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1. Nature of Operations and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Principal Financial Group, Inc. (“PFG”), its majority-owned subsidiaries and its consolidated variable interest entities (“VIEs”), have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ended December 31, 2013. These interim unaudited consolidated financial statements should be read in conjunction with our annual audited financial statements as of December 31, 2012, included in our Form 10-K for the year ended December 31, 2012, filed with the United States Securities and Exchange Commission (“SEC”). The accompanying consolidated statement of financial position as of December 31, 2012, has been derived from the audited consolidated statement of financial position but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Reclassifications have been made to prior period financial statements to conform to the March 31, 2013, presentation.
Revisions of Previously Issued Financial Statements
In conjunction with our first quarter 2013 acquisition of AFP Cuprum S.A. (“Cuprum”) in Chile, we re-evaluated the accounting treatment for similar products offered in other foreign jurisdictions, including the AFORE retirement accumulation business in Mexico. As a result of this re-evaluation, we have concluded that the AFORE product, which was previously accounted for under Accounting Standards Codification 944, Financial Services — Insurance, should be accounted for as a long-term service contract, consistent with the accounting requirements for our recently acquired retirement accumulation business in Chile. The revision to the accounting treatment for the AFORE product in Mexico will result in the following changes:
(a) Fewer acquisition costs are capitalized. Specifically, we expense as incurred salary and related costs associated with the successful efforts of our proprietary sales force and sales support staff. All direct and incremental costs such as commissions will continue to be deferred.
(b) Deferred costs are amortized on a straight line basis over the expected contract life rather than based on estimated gross profits. The amortization method change also impacts purchased customer intangible assets.
We have revised our prior period consolidated financial statements accordingly. These revisions, inclusive of any other potential adjustments, are not material in any prior period based on an analysis of quantitative and qualitative factors in accordance with SEC Staff Accounting Bulletin 108, and, as a result, amendment of previously filed periodic reports is not required. Rather, these revisions will be made the next time we file the prior period consolidated financial statements.
The following tables quantify the prior period impact of this revision.
Principal Financial Group, Inc.
Consolidated Statements of Financial Position
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale |
|
$ |
50,939.3 |
|
$ |
50,939.3 |
|
$ |
49,006.7 |
|
$ |
49,006.7 |
|
|
Fixed maturities, trading |
|
626.7 |
|
626.7 |
|
971.7 |
|
971.7 |
| ||||
|
Equity securities, available-for-sale |
|
136.5 |
|
136.5 |
|
77.1 |
|
77.1 |
| ||||
|
Equity securities, trading |
|
252.8 |
|
252.8 |
|
404.8 |
|
404.8 |
| ||||
|
Mortgage loans |
|
11,519.7 |
|
11,519.7 |
|
10,727.2 |
|
10,727.2 |
| ||||
|
Real estate |
|
1,180.3 |
|
1,180.3 |
|
1,092.9 |
|
1,092.9 |
| ||||
|
Policy loans |
|
864.9 |
|
864.9 |
|
885.1 |
|
885.1 |
| ||||
|
Other investments |
|
3,291.1 |
|
3,291.1 |
|
2,985.8 |
|
2,985.8 |
| ||||
|
Total investments |
|
68,811.3 |
|
68,811.3 |
|
66,151.3 |
|
66,151.3 |
| ||||
|
Cash and cash equivalents |
|
4,177.2 |
|
4,177.2 |
|
2,833.9 |
|
2,833.9 |
| ||||
|
Accrued investment income |
|
584.4 |
|
584.4 |
|
615.2 |
|
615.2 |
| ||||
|
Premiums due and other receivables |
|
1,084.4 |
|
1,084.4 |
|
1,196.5 |
|
1,196.5 |
| ||||
|
Deferred acquisition costs |
|
2,673.8 |
|
2,590.0 |
|
2,428.0 |
|
2,358.1 |
| ||||
|
Property and equipment |
|
464.2 |
|
464.2 |
|
457.2 |
|
457.2 |
| ||||
|
Goodwill |
|
543.4 |
|
543.4 |
|
482.3 |
|
482.3 |
| ||||
|
Other intangibles |
|
927.2 |
|
914.7 |
|
890.6 |
|
870.3 |
| ||||
|
Separate account assets |
|
81,653.8 |
|
81,653.8 |
|
71,364.4 |
|
71,364.4 |
| ||||
|
Other assets |
|
1,006.8 |
|
1,006.8 |
|
942.3 |
|
942.3 |
| ||||
|
Total assets |
|
$ |
161,926.5 |
|
$ |
161,830.2 |
|
$ |
147,361.7 |
|
$ |
147,271.5 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Contractholder funds |
|
$ |
37,786.5 |
|
$ |
37,786.5 |
|
$ |
37,676.4 |
|
$ |
37,676.4 |
|
|
Future policy benefits and claims |
|
22,436.2 |
|
22,436.2 |
|
20,210.4 |
|
20,210.4 |
| ||||
|
Other policyholder funds |
|
716.4 |
|
716.4 |
|
548.6 |
|
548.6 |
| ||||
|
Short-term debt |
|
40.8 |
|
40.8 |
|
105.2 |
|
105.2 |
| ||||
|
Long-term debt |
|
2,671.3 |
|
2,671.3 |
|
1,564.8 |
|
1,564.8 |
| ||||
|
Income taxes currently payable |
|
15.3 |
|
15.3 |
|
3.1 |
|
3.1 |
| ||||
|
Deferred income taxes |
|
626.5 |
|
600.0 |
|
208.7 |
|
184.0 |
| ||||
|
Separate account liabilities |
|
81,653.8 |
|
81,653.8 |
|
71,364.4 |
|
71,364.4 |
| ||||
|
Other liabilities |
|
6,146.1 |
|
6,146.1 |
|
6,286.2 |
|
6,286.2 |
| ||||
|
Total liabilities |
|
152,092.9 |
|
152,066.4 |
|
137,967.8 |
|
137,943.1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Redeemable noncontrolling interest |
|
60.4 |
|
60.4 |
|
22.2 |
|
22.2 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
| ||||
|
Series A preferred stock, par value |
|
— |
|
— |
|
— |
|
— |
| ||||
|
Series B preferred stock, par value |
|
0.1 |
|
0.1 |
|
0.1 |
|
0.1 |
| ||||
|
Common stock, par value |
|
4.5 |
|
4.5 |
|
4.5 |
|
4.5 |
| ||||
|
Additional paid-in capital |
|
9,730.9 |
|
9,730.9 |
|
9,634.7 |
|
9,634.7 |
| ||||
|
Retained earnings |
|
4,940.2 |
|
4,862.0 |
|
4,402.3 |
|
4,323.4 |
| ||||
|
Accumulated other comprehensive income |
|
631.9 |
|
640.3 |
|
258.0 |
|
271.4 |
| ||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
(5,554.4 |
) |
(5,281.7 |
) |
(5,281.7 |
) | ||||
|
Total stockholders’ equity attributable to Principal Financial Group, Inc. |
|
9,753.2 |
|
9,683.4 |
|
9,017.9 |
|
8,952.4 |
| ||||
|
Noncontrolling interest |
|
20.0 |
|
20.0 |
|
353.8 |
|
353.8 |
| ||||
|
Total stockholders’ equity |
|
9,773.2 |
|
9,703.4 |
|
9,371.7 |
|
9,306.2 |
| ||||
|
Total liabilities and stockholders’ equity |
|
$ |
161,926.5 |
|
$ |
161,830.2 |
|
$ |
147,361.7 |
|
$ |
147,271.5 |
|
Principal Financial Group, Inc.
Consolidated Statements of Operations
|
|
|
For the year ended |
|
For the year ended |
| ||||||||
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions, except per share data) |
| ||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||
|
Premiums and other considerations |
|
$ |
3,219.4 |
|
$ |
3,219.4 |
|
$ |
2,891.0 |
|
$ |
2,891.0 |
|
|
Fees and other revenues |
|
2,626.7 |
|
2,626.7 |
|
2,526.7 |
|
2,526.7 |
| ||||
|
Net investment income |
|
3,254.9 |
|
3,254.9 |
|
3,375.3 |
|
3,375.3 |
| ||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
232.7 |
|
232.7 |
|
75.0 |
|
75.0 |
| ||||
|
Total other-than-temporary impairment losses on available-for- sale securities |
|
(135.9 |
) |
(135.9 |
) |
(147.6 |
) |
(147.6 |
) | ||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income |
|
17.3 |
|
17.3 |
|
(49.7 |
) |
(49.7 |
) | ||||
|
Net impairment losses on available-for-sale securities |
|
(118.6 |
) |
(118.6 |
) |
(197.3 |
) |
(197.3 |
) | ||||
|
Net realized capital gains (losses) |
|
114.1 |
|
114.1 |
|
(122.3 |
) |
(122.3 |
) | ||||
|
Total revenues |
|
9,215.1 |
|
9,215.1 |
|
8,670.7 |
|
8,670.7 |
| ||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||
|
Benefits, claims and settlement expenses |
|
5,123.9 |
|
5,123.9 |
|
4,616.6 |
|
4,616.6 |
| ||||
|
Dividends to policyholders |
|
197.7 |
|
197.7 |
|
210.2 |
|
210.2 |
| ||||
|
Operating expenses |
|
2,934.1 |
|
2,933.5 |
|
2,950.8 |
|
2,971.1 |
| ||||
|
Total expenses |
|
8,255.7 |
|
8,255.1 |
|
7,777.6 |
|
7,797.9 |
| ||||
|
Income before income taxes |
|
959.4 |
|
960.0 |
|
893.1 |
|
872.8 |
| ||||
|
Income taxes |
|
134.7 |
|
134.6 |
|
204.2 |
|
198.3 |
| ||||
|
Net income |
|
824.7 |
|
825.4 |
|
688.9 |
|
674.5 |
| ||||
|
Net income attributable to noncontrolling interest |
|
18.8 |
|
18.8 |
|
36.2 |
|
36.2 |
| ||||
|
Net income attributable to Principal Financial Group, Inc. |
|
805.9 |
|
806.6 |
|
652.7 |
|
638.3 |
| ||||
|
Preferred stock dividends |
|
33.0 |
|
33.0 |
|
33.0 |
|
33.0 |
| ||||
|
Net income available to common stockholders |
|
$ |
772.9 |
|
$ |
773.6 |
|
$ |
619.7 |
|
$ |
605.3 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per common share |
|
$ |
2.60 |
|
$ |
2.60 |
|
$ |
1.97 |
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per common share |
|
$ |
2.57 |
|
$ |
2.58 |
|
$ |
1.95 |
|
$ |
1.91 |
|
Principal Financial Group, Inc.
Consolidated Statements of Operations
|
|
|
For the six months ended |
|
For the nine months ended |
| ||||||||
|
|
|
June 30, 2012 |
|
September 30, 2012 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions, except per share data) |
| ||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||
|
Premiums and other considerations |
|
$ |
1,361.1 |
|
$ |
1,361.1 |
|
$ |
2,519.3 |
|
$ |
2,519.3 |
|
|
Fees and other revenues |
|
1,234.1 |
|
1,234.1 |
|
1,909.1 |
|
1,909.1 |
| ||||
|
Net investment income |
|
1,625.8 |
|
1,625.8 |
|
2,409.6 |
|
2,409.6 |
| ||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
54.3 |
|
54.3 |
|
176.4 |
|
176.4 |
| ||||
|
Total other-than-temporary impairment losses on available-for- sale securities |
|
(82.8 |
) |
(82.8 |
) |
(126.4 |
) |
(126.4 |
) | ||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
22.0 |
|
22.0 |
|
31.2 |
|
31.2 |
| ||||
|
Net impairment losses on available-for-sale securities |
|
(60.8 |
) |
(60.8 |
) |
(95.2 |
) |
(95.2 |
) | ||||
|
Net realized capital gains (losses) |
|
(6.5 |
) |
(6.5 |
) |
81.2 |
|
81.2 |
| ||||
|
Total revenues |
|
4,214.5 |
|
4,214.5 |
|
6,919.2 |
|
6,919.2 |
| ||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||
|
Benefits, claims and settlement expenses |
|
2,322.5 |
|
2,322.5 |
|
3,969.5 |
|
3,969.5 |
| ||||
|
Dividends to policyholders |
|
99.8 |
|
99.8 |
|
149.5 |
|
149.5 |
| ||||
|
Operating expenses |
|
1,280.1 |
|
1,284.7 |
|
2,106.7 |
|
2,101.1 |
| ||||
|
Total expenses |
|
3,702.4 |
|
3,707.0 |
|
6,225.7 |
|
6,220.1 |
| ||||
|
Income before income taxes |
|
512.1 |
|
507.5 |
|
693.5 |
|
699.1 |
| ||||
|
Income taxes |
|
109.1 |
|
107.6 |
|
99.2 |
|
100.4 |
| ||||
|
Net income |
|
403.0 |
|
399.9 |
|
594.3 |
|
598.7 |
| ||||
|
Net income attributable to noncontrolling interest |
|
11.9 |
|
11.9 |
|
15.3 |
|
15.3 |
| ||||
|
Net income attributable to Principal Financial Group, Inc. |
|
391.1 |
|
388.0 |
|
579.0 |
|
583.4 |
| ||||
|
Preferred stock dividends |
|
16.5 |
|
16.5 |
|
24.7 |
|
24.7 |
| ||||
|
Net income available to common stockholders |
|
$ |
374.6 |
|
$ |
371.5 |
|
$ |
554.3 |
|
$ |
558.7 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per common share |
|
$ |
1.25 |
|
$ |
1.24 |
|
$ |
1.86 |
|
$ |
1.87 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per common share |
|
$ |
1.24 |
|
$ |
1.22 |
|
$ |
1.84 |
|
$ |
1.85 |
|
Principal Financial Group, Inc.
Consolidated Statements of Operations
|
|
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
| ||||||||||||||||
|
|
|
March 31, 2012 |
|
June 30, 2012 |
|
September 30, 2012 |
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||||||
|
|
|
(in millions, except per share data) |
| ||||||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Premiums and other considerations |
|
$ |
679.8 |
|
$ |
679.8 |
|
$ |
681.3 |
|
$ |
681.3 |
|
$ |
1,158.2 |
|
$ |
1,158.2 |
|
$ |
700.1 |
|
$ |
700.1 |
|
|
Fees and other revenues |
|
598.0 |
|
598.0 |
|
636.1 |
|
636.1 |
|
675.0 |
|
675.0 |
|
717.6 |
|
717.6 |
| ||||||||
|
Net investment income |
|
824.8 |
|
824.8 |
|
801.0 |
|
801.0 |
|
783.8 |
|
783.8 |
|
845.3 |
|
845.3 |
| ||||||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
22.1 |
|
22.1 |
|
32.2 |
|
32.2 |
|
122.1 |
|
122.1 |
|
56.3 |
|
56.3 |
| ||||||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
(33.7 |
) |
(33.7 |
) |
(49.1 |
) |
(49.1 |
) |
(43.6 |
) |
(43.6 |
) |
(9.5 |
) |
(9.5 |
) | ||||||||
|
Other-than-temporary impairment losses on fixed maturities, available-for- sale reclassified to (from) other comprehensive income |
|
4.9 |
|
4.9 |
|
17.1 |
|
17.1 |
|
9.2 |
|
9.2 |
|
(13.9 |
) |
(13.9 |
) | ||||||||
|
Net impairment losses on available-for-sale securities |
|
(28.8 |
) |
(28.8 |
) |
(32.0 |
) |
(32.0 |
) |
(34.4 |
) |
(34.4 |
) |
(23.4 |
) |
(23.4 |
) | ||||||||
|
Net realized capital gains (losses) |
|
(6.7 |
) |
(6.7 |
) |
0.2 |
|
0.2 |
|
87.7 |
|
87.7 |
|
32.9 |
|
32.9 |
| ||||||||
|
Total revenues |
|
2,095.9 |
|
2,095.9 |
|
2,118.6 |
|
2,118.6 |
|
2,704.7 |
|
2,704.7 |
|
2,295.9 |
|
2,295.9 |
| ||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Benefits, claims and settlement expenses |
|
1,212.5 |
|
1,212.5 |
|
1,110.0 |
|
1,110.0 |
|
1,647.0 |
|
1,647.0 |
|
1,154.4 |
|
1,154.4 |
| ||||||||
|
Dividends to policyholders |
|
50.3 |
|
50.3 |
|
49.5 |
|
49.5 |
|
49.7 |
|
49.7 |
|
48.2 |
|
48.2 |
| ||||||||
|
Operating expenses |
|
556.0 |
|
555.1 |
|
724.1 |
|
729.6 |
|
826.6 |
|
816.4 |
|
827.4 |
|
832.4 |
| ||||||||
|
Total expenses |
|
1,818.8 |
|
1,817.9 |
|
1,883.6 |
|
1,889.1 |
|
2,523.3 |
|
2,513.1 |
|
2,030.0 |
|
2,035.0 |
| ||||||||
|
Income before income taxes |
|
277.1 |
|
278.0 |
|
235.0 |
|
229.5 |
|
181.4 |
|
191.6 |
|
265.9 |
|
260.9 |
| ||||||||
|
Income taxes (benefits) |
|
58.2 |
|
56.7 |
|
50.9 |
|
50.9 |
|
(9.9 |
) |
(7.2 |
) |
35.5 |
|
34.2 |
| ||||||||
|
Net income |
|
218.9 |
|
221.3 |
|
184.1 |
|
178.6 |
|
191.3 |
|
198.8 |
|
230.4 |
|
226.7 |
| ||||||||
|
Net income attributable to noncontrolling interest |
|
9.2 |
|
9.2 |
|
2.7 |
|
2.7 |
|
3.4 |
|
3.4 |
|
3.5 |
|
3.5 |
| ||||||||
|
Net income attributable to Principal Financial Group, Inc. |
|
209.7 |
|
212.1 |
|
181.4 |
|
175.9 |
|
187.9 |
|
195.4 |
|
226.9 |
|
223.2 |
| ||||||||
|
Preferred stock dividends |
|
8.2 |
|
8.2 |
|
8.3 |
|
8.3 |
|
8.2 |
|
8.2 |
|
8.3 |
|
8.3 |
| ||||||||
|
Net income available to common stockholders |
|
$ |
201.5 |
|
$ |
203.9 |
|
$ |
173.1 |
|
$ |
167.6 |
|
$ |
179.7 |
|
$ |
187.2 |
|
$ |
218.6 |
|
$ |
214.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Basic earnings per common share |
|
$ |
0.67 |
|
$ |
0.68 |
|
$ |
0.58 |
|
$ |
0.56 |
|
$ |
0.61 |
|
$ |
0.64 |
|
$ |
0.74 |
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Diluted earnings per common share |
|
$ |
0.66 |
|
$ |
0.68 |
|
$ |
0.58 |
|
$ |
0.56 |
|
$ |
0.60 |
|
$ |
0.63 |
|
$ |
0.74 |
|
$ |
0.72 |
|
Principal Financial Group, Inc.
