) | |||||||||||||||
Collateralized mortgage obligations | — | 12.0 | — | — | — | 12.0 | |||||||||||||||||
Total fixed maturities, available for sale | 31.6 | 130.6 | (20.7 | ) | — | — | 141.5 | ||||||||||||||||
Equity securities - corporate securities | 3.3 | 2.2 | — | — | — | 5.5 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (101.9 | ) | — | 19.2 | (17.5 | ) | 44.9 | (55.3 | ) |
September 30, 2015 | |||||||||||||||||||||||||||||||
Beginning balance as of June 30, 2015 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2015 | Amount of total gains (losses) for the three months ended September 30, 2015 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 133.7 | $ | 4.6 | $ | — | $ | (3.8 | ) | $ | 11.8 | $ | — | $ | 146.3 | $ | — | ||||||||||||||
Asset-backed securities | 53.3 | 10.4 | — | .2 | — | (23.9 | ) | 40.0 | — | ||||||||||||||||||||||
Commercial mortgage-backed securities | 1.2 | 14.6 | — | (.2 | ) | — | — | 15.6 | — | ||||||||||||||||||||||
Mortgage pass-through securities | .2 | (.1 | ) | — | — | — | — | .1 | — | ||||||||||||||||||||||
Total fixed maturities, available for sale | 188.4 | 29.5 | — | (3.8 | ) | 11.8 | (23.9 | ) | 202.0 | — | |||||||||||||||||||||
Equity securities - corporate securities | 29.9 | 1.0 | — | — | — | — | 30.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 39.9 | — | — | (.6 | ) | — | (9.2 | ) | 30.1 | (.6 | ) | ||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,074.0 | ) | 16.1 | (21.2 | ) | — | — | — | (1,079.1 | ) | (21.2 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2015 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 6.0 | $ | (1.4 | ) | $ | — | $ | — | $ | 4.6 | ||||||||
Asset-backed securities | 11.0 | (.6 | ) | — | — | 10.4 | |||||||||||||
Commercial mortgage-backed securities | 14.6 | — | — | — | 14.6 | ||||||||||||||
Mortgage pass-through securities | — | (.1 | ) | — | — | (.1 | ) | ||||||||||||
Total fixed maturities, available for sale | 31.6 | (2.1 | ) | — | — | 29.5 | |||||||||||||
Equity securities - corporate securities | 1.0 | — | — | — | 1.0 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (38.0 | ) | 39.0 | — | 15.1 | 16.1 |
September 30, 2015 | |||||||||||||||||||||||||||||||
Beginning balance as of December 31, 2014 | Purchases, sales, issuances and settlements, net (b) | Total realized and unrealized gains (losses) included in net income | Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss) | Transfers into Level 3 (a) | Transfers out of Level 3 (a) | Ending balance as of September 30, 2015 | Amount of total gains (losses) for the nine months ended September 30, 2015 included in our net income relating to assets and liabilities still held as of the reporting date | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||||||||||||||
Corporate securities | $ | 365.9 | $ | (21.7 | ) | $ | (2.2 | ) | $ | (10.0 | ) | $ | 21.0 | $ | (206.7 | ) | $ | 146.3 | $ | — | |||||||||||
States and political subdivisions | 35.5 | — | — | — | — | (35.5 | ) | — | — | ||||||||||||||||||||||
Asset-backed securities | 59.2 | 10.0 | — | (.6 | ) | — | (28.6 | ) | 40.0 | — | |||||||||||||||||||||
Commercial mortgage-backed securities | 1.2 | 14.5 | — | (.1 | ) | — | — | 15.6 | — | ||||||||||||||||||||||
Mortgage pass-through securities | .4 | (.3 | ) | — | — | — | — | .1 | — | ||||||||||||||||||||||
Total fixed maturities, available for sale | 462.2 | 2.5 | (2.2 | ) | (10.7 | ) | 21.0 | (270.8 | ) | 202.0 | — | ||||||||||||||||||||
Equity securities - corporate securities | 28.0 | 2.9 | — | — | — | — | 30.9 | — | |||||||||||||||||||||||
Trading securities - commercial mortgage-backed securities | 28.6 | — | — | 1.5 | — | — | 30.1 | 1.5 | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (1,081.5 | ) | 6.1 | (3.7 | ) | — | — | — | (1,079.1 | ) | (3.7 | ) |
(a) | Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate. |
(b) | Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2015 (dollars in millions): |
Purchases | Sales | Issuances | Settlements | Purchases, sales, issuances and settlements, net | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed maturities, available for sale: | |||||||||||||||||||
Corporate securities | $ | 6.1 | $ | (27.8 | ) | $ | — | $ | — | $ | (21.7 | ) | |||||||
Asset-backed securities | 11.0 | (1.0 | ) | — | — | 10.0 | |||||||||||||
Commercial mortgage-backed securities | 14.5 | — | — | — | 14.5 | ||||||||||||||
Mortgage pass-through securities | — | (.3 | ) | — | — | (.3 | ) | ||||||||||||
Total fixed maturities, available for sale | 31.6 | (29.1 | ) | — | — | 2.5 | |||||||||||||
Equity securities - corporate securities | 2.9 | — | — | — | 2.9 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Future policy benefits - embedded derivatives associated with fixed index annuity products | (101.4 | ) | 61.4 | (2.3 | ) | 48.4 | 6.1 |
Fair value at September 30, 2016 | Valuation techniques | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 201.1 | Discounted cash flow analysis | Discount margins | 2.50% - 13.00% (4.51%) | ||||
Asset-backed securities (b) | 26.1 | Discounted cash flow analysis | Discount margins | 2.23% - 3.70% (2.90%) | |||||
Equity securities (c) | 23.9 | Market multiple | Projected cash flows | 0.4% - 6.2% (5.9%) | |||||
Other assets categorized as Level 3 (d) | 177.1 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 428.2 | ||||||||
Liabilities: | |||||||||
Future policy benefits (e) | 1,145.7 | Discounted projected embedded derivatives | Projected portfolio yields | 5.15% - 5.61% (5.42%) | |||||
Discount rates | 0.00% - 2.48% (1.26%) | ||||||||
Surrender rates | 1.67% - 46.56% (14.09%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Equity securities - The significant unobservable input used in the fair value measurement of these equity securities is projected cash flows. Generally, increases (decreases) in the projected cash flows would result in higher (lower) fair value measurements. |
(d) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(e) | Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
Fair value at December 31, 2015 | Valuation techniques | Unobservable inputs | Range (weighted average) | ||||||
Assets: | |||||||||
Corporate securities (a) | $ | 76.9 | Discounted cash flow analysis | Discount margins | 1.65% - 9.74% (5.35%) | ||||
Asset-backed securities (b) | 22.2 | Discounted cash flow analysis | Discount margins | 2.83% - 4.45% (3.50%) | |||||
Equity security (c) | 32.0 | Market approach | Projected cash flows | Not applicable | |||||
Other assets categorized as Level 3 (d) | 148.3 | Unadjusted third-party price source | Not applicable | Not applicable | |||||
Total | 279.4 | ||||||||
Liabilities: | |||||||||
Future policy benefits (e) | 1,057.1 | Discounted projected embedded derivatives | Projected portfolio yields | 5.15% - 5.61% (5.42%) | |||||
Discount rates | 0.00% - 3.18% (1.94%) | ||||||||
Surrender rates | 1.67% - 46.56% (14.09%) |
(a) | Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(b) | Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. |
(c) | Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value. |
(d) | Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources. |
(e) | Future policy benefits - The significant unobservable inputs used in the fair value measurement of our embedded derivatives associated with fixed index annuity products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative. |
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