Consolidated Statements of Comprehensive Income
|
|
|
For the year ended |
|
For the year ended |
| ||||||||
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Net income |
|
$ |
824.7 |
|
$ |
825.4 |
|
$ |
688.9 |
|
$ |
674.5 |
|
|
Other comprehensive income (loss), net: |
|
|
|
|
|
|
|
|
| ||||
|
Net unrealized gains on available-for-sale securities |
|
557.6 |
|
557.6 |
|
208.6 |
|
208.6 |
| ||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(6.7 |
) |
(6.7 |
) |
31.0 |
|
31.0 |
| ||||
|
Net unrealized gains (losses) on derivative instruments |
|
(43.6 |
) |
(43.6 |
) |
23.6 |
|
23.6 |
| ||||
|
Foreign currency translation adjustment |
|
(4.8 |
) |
(9.8 |
) |
(139.5 |
) |
(130.9 |
) | ||||
|
Net unrecognized postretirement benefit obligation |
|
(127.4 |
) |
(127.4 |
) |
(172.9 |
) |
(172.9 |
) | ||||
|
Other comprehensive income (loss) |
|
375.1 |
|
370.1 |
|
(49.2 |
) |
(40.6 |
) | ||||
|
Comprehensive income |
|
1,199.8 |
|
1,195.5 |
|
639.7 |
|
633.9 |
| ||||
|
Comprehensive income attributable to noncontrolling interest |
|
20.0 |
|
20.0 |
|
35.7 |
|
35.7 |
| ||||
|
Comprehensive income attributable to Principal Financial Group, Inc. |
|
$ |
1,179.8 |
|
$ |
1,175.5 |
|
$ |
604.0 |
|
$ |
598.2 |
|
Principal Financial Group, Inc.
Consolidated Statements of Comprehensive Income
|
|
|
For the six months ended |
|
For the nine months ended |
| ||||||||
|
|
|
June 30, 2012 |
|
September 30, 2012 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Net income |
|
$ |
403.0 |
|
$ |
399.9 |
|
$ |
594.3 |
|
$ |
598.7 |
|
|
Other comprehensive income, net: |
|
|
|
|
|
|
|
|
| ||||
|
Net unrealized gains on available-for-sale securities |
|
262.0 |
|
262.0 |
|
558.0 |
|
558.0 |
| ||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(10.8 |
) |
(10.8 |
) |
(14.8 |
) |
(14.8 |
) | ||||
|
Net unrealized gains on derivative instruments |
|
45.4 |
|
45.4 |
|
27.2 |
|
27.2 |
| ||||
|
Foreign currency translation adjustment |
|
(21.4 |
) |
(23.9 |
) |
27.2 |
|
21.5 |
| ||||
|
Net unrecognized postretirement benefit obligation |
|
17.5 |
|
17.5 |
|
26.2 |
|
26.2 |
| ||||
|
Other comprehensive income |
|
292.7 |
|
290.2 |
|
623.8 |
|
618.1 |
| ||||
|
Comprehensive income |
|
695.7 |
|
690.1 |
|
1,218.1 |
|
1,216.8 |
| ||||
|
Comprehensive income attributable to noncontrolling interest |
|
12.1 |
|
12.1 |
|
16.3 |
|
16.3 |
| ||||
|
Comprehensive income attributable to Principal Financial Group, Inc. |
|
$ |
683.6 |
|
$ |
678.0 |
|
$ |
1,201.8 |
|
$ |
1,200.5 |
|
Principal Financial Group, Inc.
Consolidated Statements of Comprehensive Income
|
|
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
| ||||||||||||||||
|
|
|
March 31, 2012 |
|
June 30, 2012 |
|
September 30, 2012 |
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||||||
|
|
|
(in millions) |
| ||||||||||||||||||||||
|
Net income |
|
$ |
218.9 |
|
$ |
221.3 |
|
$ |
184.1 |
|
$ |
178.6 |
|
$ |
191.3 |
|
$ |
198.8 |
|
$ |
230.4 |
|
$ |
226.7 |
|
|
Other comprehensive income (loss) net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Net unrealized gains (losses) on available-for-sale securities |
|
161.3 |
|
161.3 |
|
100.7 |
|
100.7 |
|
296.0 |
|
296.0 |
|
(0.4 |
) |
(0.4 |
) | ||||||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(0.9 |
) |
(0.9 |
) |
(9.9 |
) |
(9.9 |
) |
(4.0 |
) |
(4.0 |
) |
8.1 |
|
8.1 |
| ||||||||
|
Net unrealized gains (losses) on derivative instruments |
|
(3.5 |
) |
(3.5 |
) |
48.9 |
|
48.9 |
|
(18.2 |
) |
(18.2 |
) |
(70.8 |
) |
(70.8 |
) | ||||||||
|
Foreign currency translation adjustment |
|
65.3 |
|
59.6 |
|
(86.7 |
) |
(83.5 |
) |
48.6 |
|
45.4 |
|
(32.0 |
) |
(31.3 |
) | ||||||||
|
Net unrecognized postretirement benefit obligation |
|
8.7 |
|
8.7 |
|
8.8 |
|
8.8 |
|
8.7 |
|
8.7 |
|
(153.6 |
) |
(153.6 |
) | ||||||||
|
Other comprehensive income (loss) |
|
230.9 |
|
225.2 |
|
61.8 |
|
65.0 |
|
331.1 |
|
327.9 |
|
(248.7 |
) |
(248.0 |
) | ||||||||
|
Comprehensive income (loss) |
|
449.8 |
|
446.5 |
|
245.9 |
|
243.6 |
|
522.4 |
|
526.7 |
|
(18.3 |
) |
(21.3 |
) | ||||||||
|
Comprehensive income attributable to noncontrolling interest |
|
10.0 |
|
10.0 |
|
2.1 |
|
2.1 |
|
4.2 |
|
4.2 |
|
3.7 |
|
3.7 |
| ||||||||
|
Comprehensive income (loss) attributable to Principal Financial Group, Inc. |
|
$ |
439.8 |
|
$ |
436.5 |
|
$ |
243.8 |
|
$ |
241.5 |
|
$ |
518.2 |
|
$ |
522.5 |
|
$ |
(22.0 |
) |
$ |
(25.0 |
) |
Certain of the prior period line items in the consolidated statements of cash flows and stockholders’ equity were immaterially affected by the revisions of previously issued financial statements. All of the line item changes in the consolidated statements of cash flows were included in the operating activities section and the changes in the consolidated statements of stockholders’ equity have largely been addressed through the preceding disclosures.
Recent Accounting Pronouncements
In March 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that clarifies how the cumulative translation adjustment (“CTA”) related to a parent’s investment in a foreign entity should be released when certain transactions related to the foreign entity occur. This guidance will be effective prospectively for us beginning on January 1, 2014, and is not expected to have a material impact on our consolidated financial statements.
In February 2013, the FASB issued authoritative guidance that requires entities to disclose additional information about items reclassified out of accumulated other comprehensive income (“AOCI”). Entities are required to disclose information regarding changes in AOCI balances by component and significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements. This guidance was effective for us beginning January 1, 2013, and did not have a material impact on our consolidated financial statements. This guidance did not impact the requirements for reporting of comprehensive income under FASB guidance issued in June 2011, which changed the presentation of comprehensive income in the financial statements. The guidance eliminated the presentation options contained in previous guidance and instead required entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements that show the components of net income and other comprehensive income (“OCI”), including adjustments for items that are reclassified from OCI to net income. The guidance did not change the items that must be reported in OCI or when an item of OCI must be reclassified to net income. This guidance was effective for us on January 1, 2012, and did not have a material impact on our consolidated financial statements. See Note 9, Stockholders’ Equity, for further details.
In January 2013 and December 2011, the FASB issued authoritative guidance related to balance sheet offsetting. The 2011 guidance requires disclosures about assets and liabilities that are offset or have the potential to be offset. These disclosures are intended to address differences in the asset and liability offsetting requirements under U.S. GAAP and International Financial Reporting Standards. The 2013 guidance clarified that the disclosure requirements would apply to derivative instruments, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement. Both pieces of guidance were effective for us beginning January 1, 2013, with retrospective application required and did not have a material impact on our consolidated financial statements. See Note 4, Investments, for further details.
In July 2012, the FASB issued authoritative guidance that amends how indefinite-lived intangible assets are tested for impairment. The amendments provide an option to perform a qualitative assessment to determine whether it is necessary to perform the annual fair value calculation impairment test. This new guidance is effective for our 2013 indefinite-lived intangible asset impairment testing and is not expected to have a material impact on our consolidated financial statements.
In December 2011, the FASB issued authoritative guidance that requires a reporting entity to follow the real estate sales guidance when the reporting entity ceases to have a controlling financial interest in a subsidiary that is in-substance real estate as a result of a default on the subsidiary’s nonrecourse debt. This guidance was effective for us on January 1, 2013, and did not have a material impact on our consolidated financial statements.
In September 2011, the FASB issued authoritative guidance that amends how goodwill is tested for impairment. The amendments provide an option to perform a qualitative assessment to determine whether it is necessary to perform the annual two-step quantitative goodwill impairment test. This guidance was effective for our 2012 goodwill impairment test and did not have a material impact on our consolidated financial statements.
In May 2011, the FASB issued authoritative guidance that clarifies and changes fair value measurement and disclosure requirements. This guidance expands existing disclosure requirements for fair value measurements and makes other amendments but does not require additional fair value measurements. This guidance was effective for us on January 1, 2012, and did not have a material impact on our consolidated financial statements. See Note 10, Fair Value Measurements, for further details.
In April 2011, the FASB issued authoritative guidance that modifies the criteria for determining when repurchase agreements would be accounted for as secured borrowings as opposed to sales. The guidance was effective for us on January 1, 2012, for new transfers and modifications to existing transactions and did not have a material impact on our consolidated financial statements.
Separate Accounts
The separate accounts are legally segregated and are not subject to the claims that arise out of any of our other business. The client, rather than us, directs the investments and bears the investment risk of these funds. The separate account assets represent the fair value of funds that are separately administered by us for contracts with equity, real estate and fixed income investments and are presented as a summary total within the consolidated statements of financial position. An equivalent amount is reported as separate account liabilities, which represent the obligation to return the monies to the client. We receive fees for mortality, withdrawal and expense risks, as well as administrative, maintenance and investment advisory services that are included in the consolidated statements of operations. Net deposits, net investment income and realized and unrealized capital gains and losses of the separate accounts are not reflected in the consolidated statements of operations. Separate account assets and separate account liabilities include certain non-domestic retirement accumulation products where the segregated funds and associated obligation to the client are consolidated within our financial statements. We have determined that summary totals are the most meaningful presentation for these funds.
At March 31, 2013 and December 31, 2012, the separate account assets include a separate account valued at $171.5 million and $148.3 million, respectively, which primarily includes shares of our stock that were allocated and issued to eligible participants of qualified employee benefit plans administered by us as part of the policy credits issued under our 2001 demutualization. These shares are included in both basic and diluted earnings per share calculations. In the consolidated statements of financial position, the separate account shares are recorded at fair value and are reported as separate account assets with a corresponding separate account liability to eligible participants of the qualified plan. Changes in fair value of the separate account shares are reflected in both the separate account assets and separate account liabilities and do not impact our results of operations.
|
|||
2. Acquisition
On February 4, 2013, we completed the purchase of Cuprum, a premier pension manager in Chile that will grow our ability to offer customers in Chile unmatched pension savings and retirement solutions. Our acquisition agreement required Empresas Penta S.A. and Inversiones Banpenta Limitada to sell their 63% ownership in Cuprum pursuant to a public tender offer that also included the remaining 37% of publicly traded shares. As a result of the public tender offer, we acquired a 91.55% ownership stake in Cuprum for a purchase price of $1.3 billion. Cuprum is consolidated within the Principal International segment on a one-month lag.
A summary of the fair values of the net assets acquired as of February 4, 2013, based upon current valuation estimates, is as follows (in millions):
|
Assets |
|
|
| |
|
Equity securities, available-for-sale |
|
$ |
3.2 |
|
|
Equity securities, trading |
|
340.5 |
| |
|
Real estate |
|
1.9 |
| |
|
Other investments |
|
5.3 |
| |
|
Cash and cash equivalents |
|
3.5 |
| |
|
Premiums due and other receivables |
|
1.4 |
| |
|
Property and equipment |
|
19.6 |
| |
|
Goodwill |
|
646.3 |
| |
|
Other intangibles |
|
678.7 |
| |
|
Separate account assets |
|
33,919.4 |
| |
|
Other assets |
|
27.3 |
| |
|
Total assets |
|
35,647.1 |
| |
|
Liabilities |
|
|
| |
|
Short-term debt |
|
5.0 |
| |
|
Long-term debt |
|
114.6 |
| |
|
Separate account liabilities |
|
33,919.4 |
| |
|
Other liabilities |
|
231.0 |
| |
|
Total liabilities |
|
34,270.0 |
| |
|
Noncontrolling interest |
|
113.6 |
| |
|
Net assets acquired |
|
$ |
1,263.5 |
|
Of the acquired intangible assets, $646.3 million was assigned to goodwill and is not subject to amortization. The goodwill is largely related to future sales anticipated from our internal workforce and entity-specific revenue synergies that will be generated by combining Cuprum with our existing businesses.
Of the remaining acquired intangible assets, $187.6 million was assigned to trade name, which is not subject to amortization, and $491.1 million was assigned to customer relationships, which is subject to amortization over a 15-year useful life.
See Note 3, Variable Interest Entities, for further information on Cuprum’s separate account assets and liabilities.
The following (unaudited) pro forma consolidated results of operations have been prepared to show the impact of the acquisition of Cuprum as if the acquisition had occurred January 1, 2013 for the three months ended March 31, 2013 and on January 1, 2012 for the three months ended March 31, 2012. This supplemental pro forma information has been prepared for comparative purposes and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.
|
|
|
For the three months ended, |
| ||||
|
|
|
March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions, except per share data) |
| ||||
|
|
|
|
|
|
| ||
|
Total revenues |
|
$ |
2,216.6 |
|
$ |
2,159.1 |
|
|
Net income |
|
217.6 |
|
250.2 |
| ||
|
Basic earnings per common share |
|
0.74 |
|
0.83 |
| ||
|
Diluted earnings per common share |
|
0.73 |
|
0.82 |
| ||
The (unaudited) total revenues and net income of Cuprum included in the consolidated statement of operations from the acquisition date to the period ended March 31, 2013, were as follows:
|
|
|
For the three months ended, |
| |
|
|
|
March 31, 2013 |
| |
|
|
|
(in millions) |
| |
|
Total revenues |
|
$ |
18.3 |
|
|
Net income |
|
9.3 |
| |
|
|||
3. Variable Interest Entities
We have relationships with and may have a variable interest in various types of special purpose entities. Following is a discussion of our interest in entities that meet the definition of a VIE. When we are the primary beneficiary, we are required to consolidate the entity in our financial statements. The primary beneficiary of a VIE is defined as the enterprise with (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. On an ongoing basis, we assess whether we are the primary beneficiary of VIEs we have relationships with.
Consolidated Variable Interest Entities
Grantor Trusts
We contributed undated subordinated floating rate notes to three grantor trusts. The trusts separated the cash flows by issuing an interest-only certificate and a residual certificate related to each note contributed. Each interest-only certificate entitles the holder to interest on the stated note for a specified term, while the residual certificate entitles the holder to interest payments subsequent to the term of the interest-only certificate and to all principal payments. We retained the interest-only certificates and the residual certificates were subsequently sold to third parties. We have determined these grantor trusts are VIEs due to insufficient equity to sustain them. We determined we are the primary beneficiary as a result of our contribution of securities into the trusts and our continuing interest in the trusts.
Collateralized Private Investment Vehicles
We invest in synthetic collateralized debt obligations, collateralized bond obligations, collateralized loan obligations and other collateralized structures, which are VIEs due to insufficient equity to sustain the entities (collectively known as “collateralized private investment vehicles”). The performance of the notes of these structures is primarily linked to a synthetic portfolio by derivatives; each note has a specific loss attachment and detachment point. The notes and related derivatives are collateralized by a pool of permitted investments. The investments are held by a trustee and can only be liquidated to settle obligations of the trusts. These obligations primarily include derivatives and the notes due at maturity or termination of the trusts. We determined we are the primary beneficiary for certain of these entities because we act as the investment manager of the underlying portfolio and we have an ownership interest.
Commercial Mortgage-Backed Securities
In September 2000, we sold commercial mortgage loans to a real estate mortgage investment conduit trust. The trust issued various commercial mortgage-backed securities (“CMBS”) certificates using the cash flows of the underlying commercial mortgages it purchased. This is considered a VIE due to insufficient equity to sustain itself. We have determined we are the primary beneficiary as we retained the special servicing role for the assets within the trust as well as the ownership of the bond class that controls the unilateral kick out rights of the special servicer.
Mandatory Retirement Savings
As a result of our first quarter 2013 acquisition of Cuprum, we hold an equity interest in mandatory privatized social security funds in which we provide asset management services. We determined that the mandatory privatized social security funds, which include contributors for voluntary pension savings, voluntary non-pension savings and compensation savings accounts, are VIEs. This is because the equity holders as a group lack the power, due to voting rights or similar rights, to direct the activities of the entity that most significantly impact the entity’s economic performance and also because equity investors are protected from below-average market investment returns relative to the industry’s return, due to a regulatory guarantee. Further we concluded that we are the primary beneficiary through our power to make decisions and our variable interest in the funds. The purpose of the funds, which reside in legally segregated entities, is to provide long-term retirement savings. The obligation to the client is directly related to the assets held in the funds and, as such, we present the assets as separate account assets and the obligation as separate account liabilities within our consolidated statements of financial position.
The carrying amounts of our consolidated VIE assets, which can only be used to settle obligations of consolidated VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse are as follows:
|
|
|
|
|
Collateralized |
|
|
|
Mandatory |
|
|
| |||||
|
|
|
|
|
private investment |
|
|
|
retirement |
|
|
| |||||
|
|
|
Grantor trusts |
|
vehicles |
|
CMBS |
|
savings |
|
Total |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
220.3 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
220.3 |
|
|
Fixed maturities, trading |
|
— |
|
110.4 |
|
— |
|
— |
|
110.4 |
| |||||
|
Other investments |
|
— |
|
— |
|
77.2 |
|
— |
|
77.2 |
| |||||
|
Accrued investment income |
|
0.5 |
|
— |
|
0.5 |
|
— |
|
1.0 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
— |
|
33,892.2 |
|
33,892.2 |
| |||||
|
Total assets |
|
$ |
220.8 |
|
$ |
110.4 |
|
$ |
77.7 |
|
$ |
33,892.2 |
|
$ |
34,301.1 |
|
|
Deferred income taxes |
|
$ |
1.8 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1.8 |
|
|
Separate account liabilities |
|
— |
|
— |
|
— |
|
33,892.2 |
|
33,892.2 |
| |||||
|
Other liabilities (1) |
|
175.3 |
|
100.4 |
|
42.6 |
|
— |
|
318.3 |
| |||||
|
Total liabilities |
|
$ |
177.1 |
|
$ |
100.4 |
|
$ |
42.6 |
|
$ |
33,892.2 |
|
$ |
34,212.3 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
194.6 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
194.6 |
|
|
Fixed maturities, trading |
|
— |
|
110.4 |
|
— |
|
— |
|
110.4 |
| |||||
|
Other investments |
|
— |
|
— |
|
80.3 |
|
— |
|
80.3 |
| |||||
|
Accrued investment income |
|
0.5 |
|
— |
|
0.6 |
|
— |
|
1.1 |
| |||||
|
Total assets |
|
$ |
195.1 |
|
$ |
110.4 |
|
$ |
80.9 |
|
$ |
— |
|
$ |
386.4 |
|
|
Deferred income taxes |
|
$ |
1.8 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1.8 |
|
|
Other liabilities (1) |
|
152.4 |
|
104.8 |
|
45.7 |
|
— |
|
302.9 |
| |||||
|
Total liabilities |
|
$ |
154.2 |
|
$ |
104.8 |
|
$ |
45.7 |
|
$ |
— |
|
$ |
304.7 |
|
(1) Grantor trusts contain an embedded derivative of a forecasted transaction to deliver the underlying securities; collateralized private investment vehicles include derivative liabilities and obligation to redeem notes at maturity or termination of the trust; CMBS includes obligation to the bondholders; and hedge funds include liabilities to securities brokers.
We did not provide financial or other support to investees designated as VIEs for the periods March 31, 2013 and 2012.
Unconsolidated Variable Interest Entities
Invested Securities
We hold a variable interest in a number of VIEs where we are not the primary beneficiary. Our investments in these VIEs are reported in fixed maturities, available-for-sale; fixed maturities, trading and other investments in the consolidated statements of financial position and are described below.
VIEs include CMBS, residential mortgage-backed pass-through securities (“RMBS”) and other asset-backed securities (“ABS”). All of these entities were deemed VIEs because the equity within these entities is insufficient to sustain them. We determined we are not the primary beneficiary in any of the entities within these categories of investments. This determination was based primarily on the fact we do not own the class of security that controls the unilateral right to replace the special servicer or equivalent function.
As previously discussed, we invest in several types of collateralized private investment vehicles, which are VIEs. These include cash and synthetic structures that we do not manage. We have determined we are not the primary beneficiary of these collateralized private investment vehicles primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.
We have invested in various VIE trusts as a debt holder. All of these entities are classified as VIEs due to insufficient equity to sustain them. We have determined we are not the primary beneficiary primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.
We have invested in partnerships, some of which are classified as VIEs. The partnership returns are in the form of income tax credits and investment income. These entities are classified as VIEs as the general partner does not have an equity investment at risk in the entity. We have determined we are not the primary beneficiary because we are not the general partner, who makes all the significant decisions for the entity.
The carrying value and maximum loss exposure for our unconsolidated VIEs were as follows:
|
|
|
|
|
Maximum exposure to |
| ||
|
|
|
Asset carrying value |
|
loss (1) |
| ||
|
|
|
(in millions) |
| ||||
|
March 31, 2013 |
|
|
|
|
| ||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Corporate |
|
$ |
527.9 |
|
$ |
408.9 |
|
|
Residential mortgage-backed pass-through securities |
|
3,123.2 |
|
2,950.3 |
| ||
|
Commercial mortgage-backed securities |
|
3,990.7 |
|
4,110.9 |
| ||
|
Collateralized debt obligations |
|
394.0 |
|
431.7 |
| ||
|
Other debt obligations |
|
3,848.6 |
|
3,808.4 |
| ||
|
Fixed maturities, trading: |
|
|
|
|
| ||
|
Residential mortgage-backed pass-through securities |
|
71.5 |
|
71.5 |
| ||
|
Commercial mortgage-backed securities |
|
3.1 |
|
3.1 |
| ||
|
Collateralized debt obligations |
|
59.2 |
|
59.2 |
| ||
|
Other debt obligations |
|
1.9 |
|
1.9 |
| ||
|
Other investments: |
|
|
|
|
| ||
|
Other limited partnership interests |
|
128.4 |
|
128.4 |
| ||
|
|
|
|
|
|
| ||
|
December 31, 2012 |
|
|
|
|
| ||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Corporate |
|
$ |
523.2 |
|
$ |
403.7 |
|
|
Residential mortgage-backed pass-through securities |
|
3,226.7 |
|
3,022.7 |
| ||
|
Commercial mortgage-backed securities |
|
3,897.4 |
|
4,094.8 |
| ||
|
Collateralized debt obligations |
|
379.2 |
|
428.8 |
| ||
|
Other debt obligations |
|
3,779.2 |
|
3,756.9 |
| ||
|
Fixed maturities, trading: |
|
|
|
|
| ||
|
Residential mortgage-backed pass-through securities |
|
77.7 |
|
77.7 |
| ||
|
Commercial mortgage-backed securities |
|
2.8 |
|
2.8 |
| ||
|
Collateralized debt obligations |
|
56.4 |
|
56.4 |
| ||
|
Other debt obligations |
|
3.2 |
|
3.2 |
| ||
|
Other investments: |
|
|
|
|
| ||
|
Other limited partnership interests |
|
136.2 |
|
136.2 |
| ||
(1) Our risk of loss is limited to our initial investment measured at amortized cost for fixed maturities, available-for-sale and other investments. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading.
Sponsored Investment Funds
We are the investment manager for certain money market mutual funds that are deemed to be VIEs. We are not the primary beneficiary of these VIEs since our involvement is limited primarily to being a service provider, and our variable interest does not absorb the majority of the variability of the entities’ net assets. As of March 31, 2013 and December 31, 2012, these VIEs held $1.4 billion and $1.5 billion in total assets, respectively. We have no contractual obligation to contribute to the funds.
We provide asset management and other services to certain investment structures that are considered VIEs as we generally earn performance-based management fees. We are not the primary beneficiary of these entities as we do not have the obligation to absorb losses of the entities that could be potentially significant to the VIE or the right to receive benefits from these entities that could be potentially significant.
|
|||
4. Investments
Fixed Maturities and Equity Securities
Fixed maturities include bonds, ABS, redeemable preferred stock and certain nonredeemable preferred stock. Equity securities include mutual funds, common stock, nonredeemable preferred stock and mandatory regulatory required investments. We classify fixed maturities and equity securities as either available-for-sale or trading at the time of the purchase and, accordingly, carry them at fair value. See Note 10, Fair Value Measurements, for methodologies related to the determination of fair value. Unrealized gains and losses related to available-for-sale securities, excluding those in fair value hedging relationships, are reflected in stockholders’ equity, net of adjustments related to deferred acquisition costs (“DAC”), sales inducements, unearned revenue reserves, policyholder liabilities, derivatives in cash flow hedge relationships and applicable income taxes. Unrealized gains and losses related to hedged portions of available-for-sale securities in fair value hedging relationships and mark-to-market adjustments on certain trading securities are reflected in net realized capital gains (losses). We also have a minimal amount of assets within trading securities portfolios that support investment strategies that involve the active and frequent purchase and sale of fixed maturities. In addition, we have assets within the trading securities portfolio that represent mandatory regulatory required investments. Mark-to-market adjustments related to these trading securities are reflected in net investment income.
The cost of fixed maturities is adjusted for amortization of premiums and accrual of discounts, both computed using the interest method. The cost of fixed maturities and equity securities classified as available-for-sale is adjusted for declines in value that are other than temporary. Impairments in value deemed to be other than temporary are primarily reported in net income as a component of net realized capital gains (losses), with noncredit impairment losses for certain fixed maturities, available-for-sale reported in OCI. For loan-backed and structured securities, we recognize income using a constant effective yield based on currently anticipated cash flows.
The amortized cost, gross unrealized gains and losses, other-than-temporary impairments in AOCI and fair value of fixed maturities and equity securities available-for-sale are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Other-than- |
| |||||
|
|
|
|
|
Gross |
|
Gross |
|
|
|
temporary |
| |||||
|
|
|
Amortized |
|
unrealized |
|
unrealized |
|
|
|
impairments in |
| |||||
|
|
|
cost |
|
gains |
|
losses |
|
Fair value |
|
AOCI (1) |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
U.S. government and agencies |
|
$ |
930.4 |
|
$ |
29.0 |
|
$ |
6.1 |
|
$ |
953.3 |
|
$ |
— |
|
|
Non-U.S. government and agencies |
|
903.9 |
|
278.9 |
|
3.1 |
|
1,179.7 |
|
— |
| |||||
|
States and political subdivisions |
|
3,260.8 |
|
234.8 |
|
3.8 |
|
3,491.8 |
|
— |
| |||||
|
Corporate |
|
31,510.2 |
|
2,881.9 |
|
289.3 |
|
34,102.8 |
|
20.4 |
| |||||
|
Residential mortgage-backed pass-through securities |
|
2,950.3 |
|
176.8 |
|
3.9 |
|
3,123.2 |
|
— |
| |||||
|
Commercial mortgage-backed securities |
|
4,110.9 |
|
251.7 |
|
371.9 |
|
3,990.7 |
|
217.8 |
| |||||
|
Collateralized debt obligations |
|
431.7 |
|
8.6 |
|
46.3 |
|
394.0 |
|
3.1 |
| |||||
|
Other debt obligations |
|
3,808.4 |
|
75.4 |
|
35.2 |
|
3,848.6 |
|
80.9 |
| |||||
|
Total fixed maturities, available-for-sale |
|
$ |
47,906.6 |
|
$ |
3,937.1 |
|
$ |
759.6 |
|
$ |
51,084.1 |
|
$ |
322.2 |
|
|
Total equity securities, available-for-sale |
|
$ |
138.9 |
|
$ |
14.1 |
|
$ |
6.0 |
|
$ |
147.0 |
|
|
| |
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
U.S. government and agencies |
|
$ |
911.4 |
|
$ |
33.2 |
|
$ |
0.3 |
|
$ |
944.3 |
|
$ |
— |
|
|
Non-U.S. government and agencies |
|
944.9 |
|
264.3 |
|
0.9 |
|
1,208.3 |
|
— |
| |||||
|
States and political subdivisions |
|
2,940.4 |
|
241.1 |
|
2.7 |
|
3,178.8 |
|
— |
| |||||
|
Corporate |
|
31,615.4 |
|
3,029.9 |
|
319.9 |
|
34,325.4 |
|
19.5 |
| |||||
|
Residential mortgage-backed pass-through securities |
|
3,022.7 |
|
204.4 |
|
0.4 |
|
3,226.7 |
|
— |
| |||||
|
Commercial mortgage-backed securities |
|
4,094.8 |
|
241.7 |
|
439.1 |
|
3,897.4 |
|
195.4 |
| |||||
|
Collateralized debt obligations |
|
428.8 |
|
7.0 |
|
56.6 |
|
379.2 |
|
4.3 |
| |||||
|
Other debt obligations |
|
3,756.9 |
|
73.5 |
|
51.2 |
|
3,779.2 |
|
82.8 |
| |||||
|
Total fixed maturities, available-for-sale |
|
$ |
47,715.3 |
|
$ |
4,095.1 |
|
$ |
871.1 |
|
$ |
50,939.3 |
|
$ |
302.0 |
|
|
Total equity securities, available-for-sale |
|
$ |
132.4 |
|
$ |
12.6 |
|
$ |
8.5 |
|
$ |
136.5 |
|
|
| |
(1) Excludes $127.9 million and $95.0 million as of March 31, 2013 and December 31, 2012, respectively, of net unrealized gains on impaired fixed maturities, available-for-sale related to changes in fair value subsequent to the impairment date, which are included in gross unrealized gains and gross unrealized losses.
The amortized cost and fair value of fixed maturities available-for-sale at March 31, 2013, by expected maturity, were as follows:
|
|
|
Amortized cost |
|
Fair value |
| ||
|
|
|
(in millions) |
| ||||
|
Due in one year or less |
|
$ |
3,516.1 |
|
$ |
3,573.7 |
|
|
Due after one year through five years |
|
12,817.9 |
|
13,553.1 |
| ||
|
Due after five years through ten years |
|
8,817.9 |
|
9,801.2 |
| ||
|
Due after ten years |
|
11,453.4 |
|
12,799.6 |
| ||
|
Subtotal |
|
36,605.3 |
|
39,727.6 |
| ||
|
Mortgage-backed and other asset-backed securities |
|
11,301.3 |
|
11,356.5 |
| ||
|
Total |
|
$ |
47,906.6 |
|
$ |
51,084.1 |
|
Actual maturities may differ because borrowers may have the right to call or prepay obligations. Our portfolio is diversified by industry, issuer and asset class. Credit concentrations are managed to established limits.
Net Realized Capital Gains and Losses
Net realized capital gains and losses on sales of investments are determined on the basis of specific identification. In general, in addition to realized capital gains and losses on investment sales and periodic settlements on derivatives not designated as hedges, we report gains and losses related to the following in net realized capital gains (losses): other-than-temporary impairments of securities and subsequent realized recoveries, mark-to-market adjustments on certain trading securities, mark-to-market adjustments on certain seed money investments, fair value hedge and cash flow hedge ineffectiveness, mark-to-market adjustments on derivatives not designated as hedges, changes in the mortgage loan valuation allowance provision and impairments of real estate held for investment. Investment gains and losses on sales of certain real estate held for sale, which do not meet the criteria for classification as a discontinued operation and mark-to-market adjustments on trading securities that support investment strategies that involve the active and frequent purchase and sale of fixed maturities are reported as net investment income and are excluded from net realized capital gains (losses). The major components of net realized capital gains (losses) on investments are summarized as follows:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Gross gains |
|
$ |
15.5 |
|
$ |
15.3 |
|
|
Gross losses |
|
(50.7 |
) |
(36.1 |
) | ||
|
Other-than-temporary impairment losses reclassified to OCI |
|
20.2 |
|
4.9 |
| ||
|
Hedging, net |
|
(29.0 |
) |
(16.7 |
) | ||
|
Fixed maturities, trading |
|
0.1 |
|
3.0 |
| ||
|
Equity securities, available-for-sale: |
|
|
|
|
| ||
|
Gross gains |
|
— |
|
0.1 |
| ||
|
Equity securities, trading |
|
6.3 |
|
34.2 |
| ||
|
Mortgage loans |
|
(6.2 |
) |
(11.1 |
) | ||
|
Derivatives |
|
18.2 |
|
27.6 |
| ||
|
Other |
|
(25.3 |
) |
(27.9 |
) | ||
|
Net realized capital losses |
|
$ |
(50.9 |
) |
$ |
(6.7 |
) |
Proceeds from sales of investments (excluding call and maturity proceeds) in fixed maturities, available-for-sale were $0.6 billion and $0.4 billion for the three months ended March 31, 2013 and 2012, respectively.
Other-Than-Temporary Impairments
We have a process in place to identify fixed maturity and equity securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring market events that could impact issuers’ credit ratings, business climate, management changes, litigation and government actions and other similar factors. This process also involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.
Each reporting period, all securities are reviewed to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events; (4) for structured securities, the adequacy of the expected cash flows; (5) for fixed maturities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and (6) for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value. To the extent we determine that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.
Impairment losses on equity securities are recognized in net income and are measured as the difference between amortized cost and fair value. The way in which impairment losses on fixed maturities are recognized in the financial statements is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, we recognize an other-than-temporary impairment in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. We recognize the credit loss portion in net income and the noncredit loss portion in OCI (“bifurcated OTTI”).
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities, were as follows:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale |
|
$ |
(44.7 |
) |
$ |
(33.7 |
) |
|
Equity securities, available-for-sale |
|
— |
|
— |
| ||
|
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities |
|
(44.7 |
) |
(33.7 |
) | ||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to OCI (1) |
|
20.2 |
|
4.9 |
| ||
|
Net impairment losses on available-for-sale securities |
|
$ |
(24.5 |
) |
$ |
(28.8 |
) |
(1) Represents the net impact of (a) gains resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI and (b) losses resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold.
We estimate the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The ABS cash flow estimates are based on security specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or liquidations using bond specific facts and circumstances including timing, security interests and loss severity.
The following table provides a rollforward of accumulated credit losses for fixed maturities with bifurcated credit losses. The purpose of the table is to provide detail of (1) additions to the bifurcated credit loss amounts recognized in net realized capital gains (losses) during the period and (2) decrements for previously recognized bifurcated credit losses where the loss is no longer bifurcated and/or there has been a positive change in expected cash flows or accretion of the bifurcated credit loss amount.
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Beginning balance |
|
$ |
(335.2 |
) |
$ |
(434.8 |
) |
|
Credit losses for which an other-than-temporary impairment was not previously recognized |
|
(4.3 |
) |
(7.4 |
) | ||
|
Credit losses for which an other-than-temporary impairment was previously recognized |
|
(18.3 |
) |
(20.8 |
) | ||
|
Reduction for credit losses previously recognized on fixed maturities now sold or intended to be sold |
|
35.8 |
|
57.3 |
| ||
|
Net reduction for positive changes in cash flows expected to be collected and amortization (1) |
|
3.4 |
|
1.0 |
| ||
|
Ending balance |
|
$ |
(318.6 |
) |
$ |
(404.7 |
) |
(1) Amounts are recognized in net investment income.
Gross Unrealized Losses for Fixed Maturities and Equity Securities
For fixed maturities and equity securities available-for-sale with unrealized losses, including other-than-temporary impairment losses reported in OCI, the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are summarized as follows:
|
|
|
March 31, 2013 |
| ||||||||||||||||
|
|
|
Less than |
|
Greater than or |
|
|
| ||||||||||||
|
|
|
twelve months |
|
equal to twelve months |
|
Total |
| ||||||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
| ||||||
|
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
| ||||||
|
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U.S. government and agencies |
|
$ |
233.0 |
|
$ |
6.1 |
|
$ |
— |
|
$ |
— |
|
$ |
233.0 |
|
$ |
6.1 |
|
|
Non-U.S. governments |
|
30.0 |
|
1.3 |
|
11.6 |
|
1.8 |
|
41.6 |
|
3.1 |
| ||||||
|
States and political subdivisions |
|
342.9 |
|
3.3 |
|
8.7 |
|
0.5 |
|
351.6 |
|
3.8 |
| ||||||
|
Corporate |
|
1,318.1 |
|
21.1 |
|
1,619.7 |
|
268.2 |
|
2,937.8 |
|
289.3 |
| ||||||
|
Residential mortgage-backed pass- through securities |
|
349.6 |
|
3.8 |
|
2.1 |
|
0.1 |
|
351.7 |
|
3.9 |
| ||||||
|
Commercial mortgage-backed securities |
|
96.3 |
|
1.4 |
|
687.1 |
|
370.5 |
|
783.4 |
|
371.9 |
| ||||||
|
Collateralized debt obligations |
|
30.2 |
|
0.1 |
|
92.4 |
|
46.2 |
|
122.6 |
|
46.3 |
| ||||||
|
Other debt obligations |
|
396.5 |
|
2.9 |
|
275.9 |
|
32.3 |
|
672.4 |
|
35.2 |
| ||||||
|
Total fixed maturities, available-for-sale |
|
$ |
2,796.6 |
|
$ |
40.0 |
|
$ |
2,697.5 |
|
$ |
719.6 |
|
$ |
5,494.1 |
|
$ |
759.6 |
|
|
Total equity securities, available-for-sale |
|
$ |
5.0 |
|
$ |
— |
|
$ |
55.4 |
|
$ |
6.0 |
|
$ |
60.4 |
|
$ |
6.0 |
|
Of the total amounts, Principal Life Insurance Company’s (“Principal Life”) consolidated portfolio represented $4,809.6 million in available-for-sale fixed maturities with gross unrealized losses of $706.5 million. Of those fixed maturity securities in Principal Life’s consolidated portfolio with a gross unrealized loss position, 76% were investment grade (rated AAA through BBB-) with an average price of 87 (carrying value/amortized cost) at March 31, 2013. Gross unrealized losses in our fixed maturities portfolio decreased during the three months ended March 31, 2013, due to a tightening of credit spreads, primarily in the corporate and commercial mortgage-backed securities sectors.
For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 309 securities with a carrying value of $2,413.1 million and unrealized losses of $30.0 million reflecting an average price of 99 at March 31, 2013. Of this portfolio, 93% was investment grade (rated AAA through BBB-) at March 31, 2013, with associated unrealized losses of $27.4 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 417 securities with a carrying value of $2,396.5 million and unrealized losses of $676.5 million. The average rating of this portfolio was BBB- with an average price of 78 at March 31, 2013. Of the $676.5 million in unrealized losses, the commercial mortgage-backed securities sector accounts for $370.4 million in unrealized losses with an average price of 65 and an average credit rating of BB. The remaining unrealized losses consist primarily of $227.0 million within the corporate sector at March 31, 2013. The average price of the corporate sector was 85 and the average credit rating was BBB. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired at March 31, 2013.
|
|
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
Less than |
|
Greater than or |
|
|
| ||||||||||||
|
|
|
twelve months |
|
equal to twelve months |
|
Total |
| ||||||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
| ||||||
|
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
| ||||||
|
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U.S. government and agencies |
|
$ |
115.4 |
|
$ |
0.3 |
|
$ |
— |
|
$ |
— |
|
$ |
115.4 |
|
$ |
0.3 |
|
|
Non-U.S. governments |
|
17.3 |
|
0.2 |
|
13.4 |
|
0.7 |
|
30.7 |
|
0.9 |
| ||||||
|
States and political subdivisions |
|
235.3 |
|
2.1 |
|
8.8 |
|
0.6 |
|
244.1 |
|
2.7 |
| ||||||
|
Corporate |
|
831.8 |
|
10.6 |
|
1,961.7 |
|
309.3 |
|
2,793.5 |
|
319.9 |
| ||||||
|
Residential mortgage-backed pass-through securities |
|
70.4 |
|
0.3 |
|
2.4 |
|
0.1 |
|
72.8 |
|
0.4 |
| ||||||
|
Commercial mortgage-backed securities |
|
98.9 |
|
3.3 |
|
785.0 |
|
435.8 |
|
883.9 |
|
439.1 |
| ||||||
|
Collateralized debt obligations |
|
72.2 |
|
1.0 |
|
133.8 |
|
55.6 |
|
206.0 |
|
56.6 |
| ||||||
|
Other debt obligations |
|
235.6 |
|
2.0 |
|
414.9 |
|
49.2 |
|
650.5 |
|
51.2 |
| ||||||
|
Total fixed maturities, available-for-sale |
|
$ |
1,676.9 |
|
$ |
19.8 |
|
$ |
3,320.0 |
|
$ |
851.3 |
|
$ |
4,996.9 |
|
$ |
871.1 |
|
|
Total equity securities, available-for-sale |
|
$ |
5.8 |
|
$ |
0.1 |
|
$ |
52.9 |
|
$ |
8.4 |
|
$ |
58.7 |
|
$ |
8.5 |
|
Of the total amounts, Principal Life’s consolidated portfolio represented $4,419.4 million in available-for-sale fixed maturities with gross unrealized losses of $825.7 million. Of those fixed maturity securities in Principal Life’s consolidated portfolio with a gross unrealized loss position, 71% were investment grade (rated AAA through BBB-) with an average price of 84 (carrying value/amortized cost) at December 31, 2012. Gross unrealized losses in our fixed maturities portfolio decreased during the year ended December 31, 2012, due to a tightening of credit spreads, primarily in the corporate and commercial mortgage-backed securities sectors.
For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 224 securities with a carrying value of $1,382.1 million and unrealized losses of $16.2 million reflecting an average price of 99 at December 31, 2012. Of this portfolio, 89% was investment grade (rated AAA through BBB-) at December 31, 2012, with associated unrealized losses of $13.3 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 488 securities with a carrying value of $3,037.3 million and unrealized losses of $809.5 million. The average rating of this portfolio was BBB- with an average price of 79 at December 31, 2012. Of the $809.5 million in unrealized losses, the commercial mortgage-backed securities sector accounts for $435.8 million in unrealized losses with an average price of 64 and an average credit rating of BB+. The remaining unrealized losses consist primarily of $268.1 million within the corporate sector at December 31, 2012. The average price of the corporate sector was 86 and the average credit rating was BBB. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired at December 31, 2012.
Net Unrealized Gains and Losses on Available-for-Sale Securities and Derivative Instruments
The net unrealized gains and losses on investments in fixed maturities available-for-sale, equity securities available-for-sale and derivative instruments are reported as a separate component of stockholders’ equity. The cumulative amount of net unrealized gains and losses on available-for-sale securities and derivative instruments net of adjustments related to DAC, reinsurance assets or liabilities, sales inducements, unearned revenue reserves, changes in policyholder liabilities and applicable income taxes was as follows:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Net unrealized gains on fixed maturities, available-for-sale (1) |
|
$ |
3,495.7 |
|
$ |
3,562.5 |
|
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(322.2 |
) |
(302.0 |
) | ||
|
Net unrealized gains on equity securities, available-for-sale |
|
8.1 |
|
4.1 |
| ||
|
Adjustments for assumed changes in amortization patterns |
|
(469.3 |
) |
(515.2 |
) | ||
|
Adjustments for assumed changes in policyholder liabilities |
|
(1,289.2 |
) |
(1,198.7 |
) | ||
|
Net unrealized gains on derivative instruments |
|
122.8 |
|
90.7 |
| ||
|
Net unrealized gains on equity method subsidiaries and noncontrolling interest adjustments |
|
155.9 |
|
191.3 |
| ||
|
Provision for deferred income taxes |
|
(554.7 |
) |
(597.0 |
) | ||
|
Net unrealized gains on available-for-sale securities and derivative instruments |
|
$ |
1,147.1 |
|
$ |
1,235.7 |
|
(1) Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships.
Mortgage Loans
Mortgage loans consist of commercial and residential mortgage loans. We evaluate risks inherent in our commercial mortgage loans in two classes: (1) brick and mortar property loans, where we analyze the property’s rent payments as support for the loan, and (2) credit tenant loans (“CTL”), where we rely on the credit analysis of the tenant for the repayment of the loan. We evaluate risks inherent in our residential mortgage loan portfolio in two classes: (1) home equity mortgages and (2) first lien mortgages. The carrying amount of our mortgage loan portfolio was as follows:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Commercial mortgage loans |
|
$ |
10,286.5 |
|
$ |
10,235.1 |
|
|
Residential mortgage loans |
|
1,380.9 |
|
1,382.0 |
| ||
|
Total amortized cost |
|
11,667.4 |
|
11,617.1 |
| ||
|
|
|
|
|
|
| ||
|
Valuation allowance |
|
(89.5 |
) |
(97.4 |
) | ||
|
Total carrying value |
|
$ |
11,577.9 |
|
$ |
11,519.7 |
|
We periodically purchase mortgage loans as well as sell mortgage loans we have originated. We purchased $48.5 million and $11.4 million of residential mortgage loans during the three months ended March 31, 2013 and 2012, respectively. We sold $0.0 million and $5.8 million of residential mortgage loans during the three months ended March 31, 2013 and 2012, respectively. We purchased $0.0 million and $31.0 million of commercial mortgage loans during the three months ended March 31, 2013 and 2012, respectively. We sold $13.0 million and $0.0 million of commercial mortgage loans during the three months ended March 31, 2013 and 2012, respectively.
Our commercial mortgage loan portfolio consists primarily of non-recourse, fixed rate mortgages on fully or near fully leased properties. Our commercial mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||
|
|
|
Amortized |
|
Percent |
|
Amortized |
|
Percent |
| ||
|
|
|
cost |
|
of total |
|
cost |
|
of total |
| ||
|
|
|
($in millions) |
| ||||||||
|
Geographic distribution |
|
|
|
|
|
|
|
|
| ||
|
New England |
|
$ |
539.0 |
|
5.2 |
% |
$ |
536.6 |
|
5.2 |
% |
|
Middle Atlantic |
|
2,275.8 |
|
22.2 |
|
2,233.4 |
|
21.8 |
| ||
|
East North Central |
|
588.1 |
|
5.7 |
|
635.6 |
|
6.2 |
| ||
|
West North Central |
|
377.7 |
|
3.7 |
|
377.3 |
|
3.7 |
| ||
|
South Atlantic |
|
2,065.4 |
|
20.1 |
|
2,135.0 |
|
20.9 |
| ||
|
East South Central |
|
199.8 |
|
1.9 |
|
244.8 |
|
2.4 |
| ||
|
West South Central |
|
784.2 |
|
7.6 |
|
767.9 |
|
7.5 |
| ||
|
Mountain |
|
754.8 |
|
7.3 |
|
726.6 |
|
7.1 |
| ||
|
Pacific |
|
2,677.7 |
|
26.1 |
|
2,562.3 |
|
25.0 |
| ||
|
International |
|
24.0 |
|
0.2 |
|
15.6 |
|
0.2 |
| ||
|
Total |
|
$ |
10,286.5 |
|
100.0 |
% |
$ |
10,235.1 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
| ||
|
Property type distribution |
|
|
|
|
|
|
|
|
| ||
|
Office |
|
$ |
3,288.3 |
|
31.9 |
% |
$ |
3,078.8 |
|
30.1 |
% |
|
Retail |
|
2,866.4 |
|
27.9 |
|
2,928.3 |
|
28.6 |
| ||
|
Industrial |
|
1,697.0 |
|
16.5 |
|
1,765.5 |
|
17.2 |
| ||
|
Apartments |
|
1,676.6 |
|
16.3 |
|
1,685.9 |
|
16.5 |
| ||
|
Hotel |
|
440.6 |
|
4.3 |
|
445.8 |
|
4.4 |
| ||
|
Mixed use/other |
|
317.6 |
|
3.1 |
|
330.8 |
|
3.2 |
| ||
|
Total |
|
$ |
10,286.5 |
|
100.0 |
% |
$ |
10,235.1 |
|
100.0 |
% |
Our residential mortgage loan portfolio is composed of home equity mortgages with an amortized cost of $470.2 million and $495.7 million and first lien mortgages with an amortized cost of $910.7 million and $886.3 million as of March 31, 2013 and December 31, 2012, respectively. Most of our residential home equity mortgages are concentrated in the United States and are generally second lien mortgages comprised of closed-end loans and lines of credit. The majority of our first lien loans are concentrated in the Chilean market.
Mortgage Loan Credit Monitoring
Commercial Credit Risk Profile Based on Internal Rating
We actively monitor and manage our commercial mortgage loan portfolio. All commercial mortgage loans are analyzed regularly and substantially all are internally rated, based on a proprietary risk rating cash flow model, in order to monitor the financial quality of these assets. The model stresses expected cash flows at various levels and at different points in time depending on the durability of the income stream, which includes our assessment of factors such as location (macro and micro markets), tenant quality and lease expirations. Our internal rating analysis presents expected losses in terms of a Standard & Poor’s (“S&P”) bond equivalent rating. As the credit risk for commercial mortgage loans increases, we adjust our internal ratings downward with loans in the category “B+ and below” having the highest risk for credit loss. Internal ratings on commercial mortgage loans are updated at least annually and potentially more often for certain loans with material changes in collateral value or occupancy and for loans on an internal “watch list”.
Commercial mortgage loans that require more frequent and detailed attention than other loans in our portfolio are identified and placed on an internal “watch list”. Among the criteria that would indicate a potential problem are imbalances in ratios of loan to value or contract rents to debt service, major tenant vacancies or bankruptcies, borrower sponsorship problems, late payments, delinquent taxes and loan relief/restructuring requests.
The amortized cost of our commercial mortgage loan portfolio by credit risk, as determined by our internal rating system expressed in terms of an S&P bond equivalent rating, was as follows:
|
|
|
March 31, 2013 |
| |||||||
|
|
|
Brick and mortar |
|
CTL |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
A- and above |
|
$ |
7,520.9 |
|
$ |
210.5 |
|
$ |
7,731.4 |
|
|
BBB+ thru BBB- |
|
1,718.8 |
|
277.7 |
|
1,996.5 |
| |||
|
BB+ thru BB- |
|
278.5 |
|
1.3 |
|
279.8 |
| |||
|
B+ and below |
|
276.5 |
|
2.3 |
|
278.8 |
| |||
|
Total |
|
$ |
9,794.7 |
|
$ |
491.8 |
|
$ |
10,286.5 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
Brick and mortar |
|
CTL |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
A- and above |
|
$ |
7,257.7 |
|
$ |
231.3 |
|
$ |
7,489.0 |
|
|
BBB+ thru BBB- |
|
1,804.5 |
|
294.9 |
|
2,099.4 |
| |||
|
BB+ thru BB- |
|
266.8 |
|
1.6 |
|
268.4 |
| |||
|
B+ and below |
|
376.0 |
|
2.3 |
|
378.3 |
| |||
|
Total |
|
$ |
9,705.0 |
|
$ |
530.1 |
|
$ |
10,235.1 |
|
Residential Credit Risk Profile Based on Performance Status
Our residential mortgage loan portfolio is monitored based on performance of the loans. Monitoring on a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. We define non-performing residential mortgage loans as loans 90 days or greater delinquent or on non-accrual status.
The amortized cost of our performing and non-performing residential mortgage loans was as follows:
|
|
|
March 31, 2013 |
| |||||||
|
|
|
Home equity |
|
First liens |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
Performing |
|
$ |
447.9 |
|
$ |
889.0 |
|
$ |
1,336.9 |
|
|
Nonperforming |
|
22.3 |
|
21.7 |
|
44.0 |
| |||
|
Total |
|
$ |
470.2 |
|
$ |
910.7 |
|
$ |
1,380.9 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
Home equity |
|
First liens |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
Performing |
|
$ |
472.6 |
|
$ |
865.0 |
|
$ |
1,337.6 |
|
|
Nonperforming |
|
23.1 |
|
21.3 |
|
44.4 |
| |||
|
Total |
|
$ |
495.7 |
|
$ |
886.3 |
|
$ |
1,382.0 |
|
Non-Accrual Mortgage Loans
Commercial and residential mortgage loans are placed on non-accrual status if we have concern regarding the collectability of future payments or if a loan has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow for commercial mortgage loans or number of days past due and other circumstances for residential mortgage loans. Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. When a loan is placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income. Accrual of interest resumes after factors resulting in doubts about collectability have improved. Residential first lien mortgages in the Chilean market are carried on accrual for a longer period of delinquency than domestic loans, as assessment of collectability is based on the nature of the loans and collection practices in that market.
The amortized cost of mortgage loans on non-accrual status was as follows:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Commercial: |
|
|
|
|
| ||
|
Brick and mortar |
|
$ |
76.6 |
|
$ |
44.5 |
|
|
Residential: |
|
|
|
|
| ||
|
Home equity |
|
22.3 |
|
23.1 |
| ||
|
First liens |
|
13.3 |
|
13.2 |
| ||
|
Total |
|
$ |
112.2 |
|
$ |
80.8 |
|
The aging of our mortgage loans, based on amortized cost, was as follows:
|
|
|
March 31, 2013 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
| |||||||
|
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
| |||||||
|
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
| |||||||
|
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
| |||||||
|
|
|
(in millions) |
| |||||||||||||||||||
|
Commercial-brick and mortar |
|
$ |
46.2 |
|
$ |
4.1 |
|
$ |
19.7 |
|
$ |
70.0 |
|
$ |
9,724.7 |
|
$ |
9,794.7 |
|
$ |
— |
|
|
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
491.8 |
|
491.8 |
|
— |
| |||||||
|
Residential-home equity |
|
4.3 |
|
1.7 |
|
4.0 |
|
10.0 |
|
460.2 |
|
470.2 |
|
— |
| |||||||
|
Residential-first liens |
|
29.6 |
|
7.1 |
|
18.6 |
|
55.3 |
|
855.4 |
|
910.7 |
|
8.4 |
| |||||||
|
Total |
|
$ |
80.1 |
|
$ |
12.9 |
|
$ |
42.3 |
|
$ |
135.3 |
|
$ |
11,532.1 |
|
$ |
11,667.4 |
|
$ |
8.4 |
|
|
|
|
December 31, 2012 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
| |||||||
|
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
| |||||||
|
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
| |||||||
|
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
| |||||||
|
|
|
(in millions) |
| |||||||||||||||||||
|
Commercial-brick and mortar |
|
$ |
32.8 |
|
$ |
13.7 |
|
$ |
— |
|
$ |
46.5 |
|
$ |
9,658.5 |
|
$ |
9,705.0 |
|
$ |
— |
|
|
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
530.1 |
|
530.1 |
|
— |
| |||||||
|
Residential-home equity |
|
5.7 |
|
2.8 |
|
3.9 |
|
12.4 |
|
483.3 |
|
495.7 |
|
— |
| |||||||
|
Residential-first liens |
|
22.3 |
|
5.1 |
|
19.8 |
|
47.2 |
|
839.1 |
|
886.3 |
|
8.1 |
| |||||||
|
Total |
|
$ |
60.8 |
|
$ |
21.6 |
|
$ |
23.7 |
|
$ |
106.1 |
|
$ |
11,511.0 |
|
$ |
11,617.1 |
|
$ |
8.1 |
|
Mortgage Loan Valuation Allowance
We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio. The valuation allowance includes loan specific reserves for loans that are deemed to be impaired as well as reserves for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss may occur. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to contractual terms of the loan agreement. When we determine that a loan is impaired, a valuation allowance is established equal to the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is based on either the present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or fair value of the collateral. Subsequent changes in the estimated value are reflected in the valuation allowance. Amounts on loans deemed to be uncollectible are charged off and removed from the valuation allowance. The change in the valuation allowance provision is included in net realized capital gains (losses) on our consolidated statements of operations.
The valuation allowance is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management’s periodic evaluation and assessment of the valuation allowance adequacy is based on known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, portfolio delinquency information, underwriting standards, peer group information, current economic conditions, loss experience and other relevant factors. The evaluation of our impaired loan component is subjective, as it requires the estimation of timing and amount of future cash flows expected to be received on impaired loans.
We review our commercial mortgage loan portfolio and analyze the need for a valuation allowance for any loan that is delinquent for 60 days or more, in process of foreclosure, restructured, on the internal “watch list” or that currently has a valuation allowance. In addition to establishing allowance levels for specifically identified impaired commercial mortgage loans, management determines an allowance for all other loans in the portfolio for which historical experience and current economic conditions indicate certain losses exist. These loans are segregated by major product type and/or risk level with an estimated loss ratio applied against each product type and/or risk level. The loss ratio is generally based upon historic loss experience for each loan type as adjusted for certain environmental factors management believes to be relevant.
For our residential mortgage loan portfolio, we separate the loans into several homogeneous pools, each of which consist of loans of a similar nature including but not limited to loans similar in collateral, term and structure and loan purpose or type. We evaluate loan pools based on aggregated risk ratings, estimated specific loss potential in the different classes of credits, and historical loss experience by pool type. We adjust these quantitative factors for qualitative factors of present conditions. Qualitative factors include items such as economic and business conditions, changes in the portfolio, value of underlying collateral, and concentrations. Residential mortgage loan pools exclude loans that have been restructured or impaired, as those loans are evaluated individually.
A rollforward of our valuation allowance and ending balances of the allowance and loan balance by basis of impairment method was as follows:
|
|
|
Commercial |
|
Residential |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
For the three months ended March 31, 2013 |
|
|
|
|
|
|
| |||
|
Beginning balance |
|
$ |
51.8 |
|
$ |
45.6 |
|
$ |
97.4 |
|
|
Provision |
|
(0.5 |
) |
7.0 |
|
6.5 |
| |||
|
Charge-offs |
|
(9.5 |
) |
(5.9 |
) |
(15.4 |
) | |||
|
Recoveries |
|
— |
|
1.0 |
|
1.0 |
| |||
|
Ending balance |
|
$ |
41.8 |
|
$ |
47.7 |
|
$ |
89.5 |
|
|
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
2.7 |
|
$ |
10.8 |
|
$ |
13.5 |
|
|
Collectively evaluated for impairment |
|
39.1 |
|
36.9 |
|
76.0 |
| |||
|
Allowance ending balance |
|
$ |
41.8 |
|
$ |
47.7 |
|
$ |
89.5 |
|
|
Loan balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
17.5 |
|
$ |
35.4 |
|
$ |
52.9 |
|
|
Collectively evaluated for impairment |
|
10,269.0 |
|
1,345.5 |
|
11,614.5 |
| |||
|
Loan ending balance |
|
$ |
10,286.5 |
|
$ |
1,380.9 |
|
$ |
11,667.4 |
|
|
|
|
|
|
|
|
|
| |||
|
For the three months ended March 31, 2012 |
|
|
|
|
|
|
| |||
|
Beginning balance |
|
$ |
64.8 |
|
$ |
37.3 |
|
$ |
102.1 |
|
|
Provision |
|
7.0 |
|
6.6 |
|
13.6 |
| |||
|
Charge-offs |
|
(19.4 |
) |
(8.3 |
) |
(27.7 |
) | |||
|
Recoveries |
|
— |
|
1.2 |
|
1.2 |
| |||
|
Effect of exchange rates |
|
— |
|
0.1 |
|
0.1 |
| |||
|
Ending balance |
|
$ |
52.4 |
|
$ |
36.9 |
|
$ |
89.3 |
|
|
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
6.2 |
|
$ |
4.6 |
|
$ |
10.8 |
|
|
Collectively evaluated for impairment |
|
46.2 |
|
32.3 |
|
78.5 |
| |||
|
Allowance ending balance |
|
$ |
52.4 |
|
$ |
36.9 |
|
$ |
89.3 |
|
|
Loan balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
40.3 |
|
$ |
31.4 |
|
$ |
71.7 |
|
|
Collectively evaluated for impairment |
|
9,976.5 |
|
1,350.0 |
|
11,326.5 |
| |||
|
Loan ending balance |
|
$ |
10,016.8 |
|
$ |
1,381.4 |
|
$ |
11,398.2 |
|
Impaired Mortgage Loans
Impaired mortgage loans are loans with a related specific valuation allowance, loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary or a loan modification has been classified as a troubled debt restructuring (“TDR”). Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. Our recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:
|
|
|
March 31, 2013 |
| |||||||
|
|
|
|
|
Unpaid |
|
|
| |||
|
|
|
Recorded |
|
principal |
|
Related |
| |||
|
|
|
investment |
|
balance |
|
allowance |
| |||
|
|
|
(in millions) |
| |||||||
|
With no related allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
$ |
51.6 |
|
$ |
57.8 |
|
$ |
— |
|
|
Residential-first liens |
|
5.3 |
|
5.3 |
|
— |
| |||
|
With an allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
8.5 |
|
8.5 |
|
2.7 |
| |||
|
Residential-home equity |
|
20.4 |
|
20.4 |
|
9.6 |
| |||
|
Residential-first liens |
|
9.7 |
|
9.6 |
|
1.2 |
| |||
|
Total: |
|
|
|
|
|
|
| |||
|
Commercial |
|
$ |
60.1 |
|
$ |
66.3 |
|
$ |
2.7 |
|
|
Residential |
|
$ |
35.4 |
|
$ |
35.3 |
|
$ |
10.8 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
|
|
Unpaid |
|
|
| |||
|
|
|
Recorded |
|
principal |
|
Related |
| |||
|
|
|
investment |
|
balance |
|
allowance |
| |||
|
|
|
(in millions) |
| |||||||
|
With no related allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
$ |
22.9 |
|
$ |
25.3 |
|
$ |
— |
|
|
Residential-first liens |
|
9.7 |
|
6.6 |
|
— |
| |||
|
With an allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
4.4 |
|
4.4 |
|
2.4 |
| |||
|
Residential-home equity |
|
20.8 |
|
20.7 |
|
9.1 |
| |||
|
Residential-first liens |
|
9.2 |
|
9.1 |
|
1.3 |
| |||
|
Total: |
|
|
|
|
|
|
| |||
|
Commercial |
|
$ |
27.3 |
|
$ |
29.7 |
|
$ |
2.4 |
|
|
Residential |
|
$ |
39.7 |
|
$ |
36.4 |
|
$ |
10.4 |
|
|
|
|
Average |
|
|
| ||
|
|
|
recorded |
|
Interest income |
| ||
|
|
|
investment |
|
recognized |
| ||
|
|
|
(in millions) |
| ||||
|
For the three months ended March 31, 2013 |
|
|
|
|
| ||
|
With no related allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
$ |
37.3 |
|
$ |
0.1 |
|
|
Residential-first liens |
|
7.5 |
|
— |
| ||
|
With an allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
6.4 |
|
— |
| ||
|
Residential-home equity |
|
20.6 |
|
0.2 |
| ||
|
Residential-first liens |
|
9.5 |
|
— |
| ||
|
Total: |
|
|
|
|
| ||
|
Commercial |
|
$ |
43.7 |
|
$ |
0.1 |
|
|
Residential |
|
$ |
37.6 |
|
$ |
0.2 |
|
|
|
|
|
|
|
| ||
|
For the three months ended March 31, 2012 |
|
|
|
|
| ||
|
With no related allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
$ |
47.7 |
|
$ |
0.6 |
|
|
Residential-first liens |
|
5.3 |
|
— |
| ||
|
With an allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
77.1 |
|
0.5 |
| ||
|
Residential-home equity |
|
15.4 |
|
0.3 |
| ||
|
Residential-first liens |
|
8.8 |
|
— |
| ||
|
Total: |
|
|
|
|
| ||
|
Commercial |
|
$ |
124.8 |
|
$ |
1.1 |
|
|
Residential |
|
$ |
29.5 |
|
$ |
0.3 |
|
Mortgage Loan Modifications
Our commercial and residential mortgage loan portfolios include loans that have been modified. We assess loan modifications on a case-by-case basis to evaluate whether a TDR has occurred. The commercial mortgage loan TDRs were modified to delay or reduce principal payments and to increase, reduce or delay interest payments. For these TDR assessments, we have determined the loan rates are now considered below market based on current circumstances. The commercial mortgage loan modifications resulted in delayed cash receipts and a decrease in interest income. The residential mortgage loan TDRs include modifications of interest-only payment periods, delays in principal balloon payments, and interest rate reductions. Residential mortgage loan modifications resulted in delayed or decreased cash receipts and a decrease in interest income.
The following table includes information about outstanding loans that were modified and met the criteria of a TDR during the periods indicated. In addition, the table includes information for loans that were modified and met the criteria of a TDR within the past twelve months that were in payment default during the periods indicated:
|
|
|
For the three months ended March 31, 2013 |
| ||||||||
|
|
|
TDRs |
|
TDRs in payment default |
| ||||||
|
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
| ||
|
|
|
contracts |
|
investment |
|
contracts |
|
investment |
| ||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||
|
Commercial-brick and mortar |
|
1 |
|
$ |
0.8 |
|
— |
|
$ |
— |
|
|
Residential-home equity |
|
32 |
|
1.9 |
|
12 |
|
— |
| ||
|
Residential-first liens |
|
2 |
|
0.4 |
|
— |
|
— |
| ||
|
Total |
|
35 |
|
$ |
3.1 |
|
12 |
|
$ |
— |
|
|
|
|
For the three months ended March 31, 2012 |
| ||||||||
|
|
|
TDRs |
|
TDRs in payment default |
| ||||||
|
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
| ||
|
|
|
contracts |
|
investment |
|
contracts |
|
investment |
| ||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||
|
Commercial-brick and mortar |
|
4 |
|
$ |
63.2 |
|
— |
|
$ |
— |
|
|
Residential-home equity |
|
49 |
|
2.2 |
|
2 |
|
— |
| ||
|
Total |
|
53 |
|
$ |
65.4 |
|
2 |
|
$ |
— |
|
Commercial mortgage loans that have been designated as a TDR have been previously reserved in the mortgage loan valuation allowance to the estimated fair value of the underlying collateral reduced by the cost to sell.
Residential mortgage loans that have been designated as a TDR are specifically reserved for in the mortgage loan valuation allowance if losses result from the modification. Residential mortgage loans that have defaulted or have been discharged through bankruptcy are reduced to the expected collectible amount.
Securities Posted as Collateral
We posted $1,524.4 million in fixed maturities, available-for-sale securities at March 31, 2013, to satisfy collateral requirements primarily associated with a reinsurance arrangement, our derivative credit support annex (collateral) agreements and our obligation under funding agreements with the Federal Home Loan Bank of Des Moines (“FHLB Des Moines”). In addition, we posted $1,963.6 million in commercial mortgage loans as of March 31, 2013, to satisfy collateral requirements associated with our obligation under funding agreements with the FHLB Des Moines. Since we did not relinquish ownership rights on these instruments, they are reported as fixed maturities, available-for-sale and mortgage loans, respectively, on our consolidated statements of financial position.
Balance Sheet Offsetting
We have financial instruments that are subject to master netting agreements or similar agreements. Financial assets subject to master netting agreements or similar agreements were as follows:
|
|
|
|
|
Gross amounts not offset in the |
|
|
| ||||||
|
|
|
Gross amount |
|
Statement of Financial Position |
|
|
| ||||||
|
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
| ||||
|
|
|
assets (1) |
|
instruments (2) |
|
received |
|
Net amount |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative assets |
|
$ |
840.5 |
|
$ |
(699.1 |
) |
$ |
(128.0 |
) |
$ |
13.4 |
|
|
Reverse repurchase agreements |
|
57.4 |
|
— |
|
(57.4 |
) |
— |
| ||||
|
Total |
|
$ |
897.9 |
|
$ |
(699.1 |
) |
$ |
(185.4 |
) |
$ |
13.4 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative assets |
|
$ |
1,016.3 |
|
$ |
(779.3 |
) |
$ |
(225.5 |
) |
$ |
11.5 |
|
|
Reverse repurchase agreements |
|
148.2 |
|
— |
|
(148.2 |
) |
— |
| ||||
|
Total |
|
$ |
1,164.5 |
|
$ |
(779.3 |
) |
$ |
(373.7 |
) |
$ |
11.5 |
|
(1) The gross amount of recognized derivative and reverse repurchase agreement assets are reported with other investments on the consolidated statements of financial position. The above excludes $0.4 million of derivatives assets as of both March 31, 2013 and December 31, 2012 that are not subject to master netting agreements or similar agreements. The gross amounts of derivative and reverse repurchase agreement assets are not netted against offsetting liabilities for presentation on the consolidated statements of financial position.
(2) Represents amount of offsetting derivative assets or liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or liabilities for presentation on the consolidated statements of financial position.
Financial liabilities subject to master netting agreements or similar agreements were as follows:
|
|
|
|
|
Gross amounts not offset in the |
|
|
| ||||||
|
|
|
Gross amount |
|
Statement of Financial Position |
|
|
| ||||||
|
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
| ||||
|
|
|
liabilities (1) |
|
instruments (2) |
|
pledged |
|
Net amount |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
1,196.5 |
|
$ |
(699.1 |
) |
$ |
(371.4 |
) |
$ |
126.0 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
1,198.2 |
|
$ |
(779.3 |
) |
$ |
(279.1 |
) |
$ |
139.8 |
|
(1) The gross amount of recognized derivative liabilities are reported with other liabilities and contractholder funds on the consolidated statements of financial position. The above excludes $294.7 million and $329.8 million of derivative liabilities as of March 31, 2013 and December 31, 2012, respectively, which are primarily embedded derivatives that are not subject to master netting agreements or similar agreements. The gross amount of recognized repurchase agreement liabilities are reported with short-term debt on the consolidated statements of financial position. The gross amounts of derivative and repurchase agreement liabilities are not netted against offsetting assets for presentation on the consolidated statements of financial position.
(2) Represents amount of offsetting derivative assets or liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or liabilities for presentation on the consolidated statements of financial position.
The financial instruments that are subject to master netting agreements or similar agreements include right of setoff provisions. Derivative instruments include provisions to setoff positions covered under the agreements with the same counterparties and provisions to setoff positions outside of the agreements with the same counterparties in the event of default by one of the parties. Derivative instruments also include collateral provisions. Collateral received and pledged are generally settled daily with each counterparty. See Note 5, Derivative Financial Instruments, for further details.
Repurchase and reverse repurchase agreements include provisions to setoff other repurchase and reverse repurchase balances with the same counterparty. Repurchase and reverse repurchase agreements also include collateral provisions with the counterparties. For reverse repurchase agreements we require the counterparties to pledge collateral with a value greater than the amount of cash transferred. We have the right but do not sell or repledge collateral received in reverse repurchase agreements. Repurchase agreements are structured as secured borrowings for all counterparties. We pledge fixed maturities available-for-sale and have no continuing involvement with the collateral pledged until the agreements mature and we repurchase the collateral. The counterparties have the right to sell or repledge the collateral we have pledged. Interest incurred on repurchase agreements is reported as part of interest expense on the consolidated statements of operations. Net proceeds related to repurchase agreements are reported as a component of financing activities on the consolidated statements of cash flows. We did not have any outstanding repurchase agreements as of March 31, 2013 and December 31, 2012.
|
|||
5. Derivative Financial Instruments
Derivatives are generally used to hedge or reduce exposure to market risks associated with assets held or expected to be purchased or sold and liabilities incurred or expected to be incurred. Derivatives are used to change the characteristics of our asset/liability mix consistent with our risk management activities. Derivatives are also used in asset replication strategies.
Types of Derivative Instruments
Interest Rate Contracts
Interest rate risk is the risk we will incur economic losses due to adverse changes in interest rates. Sources of interest rate risk include the difference between the maturity and interest rate changes of assets with the liabilities they support, timing differences between the pricing of liabilities and the purchase or procurement of assets and changing cash flow profiles from original projections due to prepayment options embedded within asset and liability contracts. We use various derivatives to manage our exposure to fluctuations in interest rates.
Interest rate swaps are contracts in which we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts based upon designated market rates or rate indices and an agreed upon notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. Cash is paid or received based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty at each due date. We use interest rate swaps primarily to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities (including duration mismatches). We also use interest rate swaps to hedge against changes in the value of assets we anticipate acquiring and other anticipated transactions and commitments. Interest rate swaps are used to hedge against changes in the value of the guaranteed minimum withdrawal benefit (“GMWB”) liability. The GMWB rider on our variable annuity products provides for guaranteed minimum withdrawal benefits regardless of the actual performance of various equity and/or fixed income funds available with the product.
Interest rate options include interest rate caps and interest rate floors, which can be combined to form interest rate collars, are contracts that entitle the purchaser to pay or receive the amounts, if any, by which a specified market rate exceeds a cap strike interest rate, or falls below a floor strike interest rate, respectively, at specified dates. We use interest rate collars to manage interest rate risk related to guaranteed minimum interest rate liabilities in our individual annuities contracts.
A swaption is an option to enter into an interest rate swap at a future date. We purchase swaptions to offset or modify existing exposures. Swaptions provide us the benefit of the agreed-upon strike rate if the market rates for liabilities are higher, with the flexibility to enter into the current market rate swap if the market rates for liabilities are lower. Swaptions not only hedge against the downside risk, but also allow us to take advantage of any upside benefits.
In exchange-traded futures transactions, we agree to purchase or sell a specified number of contracts, the values of which are determined by the values of designated classes of securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. We enter into exchange-traded futures with regulated futures commissions merchants who are members of a trading exchange. We have used exchange-traded futures to reduce market risks from changes in interest rates and to alter mismatches between the assets in a portfolio and the liabilities supported by those assets.
Foreign Exchange Contracts
Foreign currency risk is the risk we will incur economic losses due to adverse fluctuations in foreign currency exchange rates. This risk arises from foreign currency-denominated funding agreements we issue, foreign currency-denominated fixed maturities we invest in and the financial results of our international operations, including acquisition and divestiture activity. We use various derivatives to manage our exposure to fluctuations in foreign currency exchange rates.
Currency swaps are contracts in which we agree with other parties to exchange, at specified intervals, a series of principal and interest payments in one currency for that of another currency. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party. The interest payments are primarily fixed-to-fixed rate; however, they may also be fixed-to-floating rate or floating-to-fixed rate. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty for payments made in the same currency at each due date. We use currency swaps to reduce market risks from changes in currency exchange rates with respect to investments or liabilities denominated in foreign currencies that we either hold or intend to acquire or sell.
Currency forwards are contracts in which we agree with other parties to deliver or receive a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. We use currency forwards to reduce market risks from changes in currency exchange rates with respect to investments or liabilities denominated in foreign currencies that we either hold or intend to acquire or sell and to hedge the currency risk associated with a business combination. We have also used currency forwards to hedge the currency risk associated with net investments in foreign operations. We did not use any currency forwards during 2013 or 2012 to hedge our net investment in foreign operations.
Currency options are contracts that give the holder the right, but not the obligation to buy or sell a specified amount of the identified currency within a limited period of time at a contracted price. The contracts are net settled in cash, based on the differential in the current foreign exchange rate and the strike price. Purchased and sold options can be combined to form a foreign currency collar where we receive a payment if the foreign exchange rate is below the purchased option strike price and make a payment if the foreign exchange rate is above the sold option strike price. We have used currency options to manage the foreign currency risk associated with a business combination.
Equity Contracts
Equity risk is the risk that we will incur economic losses due to adverse fluctuations in common stock. We use various derivatives to manage our exposure to equity risk, which arises from products in which the interest we credit is tied to an external equity index as well as products subject to minimum contractual guarantees.
We may sell an investment-type insurance contract with attributes tied to market indices (an embedded derivative as noted below), in which case we write an equity call option to convert the overall contract into a fixed-rate liability, essentially eliminating the equity component altogether. We purchase equity call spreads to hedge the equity participation rates promised to contractholders in conjunction with our fixed deferred annuity products that credit interest based on changes in an external equity index. We use exchange-traded futures and equity put options to hedge against changes in the value of the GMWB liability related to the GMWB rider on our variable annuity product, as previously explained. The premium associated with certain options is paid quarterly over the life of the option contract.
Credit Contracts
Credit risk relates to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest. We use credit default swaps to enhance the return on our investment portfolio by providing comparable exposure to fixed income securities that might not be available in the primary market. They are also used to hedge credit exposures in our investment portfolio. Credit derivatives are used to sell or buy credit protection on an identified name or names on an unfunded or synthetic basis in return for receiving or paying a quarterly premium. The premium generally corresponds to a referenced name’s credit spread at the time the agreement is executed. In cases where we sell protection, we also buy a quality cash bond to match against the credit default swap, thereby entering into a synthetic transaction replicating a cash security. When selling protection, if there is an event of default by the referenced name, as defined by the agreement, we are obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced security in a principal amount equal to the notional value of the credit default swap.
Total return swaps are contracts in which we agree with other parties to exchange, at specified intervals, an amount determined by the difference between the previous price and the current price of a reference asset based upon an agreed upon notional principal amount plus an additional amount determined by the financing spread. We currently use total return swaps referencing equity indices to hedge our portfolio from potential credit losses related to systemic events.
Other Contracts
Embedded Derivatives. We purchase or issue certain financial instruments or products that contain a derivative instrument that is embedded in the financial instrument or product. When it is determined that the embedded derivative possesses economic characteristics that are not clearly or closely related to the economic characteristics of the host contract and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host instrument for measurement purposes. The embedded derivative, which is reported with the host instrument in the consolidated statements of financial position, is carried at fair value.
We sell investment-type insurance contracts in which the return is tied to an external equity index or a leveraged inflation index. We economically hedge the risk associated with these investment-type insurance contracts.
We offer group benefit plan contracts that have guaranteed separate accounts as an investment option. We also offer a guaranteed fund as an investment option in our defined contribution plans in Hong Kong.
We have structured investment relationships with trusts we have determined to be VIEs, which are consolidated in our financial statements. The notes issued by these trusts include obligations to deliver an underlying security to residual interest holders and the obligations contain an embedded derivative of the forecasted transaction to deliver the underlying security.
We have fixed deferred annuities that credit interest based on changes in an external equity index. We also have certain variable annuity products with a GMWB rider, which allows the customer to make withdrawals of a specified annual amount, either for a fixed number of years or for the lifetime of the customer, even if the account value is reduced to zero. Declines in the equity markets may increase our exposure to benefits under contracts with the GMWB. We economically hedge the exposure in these annuity contracts, as previously explained.
Exposure
Our risk of loss is typically limited to the fair value of our derivative instruments and not to the notional or contractual amounts of these derivatives. We are also exposed to credit losses in the event of nonperformance of the counterparties. Our current credit exposure is limited to the value of derivatives that have become favorable to us. This credit risk is minimized by purchasing such agreements from financial institutions with high credit ratings and by establishing and monitoring exposure limits. We also utilize various credit enhancements, including collateral and credit triggers to reduce the credit exposure to our derivative instruments.
Our derivative transactions are generally documented under International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements. Management believes that such agreements provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Under such agreements, in connection with an early termination of a transaction, we are permitted to set off our receivable from a counterparty against our payables to the same counterparty arising out of all included transactions. For reporting purposes, we do not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparties under master netting agreements.
We posted $382.9 million and $296.9 million in cash and securities under collateral arrangements as of March 31, 2013 and December 31, 2012, respectively, to satisfy collateral requirements associated with our derivative credit support agreements.
Certain of our derivative instruments contain provisions that require us to maintain an investment grade rating from each of the major credit rating agencies on our debt. If the rating on our debt were to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value, inclusive of accrued interest, of all derivative instruments with credit-risk-related contingent features that were in a liability position without regard to netting under derivative credit support annex agreements as of March 31, 2013 and December 31, 2012, was $1,199.4 million and $1,205.4 million, respectively. With respect to these derivatives, we posted collateral of $382.9 million and $296.9 million as of March 31, 2013 and December 31, 2012, respectively, in the normal course of business, which reflects netting under derivative credit support annex agreements. If the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2013, we would be required to post an additional $71.2 million of collateral to our counterparties.
As of March 31, 2013 and December 31, 2012, we had received $73.7 million and $207.8 million, respectively, of cash collateral associated with our derivative credit support annex agreements, for which we recorded a corresponding liability reflecting our obligation to return the collateral.
Notional amounts are used to express the extent of our involvement in derivative transactions and represent a standard measurement of the volume of our derivative activity. Notional amounts represent those amounts used to calculate contractual flows to be exchanged and are not paid or received, except for contracts such as currency swaps. Credit exposure represents the gross amount owed to us under derivative contracts as of the valuation date. The notional amounts and credit exposure of our derivative financial instruments by type were as follows:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Notional amounts of derivative instruments |
|
|
|
|
| ||
|
Interest rate contracts: |
|
|
|
|
| ||
|
Interest rate swaps |
|
$ |
18,897.8 |
|
$ |
18,381.2 |
|
|
Interest rate options |
|
1,500.0 |
|
500.0 |
| ||
|
Swaptions |
|
325.0 |
|
325.0 |
| ||
|
Futures |
|
187.0 |
|
82.0 |
| ||
|
Foreign exchange contracts: |
|
|
|
|
| ||
|
Foreign currency swaps |
|
3,287.8 |
|
3,454.1 |
| ||
|
Currency forwards |
|
251.3 |
|
557.2 |
| ||
|
Foreign currency options |
|
— |
|
1,400.0 |
| ||
|
Equity contracts: |
|
|
|
|
| ||
|
Options |
|
1,827.2 |
|
1,811.8 |
| ||
|
Futures |
|
363.6 |
|
373.6 |
| ||
|
Credit contracts: |
|
|
|
|
| ||
|
Credit default swaps |
|
1,254.2 |
|
1,378.3 |
| ||
|
Total return swaps |
|
100.0 |
|
100.0 |
| ||
|
Other contracts: |
|
|
|
|
| ||
|
Embedded derivative financial instruments |
|
5,950.5 |
|
5,893.2 |
| ||
|
Total notional amounts at end of period |
|
$ |
33,944.4 |
|
$ |
34,256.4 |
|
|
|
|
|
|
|
| ||
|
Credit exposure of derivative instruments |
|
|
|
|
| ||
|
Interest rate contracts: |
|
|
|
|
| ||
|
Interest rate swaps |
|
$ |
612.1 |
|
$ |
683.9 |
|
|
Interest rate options |
|
46.3 |
|
48.5 |
| ||
|
Swaptions |
|
0.8 |
|
0.7 |
| ||
|
Foreign exchange contracts: |
|
|
|
|
| ||
|
Foreign currency swaps |
|
168.4 |
|
263.8 |
| ||
|
Currency forwards |
|
6.6 |
|
6.8 |
| ||
|
Foreign currency options |
|
— |
|
1.9 |
| ||
|
Equity contracts: |
|
|
|
|
| ||
|
Options |
|
50.8 |
|
74.3 |
| ||
|
Credit contracts: |
|
|
|
|
| ||
|
Credit default swaps |
|
7.7 |
|
6.8 |
| ||
|
Total return swaps |
|
0.3 |
|
— |
| ||
|
Total gross credit exposure |
|
893.0 |
|
1,086.7 |
| ||
|
Less: collateral received |
|
131.4 |
|
248.0 |
| ||
|
Net credit exposure |
|
$ |
761.6 |
|
$ |
838.7 |
|
The fair value of our derivative instruments classified as assets and liabilities was as follows:
|
|
|
Derivative assets (1) |
|
Derivative liabilities (2) |
| ||||||||
|
|
|
March 31, 2013 |
|
December 31, 2012 |
|
March 31, 2013 |
|
December 31, 2012 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
| ||||
|
Interest rate contracts |
|
$ |
5.9 |
|
$ |
10.3 |
|
$ |
404.7 |
|
$ |
440.5 |
|
|
Foreign exchange contracts |
|
118.4 |
|
190.0 |
|
170.9 |
|
127.2 |
| ||||
|
Total derivatives designated as hedging instruments |
|
$ |
124.3 |
|
$ |
200.3 |
|
$ |
575.6 |
|
$ |
567.7 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
| ||||
|
Interest rate contracts |
|
$ |
605.2 |
|
$ |
677.1 |
|
$ |
468.6 |
|
$ |
493.9 |
|
|
Foreign exchange contracts |
|
52.6 |
|
58.2 |
|
15.0 |
|
14.3 |
| ||||
|
Equity contracts |
|
50.8 |
|
74.3 |
|
67.8 |
|
27.7 |
| ||||
|
Credit contracts |
|
8.0 |
|
6.8 |
|
71.1 |
|
96.6 |
| ||||
|
Other contracts |
|
— |
|
— |
|
293.1 |
|
327.8 |
| ||||
|
Total derivatives not designated as hedging instruments |
|
716.6 |
|
816.4 |
|
915.6 |
|
960.3 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total derivative instruments |
|
$ |
840.9 |
|
$ |
1,016.7 |
|
$ |
1,491.2 |
|
$ |
1,528.0 |
|
(1) The fair value of derivative assets is reported with other investments on the consolidated statements of financial position.
(2) The fair value of derivative liabilities is reported with other liabilities on the consolidated statement of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative liabilities with a fair value of $117.8 million and $170.5 million as of March 31, 2013 and December 31, 2012, respectively, are reported with contractholder funds on the consolidated statements of financial position.
Credit Derivatives Sold
When we sell credit protection, we are exposed to the underlying credit risk similar to purchasing a fixed maturity security instrument. The majority of our credit derivative contracts sold reference a single name or reference security (referred to as “single name credit default swaps”). The remainder of our credit derivatives reference either a basket or index of securities. These instruments are either referenced in an over-the-counter credit derivative transaction, or embedded within an investment structure that has been fully consolidated into our financial statements.
These credit derivative transactions are subject to events of default defined within the terms of the contract, which normally consist of bankruptcy, failure to pay, or modified restructuring of the reference entity and/or issue. If a default event occurs for a reference name or security, we are obligated to pay the counterparty an amount equal to the notional amount of the credit derivative transaction. As a result, our maximum future payment is equal to the notional amount of the credit derivative. In certain cases, we also have purchased credit protection with identical underlyings to certain of our sold protection transactions. The effect of this purchased protection would reduce our total maximum future payments by $20.0 million as of March 31, 2013 and $15.0 million as of December 31, 2012. These purchased credit derivative transactions had a net asset (liability) fair value of $(0.1) million as of March 31, 2013 and $0.2 million as of December 31, 2012. In certain circumstances, our potential loss could also be reduced by any amount recovered in the default proceedings of the underlying credit name.
We purchased certain investment structures with embedded credit features that are fully consolidated into our financial statements. This consolidation results in recognition of the underlying credit derivatives and collateral within the structure, typically high quality fixed maturities that are owned by a special purpose vehicle. These credit derivatives reference a single name or several names in a basket structure. In the event of default, the collateral within the structure would typically be liquidated to pay the claims of the credit derivative counterparty.
The following tables show our credit default swap protection sold by types of contract, types of referenced/underlying asset class and external agency rating for the underlying reference security. The maximum future payments are undiscounted and have not been reduced by the effect of any offsetting transactions, collateral or recourse features described above.
|
|
|
March 31, 2013 |
| |||||||||
|
|
|
|
|
|
|
|
|
Weighted |
| |||
|
|
|
|
|
|
|
Maximum |
|
average |
| |||
|
|
|
Notional |
|
Fair |
|
future |
|
expected life |
| |||
|
|
|
amount |
|
value |
|
payments |
|
(in years) |
| |||
|
|
|
(in millions) |
| |||||||||
|
Single name credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
$ |
50.0 |
|
$ |
— |
|
$ |
50.0 |
|
4.1 |
|
|
A |
|
497.0 |
|
3.4 |
|
497.0 |
|
3.0 |
| |||
|
BBB |
|
210.0 |
|
(2.1 |
) |
210.0 |
|
4.1 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
9.0 |
|
(9.0 |
) |
9.0 |
|
8.3 |
| |||
|
Total single name credit default swaps |
|
766.0 |
|
(7.7 |
) |
766.0 |
|
3.4 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
110.4 |
|
(46.2 |
) |
110.4 |
|
4.0 |
| |||
|
Government/municipalities |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
30.0 |
|
(5.2 |
) |
30.0 |
|
4.5 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
BBB |
|
25.0 |
|
(3.3 |
) |
25.0 |
|
4.3 |
| |||
|
Total basket and index credit default swaps |
|
165.4 |
|
(54.7 |
) |
165.4 |
|
4.1 |
| |||
|
Total credit default swap protection sold |
|
$ |
931.4 |
|
$ |
(62.4 |
) |
$ |
931.4 |
|
3.5 |
|
|
|
|
December 31, 2012 |
| |||||||||
|
|
|
|
|
|
|
|
|
Weighted |
| |||
|
|
|
|
|
|
|
Maximum |
|
average |
| |||
|
|
|
Notional |
|
Fair |
|
future |
|
expected life |
| |||
|
|
|
amount |
|
value |
|
payments |
|
(in years) |
| |||
|
|
|
(in millions) |
| |||||||||
|
Single name credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
$ |
70.0 |
|
$ |
(0.2 |
) |
$ |
70.0 |
|
2.5 |
|
|
A |
|
572.0 |
|
2.4 |
|
572.0 |
|
2.4 |
| |||
|
BBB |
|
200.0 |
|
(1.6 |
) |
200.0 |
|
3.0 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
11.1 |
|
(11.0 |
) |
11.1 |
|
8.5 |
| |||
|
Total single name credit default swaps |
|
853.1 |
|
(10.4 |
) |
853.1 |
|
2.6 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
110.4 |
|
(65.2 |
) |
110.4 |
|
4.2 |
| |||
|
Government/municipalities |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
30.0 |
|
(7.3 |
) |
30.0 |
|
4.7 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
BBB |
|
25.0 |
|
(5.6 |
) |
25.0 |
|
4.5 |
| |||
|
Total basket and index credit default swaps |
|
165.4 |
|
(78.1 |
) |
165.4 |
|
4.4 |
| |||
|
Total credit default swap protection sold |
|
$ |
1,018.5 |
|
$ |
(88.5 |
) |
$ |
1,018.5 |
|
2.9 |
|
We also have invested in fixed maturities classified as available-for-sale that contain credit default swaps that do not require bifurcation and fixed maturities classified as trading that contain credit default swaps. These securities are subject to the credit risk of the issuer, normally a special purpose vehicle, which consists of the underlying credit default swaps and high quality fixed maturities that serve as collateral. A default event occurs if the cumulative losses exceed a specified attachment point, which is typically not the first loss of the portfolio. If a default event occurs that exceeds the specified attachment point, our investment may not be fully returned. We would have no future potential payments under these investments. The following tables show, by the types of referenced/underlying asset class and external rating, our fixed maturities with embedded credit derivatives.
|
|
|
March 31, 2013 |
| ||||||
|
|
|
|
|
|
|
Weighted |
| ||
|
|
|
|
|
|
|
average |
| ||
|
|
|
Amortized |
|
Carrying |
|
expected life |
| ||
|
|
|
cost |
|
value |
|
(in years) |
| ||
|
|
|
(in millions) |
| ||||||
|
Corporate debt |
|
|
|
|
|
|
| ||
|
BBB |
|
$ |
21.2 |
|
$ |
21.2 |
|
3.8 |
|
|
B |
|
25.0 |
|
25.0 |
|
0.3 |
| ||
|
Total corporate debt |
|
46.2 |
|
46.2 |
|
1.9 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Structured finance |
|
|
|
|
|
|
| ||
|
A |
|
5.6 |
|
5.6 |
|
16.9 |
| ||
|
BB |
|
35.6 |
|
33.6 |
|
2.5 |
| ||
|
B |
|
4.1 |
|
4.1 |
|
4.2 |
| ||
|
CCC |
|
22.7 |
|
22.7 |
|
5.7 |
| ||
|
Total structured finance |
|
68.0 |
|
66.0 |
|
4.9 |
| ||
|
Total fixed maturities with credit derivatives |
|
$ |
114.2 |
|
$ |
112.2 |
|
3.6 |
|
|
|
|
December 31, 2012 |
| ||||||
|
|
|
|
|
|
|
Weighted |
| ||
|
|
|
|
|
|
|
average |
| ||
|
|
|
Amortized |
|
Carrying |
|
expected life |
| ||
|
|
|
cost |
|
value |
|
(in years) |
| ||
|
|
|
(in millions) |
| ||||||
|
Corporate debt |
|
|
|
|
|
|
| ||
|
BBB |
|
$ |
20.5 |
|
$ |
20.5 |
|
4.0 |
|
|
B |
|
25.0 |
|
24.9 |
|
0.5 |
| ||
|
Total corporate debt |
|
45.5 |
|
45.4 |
|
2.1 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Structured finance |
|
|
|
|
|
|
| ||
|
AA |
|
4.6 |
|
4.6 |
|
17.0 |
| ||
|
BB |
|
39.6 |
|
37.5 |
|
2.9 |
| ||
|
B |
|
4.0 |
|
4.0 |
|
4.4 |
| ||
|
CCC |
|
17.7 |
|
17.7 |
|
6.4 |
| ||
|
Total structured finance |
|
65.9 |
|
63.8 |
|
4.9 |
| ||
|
Total fixed maturities with credit derivatives |
|
$ |
111.4 |
|
$ |
109.2 |
|
3.8 |
|
Fair Value Hedges
We use fixed-to-floating rate interest rate swaps to more closely align the interest rate characteristics of certain assets and liabilities. In general, these swaps are used in asset and liability management to modify duration, which is a measure of sensitivity to interest rate changes.
We enter into currency exchange swap agreements to convert certain foreign denominated assets and liabilities into U.S. dollar floating-rate denominated instruments to eliminate the exposure to future currency volatility on those items.
We have sold callable investment-type insurance contracts and used cancellable interest rate swaps to hedge the changes in fair value of the callable feature.
The net interest effect of interest rate swap and currency swap transactions for derivatives in fair value hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.
Hedge effectiveness testing for fair value relationships is performed utilizing a regression analysis approach for both prospective and retrospective evaluations. This regression analysis will consider multiple data points for the assessment that the hedge continues to be highly effective in achieving offsetting changes in fair value. In certain periods, the comparison of the change in value of the derivative and the change in the value of the hedged item may not be offsetting at a specific period in time due to small movements in value. However, any amounts recorded as fair value hedges have shown to be highly effective in achieving offsetting changes in fair value both for present and future periods.
The following table shows the effect of derivatives in fair value hedging relationships and the related hedged items on the consolidated statements of operations. All gains or losses on derivatives were included in the assessment of hedge effectiveness.
|
|
|
|
|
|
|
|
|
Amount of gain (loss) |
| ||||||
|
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
| ||||||||
|
|
|
recognized in net income on |
|
|
|
related hedged item for the |
| ||||||||
|
|
|
derivatives for the three months |
|
|
|
three months ended |
| ||||||||
|
Derivatives in fair value hedging |
|
ended March 31, (1) |
|
Hedged items in fair value |
|
March 31, (1) |
| ||||||||
|
relationships |
|
2013 |
|
2012 |
|
hedging relationships |
|
2013 |
|
2012 |
| ||||
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||||||||
|
Interest rate contracts |
|
$ |
30.4 |
|
$ |
31.7 |
|
Fixed maturities, available-for-sale |
|
$ |
(28.6 |
) |
$ |
(28.2 |
) |
|
Foreign exchange contracts |
|
1.3 |
|
(0.8 |
) |
Fixed maturities, available-for-sale |
|
(1.3 |
) |
1.3 |
| ||||
|
Foreign exchange contracts |
|
(64.1 |
) |
16.2 |
|
Investment-type insurance contracts |
|
63.7 |
|
(14.8 |
) | ||||
|
Total |
|
$ |
(32.4 |
) |
$ |
47.1 |
|
Total |
|
$ |
33.8 |
|
$ |
(41.7 |
) |
(1) The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges.
The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in fair value hedging relationships.
|
|
|
Amount of gain (loss) for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Hedged item |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale (1) |
|
$ |
(31.5 |
) |
$ |
(35.5 |
) |
|
Investment-type insurance contracts (2) |
|
9.3 |
|
8.8 |
| ||
(1) Reported in net investment income on the consolidated statements of operations.
(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.
Cash Flow Hedges
We utilize floating-to-fixed rate interest rate swaps to eliminate the variability in cash flows of recognized financial assets and liabilities and forecasted transactions.
We enter into currency exchange swap agreements to convert both principal and interest payments of certain foreign denominated assets and liabilities into U.S. dollar denominated fixed-rate instruments to eliminate the exposure to future currency volatility on those items.
The net interest effect of interest rate swap and currency swap transactions for derivatives in cash flow hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.
The maximum length of time we are hedging our exposure to the variability in future cash flows for forecasted transactions, excluding those related to the payments of variable interest on existing financial assets and liabilities, is 7.2 years. At March 31, 2013, we had $109.2 million of net gains reported in AOCI on the consolidated statements of financial position related to active hedges of forecasted transactions. If a hedged forecasted transaction is no longer probable of occurring, cash flow hedge accounting is discontinued. If it is probable that the hedged forecasted transaction will not occur, the deferred gain or loss is immediately reclassified from OCI into net income. We reclassified $0.2 million and $0.0 million, respectively, from AOCI into net realized capital gains (losses) as a result of the determination that hedged cash flows were probable of not occurring during the three months ended March 31, 2013 and 2012.
The following table shows the effect of derivatives in cash flow hedging relationships on the consolidated statements of operations and consolidated statements of financial position. All gains or losses on derivatives were included in the assessment of hedge effectiveness.
|
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
| ||||||||
|
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
| ||||||||
|
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
| ||||||||
|
Derivatives in cash |
|
|
|
for the three months ended |
|
reclassified from AOCI |
|
for the three months ended |
| ||||||||
|
flow hedging |
|
|
|
March 31, |
|
into net income |
|
March 31, |
| ||||||||
|
relationships |
|
Related hedged item |
|
2013 |
|
2012 |
|
(effective portion) |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||||||||
|
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
(23.7 |
) |
$ |
(2.1 |
) |
Net investment income |
|
$ |
2.7 |
|
$ |
1.9 |
|
|
Interest rate contracts |
|
Investment-type insurance contracts |
|
1.0 |
|
1.7 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
| ||||
|
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(1.6 |
) |
(1.4 |
) | ||||
|
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
41.0 |
|
(19.5 |
) |
Net realized capital losses |
|
(0.6 |
) |
(10.2 |
) | ||||
|
Foreign exchange contracts |
|
Investment-type insurance contract |
|
(3.6 |
) |
(3.9 |
) |
Benefits, claims and settlement expenses |
|
— |
|
— |
| ||||
|
Total |
|
|
|
$ |
14.7 |
|
$ |
(23.8 |
) |
Total |
|
$ |
0.5 |
|
$ |
(9.7 |
) |
The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in cash flow hedging relationships.
|
|
|
Amount of gain (loss) for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Hedged item |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale (1) |
|
$ |
2.4 |
|
$ |
2.0 |
|
|
Investment-type insurance contracts (2) |
|
(2.9 |
) |
(3.3 |
) | ||
(1) Reported in net investment income on the consolidated statements of operations.
(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.
The ineffective portion of our cash flow hedges is reported in net realized capital gains (losses) on the consolidated statements of operations. The net gain resulting from the ineffective portion of foreign currency contracts in cash flow hedging relationships was $0.3 million and $0.1 million for the three months ended March 31, 2013 and 2012, respectively.
We expect to reclassify net gains of $0.6 million from AOCI into net income in the next 12 months, which includes both net deferred gains on discontinued hedges and net losses on periodic settlements of active hedges. Actual amounts may vary from this amount as a result of market conditions.
Derivatives Not Designated as Hedging Instruments
Our use of futures, certain swaptions and swaps, collars, options and forwards are effective from an economic standpoint, but they have not been designated as hedges for financial reporting purposes. As such, periodic changes in the market value of these instruments, which includes mark-to-market gains and losses as well as periodic and final settlements, primarily flow directly into net realized capital gains (losses) on the consolidated statements of operations. Gains and losses on certain derivatives used in relation to certain trading portfolios are reported in net investment income on the consolidated statements of operations.
The following table shows the effect of derivatives not designated as hedging instruments, including fair value changes of embedded derivatives that have been bifurcated from the host contract, on the consolidated statements of operations.
|
|
|
Amount of gain (loss) recognized in |
| ||||
|
|
|
net income on derivatives for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Derivatives not designated as hedging instruments |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Interest rate contracts |
|
$ |
(29.6 |
) |
$ |
(34.8 |
) |
|
Foreign exchange contracts |
|
4.3 |
|
27.6 |
| ||
|
Equity contracts |
|
(54.6 |
) |
(63.9 |
) | ||
|
Credit contracts |
|
15.1 |
|
18.6 |
| ||
|
Other contracts |
|
57.2 |
|
68.2 |
| ||
|
Total |
|
$ |
(7.6 |
) |
$ |
15.7 |
|
|
|||
6. Income Taxes
The effective income tax rate for the three months ended March 31, 2013, was lower than the U.S. corporate income tax rate of 35% (“U.S. statutory rate”) primarily due to income tax deductions allowed for corporate dividends received, the presentation of taxes on our share of earnings generated from equity method investments and interest exclusion from taxable income.
The effective income tax rate for the three months ended March 31, 2012, was lower than the U.S. statutory rate primarily due to income tax deductions allowed for corporate dividends received, the presentation of taxes on our share of earnings generated from equity method investments and lower tax rates of foreign jurisdictions.
We are a U.S. shareholder in various foreign entities classified as controlled foreign corporations (“CFCs”) for U.S. tax purposes. U.S. shareholders of CFCs are generally required to take into account as gross income in the U.S. certain passive income earned by the CFCs (“Subpart F income”) even if the income is not currently distributed. A temporary exception (the “active financing exception”) was applicable for tax years beginning before January 1, 2012, to avoid the current recognition of Subpart F income derived in the active conduct of a banking, financing, insurance or similar business. The U.S. Congress and the President enacted legislation on January 2, 2013, retroactive to January 1, 2012, to extend the active financing exception. The legislation did not have a material impact on our consolidated results for the three months ended March 31, 2013.
The Internal Revenue Service (“IRS”) completed its examinations of tax years 2004 through 2008. We filed claims for refund for tax years 2004 and 2005 during 2012 and will file claims for refund relating to disputed adjustments for tax years 2006 through 2008. The IRS commenced audit of our federal income tax return for 2009 during the fourth quarter of 2011, for 2010 during the first quarter of 2012 and for 2011 during the first quarter of 2013. We do not expect the results of these audits or developments in other tax areas for all open tax years to significantly change the possible increase in the amount of unrecognized tax benefits, but the outcome of tax reviews is uncertain and unforeseen results can occur.
We do not believe it is reasonably possible that the amount of our unrecognized tax benefits will significantly increase or decrease in the next twelve months. The range disclosed in our 2012 financial statements was prior to the January 2013 expiration of the right to appeal the U.S. District Court for the Southern District of Iowa decision in the case of Pritired 1, LLC. We believe that we have adequate defenses against, or sufficient provisions for, contested issues, but final resolution of the contested issues could take several years while legal remedies are pursued. Consequently, we do not expect the ultimate resolution of issues from tax years 1995 - 2003 to have a material impact on our net income. Similarly, we believe there are adequate defenses against, or sufficient provisions for, any challenges that might arise in tax years subsequent to 2003.
|
|||
7. Employee and Agent Benefits
Components of Net Periodic Benefit Cost
|
|
|
|
|
Other postretirement |
| ||||||||
|
|
|
Pension benefits |
|
benefits |
| ||||||||
|
|
|
For the three months ended |
|
For the three months ended |
| ||||||||
|
|
|
March 31, |
|
March 31, |
| ||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Service cost |
|
$ |
14.3 |
|
$ |
11.7 |
|
$ |
0.3 |
|
$ |
0.3 |
|
|
Interest cost |
|
25.9 |
|
27.3 |
|
1.4 |
|
2.1 |
| ||||
|
Expected return on plan assets |
|
(31.9 |
) |
(28.6 |
) |
(7.2 |
) |
(8.4 |
) | ||||
|
Amortization of prior service benefit |
|
(2.1 |
) |
(2.4 |
) |
(6.5 |
) |
(7.1 |
) | ||||
|
Recognized net actuarial loss |
|
29.5 |
|
22.7 |
|
0.3 |
|
0.2 |
| ||||
|
Net periodic benefit cost (income) |
|
$ |
35.7 |
|
$ |
30.7 |
|
$ |
(11.7 |
) |
$ |
(12.9 |
) |
Contributions
Our funding policy for our qualified pension plan is to fund the plan annually in an amount at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act (“ERISA”) and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. The minimum annual contribution for 2013 will be zero so we will not be required to fund our qualified pension plan during 2013. However, it is possible that we may fund the qualified and nonqualified pension plans in 2013 for a combined total of $60.0 million to $110.0 million. During the three months ended March 31, 2013, we contributed $27.0 million to these plans.
|
|||
8. Contingencies, Guarantees and Indemnifications
Litigation and Regulatory Contingencies
We are regularly involved in litigation, both as a defendant and as a plaintiff, but primarily as a defendant. Litigation naming us as a defendant ordinarily arises out of our business operations as a provider of asset management and accumulation products and services; life, health and disability insurance, and our investment activities. Some of the lawsuits may be class actions, or purport to be, and some may include claims for unspecified or substantial punitive and treble damages.
We may discuss such litigation in one of three ways. We accrue a charge to income and disclose legal matters for which the chance of loss is probable and for which the amount of loss can be reasonably estimated. We may disclose contingencies for which the chance of loss is reasonably possible and provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. Finally, we may voluntarily disclose loss contingencies for which the chance of loss is remote in order to provide information concerning matters that potentially expose us to possible losses.
In addition, regulatory bodies such as state insurance departments, the SEC, the Financial Industry Regulatory Authority, the Department of Labor, the Federal Reserve Board and other regulatory agencies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, ERISA and laws governing the activities of broker-dealers. We receive requests from regulators and other governmental authorities relating to industry issues and may receive additional requests, including subpoenas and interrogatories, in the future.
On November 8, 2006, a trustee of Fairmount Park Inc. Retirement Savings Plan filed a putative class action lawsuit in the United States District Court for the Southern District of Illinois against Principal Life. Principal Life’s motion to transfer venue was granted and the case is now pending in the Southern District of Iowa. The complaint alleged, among other things, that Principal Life breached its alleged fiduciary duties while performing services to 401(k) plans by failing to disclose, or adequately disclose, to employers or plan participants the fact that Principal Life receives “revenue sharing fees from mutual funds that are included in its pre-packaged 401(k) plans” and allegedly failed to use the revenue to defray the expenses of the services provided to the plans. Plaintiff further alleged that these acts constitute prohibited transactions under ERISA. Plaintiff sought to certify a class of all retirement plans to which Principal Life was a service provider and for which Principal Life received and retained “revenue sharing” fees from mutual funds. On August 27, 2008, the plaintiff’s motion for class certification was denied. On June 13, 2011, the court entered a consent judgment resolving the claims of the plaintiff. On July 12, 2011, plaintiff filed a notice of appeal related to the issue of the denial of class certification. On February 13, 2013, the Eighth Circuit Court of Appeals dismissed the appeal. Principal Life continues to aggressively defend the lawsuit.
On October 28, 2009, Judith Curran filed a derivative action lawsuit on behalf of Principal Funds, Inc. Strategic Asset Management Portfolios in the United States District Court for the Southern District of Iowa against Principal Management Corporation; Principal Global Investors, LLC; and Principal Funds Distributor, Inc. (the “Curran Defendants”). The lawsuit alleges the Curran Defendants breached their fiduciary duty under Section 36(b) of the Investment Company Act by charging advisory fees and distribution fees that were excessive. The Curran Defendants filed a motion to dismiss the case on January 29, 2010. That motion was granted in part and overruled in part. Principal Global Investors, LLC was dismissed from the suit. Trial is set for June 17, 2013. The remaining Curran Defendants are aggressively defending the lawsuit.
On December 2, 2009 and December 4, 2009, two plaintiffs, Cruise and Mullaney, each filed putative class action lawsuits in the United States District Court for the Southern District of New York against us; Principal Life; Principal Global Investors, LLC; and Principal Real Estate Investors, LLC (the “Cruise/Mullaney Defendants”). The lawsuits alleged the Cruise/Mullaney Defendants failed to manage the Principal U.S. Property Separate Account (“PUSPSA”) in the best interests of investors, improperly imposed a “withdrawal freeze” on September 26, 2008, and instituted a “withdrawal queue” to honor withdrawal requests as sufficient liquidity became available. Plaintiffs allege these actions constitute a breach of fiduciary duties under ERISA. Plaintiffs seek to certify a class including all qualified ERISA plans and the participants of those plans that invested in PUSPSA between September 26, 2008, and the present that have suffered losses caused by the queue. The two lawsuits, as well as two subsequently filed complaints asserting similar claims, have been consolidated and are now known as In re Principal U.S. Property Account Litigation. On April 22, 2010, an order was entered granting the motion made by the Cruise/Mullaney Defendants for change of venue to the United States District Court for the Southern District of Iowa. Plaintiffs filed an Amended Consolidated Complaint adding five new plaintiffs on November 22, 2010, and the Cruise/Mullaney Defendants moved to dismiss the amended complaint. The court denied the Cruise/Mullaney Defendants’ motion to dismiss on May 17, 2011. Plaintiffs have filed a motion for class certification and the Cruise/Mullaney Defendants have resisted it. The Cruise/Mullaney Defendants are aggressively defending the lawsuit.
In 2008, Principal Life received approximately $440.0 million in connection with the termination of certain structured transactions and the resulting prepayment of Principal Life’s investment in those transactions. The transactions involved Lehman Brothers Special Financing Inc. and Lehman Brothers Holdings Inc. (collectively, “Lehman”) in various capacities. Subsequent to Lehman’s September 2008 bankruptcy filing, its bankruptcy estate has sought to recover from numerous sources significant amounts to which it claims entitlement under various theories. The estate is attempting to recover from us an unspecified amount, but possibly up to the amount paid to us, plus interest. We are one of numerous defendants to this action, which has been stayed by the bankruptcy court. We believe that we have meritorious defenses to Lehman’s claims and intend to aggressively defend against them once the stay is lifted and we are allowed to do so.
While the outcome of any pending or future litigation or regulatory matter cannot be predicted, management does not believe that any such matter will have a material adverse effect on our business or financial position. As of March 31, 2013, there were no estimated losses accrued related to the legal matters discussed above because we believe the loss from these matters is not probable and cannot be reasonably estimated.
We believe all of the litigation contingencies discussed above involve a chance of loss that is either remote or reasonably possible. All of these matters involve unspecified claim amounts, in which the respective plaintiffs seek an indeterminate amount of damages. To the extent such matters present a reasonably possible chance of loss, we are not able to estimate the possible loss or range of loss associated therewith.
The outcome of such matters is always uncertain, and unforeseen results can occur. It is possible that such outcomes could require us to pay damages or make other expenditures or establish accruals in amounts that we could not estimate at March 31, 2013.
Guarantees and Indemnifications
In the normal course of business, we have provided guarantees to third parties primarily related to a former subsidiary and joint ventures. These agreements generally expire through 2019. The maximum exposure under these agreements as of March 31, 2013, was approximately $256.0 million. At inception, the fair value of such guarantees was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. Should we be required to perform under these guarantees, we generally could recover a portion of the loss from third parties through recourse provisions included in agreements with such parties, the sale of assets held as collateral that can be liquidated in the event that performance is required under the guarantees or other recourse generally available to us; therefore, such guarantees would not result in a material adverse effect on our business or financial position. While the likelihood is remote, such outcomes could materially affect net income in a particular quarter or annual period.
We are also subject to various other indemnification obligations issued in conjunction with divestitures, acquisitions and financing transactions whose terms range in duration and often are not explicitly defined. Certain portions of these indemnifications may be capped, while other portions are not subject to such limitations; therefore, the overall maximum amount of the obligation under the indemnifications cannot be reasonably estimated. At inception, the fair value of such indemnifications was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. While we are unable to estimate with certainty the ultimate legal and financial liability with respect to these indemnifications, we believe that performance under these indemnifications would not result in a material adverse effect on our business or financial position. While the likelihood is remote, performance under these indemnifications could materially affect net income in a particular quarter or annual period.
|
|||
9. Stockholders’ Equity
Common Stock
On March 29, 2013, we paid a quarterly dividend of $67.6 million, equal to $0.23 per share, to stockholders of record as of March 11, 2013. On March 30, 2012, we paid a quarterly dividend of $54.3 million, equal to $0.18 per share, to stockholders of record as of March 12, 2012.
Reconciliation of Outstanding Shares
|
|
|
Series A |
|
Series B |
|
Common |
|
|
|
|
preferred stock |
|
preferred stock |
|
stock |
|
|
|
|
(in millions) |
| ||||
|
Outstanding shares at January 1, 2012 |
|
3.0 |
|
10.0 |
|
301.1 |
|
|
Shares issued |
|
— |
|
— |
|
2.1 |
|
|
Treasury stock acquired |
|
— |
|
— |
|
(2.3 |
) |
|
Outstanding shares at March 31, 2012 |
|
3.0 |
|
10.0 |
|
300.9 |
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares at January 1, 2013 |
|
3.0 |
|
10.0 |
|
293.8 |
|
|
Shares issued |
|
— |
|
— |
|
2.4 |
|
|
Treasury stock acquired |
|
— |
|
— |
|
(2.9 |
) |
|
Outstanding shares at March 31, 2013 |
|
3.0 |
|
10.0 |
|
293.3 |
|
In February 2012, our Board of Directors authorized a share repurchase program of up to $100.0 million of our outstanding common stock. We completed this program in May 2012. In May 2012, our Board of Directors authorized a share repurchase program of up to $200.0 million of our outstanding common stock. We completed this program in February 2013. Also in February 2013, our Board of Directors authorized a share repurchase program up to $150.0 million of our outstanding common stock.
Our Board of Directors has authorized various repurchase programs under which we are allowed to purchase shares of our outstanding common stock. Shares repurchased under these programs are accounted for as treasury stock, carried at cost and reflected as a reduction to stockholders’ equity.
Other Comprehensive Income (Loss)
|
|
|
For the three months ended March 31, 2013 |
| |||||||
|
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
| |||
|
|
|
(in millions) |
| |||||||
|
Net unrealized losses on available-for-sale securities during the period |
|
$ |
(132.3 |
) |
$ |
46.0 |
|
$ |
(86.3 |
) |
|
Reclassification adjustment for losses included in net income (1) |
|
34.1 |
|
(11.7 |
) |
22.4 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
43.7 |
|
(15.3 |
) |
28.4 |
| |||
|
Adjustments for assumed changes in policyholder liabilities |
|
(91.9 |
) |
28.1 |
|
(63.8 |
) | |||
|
Net unrealized losses on available-for-sale securities |
|
(146.4 |
) |
47.1 |
|
(99.3 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
(20.2 |
) |
7.1 |
|
(13.1 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
1.2 |
|
(0.2 |
) |
1.0 |
| |||
|
Adjustments for assumed changes in policyholder liabilities |
|
1.4 |
|
(0.6 |
) |
0.8 |
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
(17.6 |
) |
6.3 |
|
(11.3 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net unrealized gains on derivative instruments during the period |
|
32.6 |
|
(10.8 |
) |
21.8 |
| |||
|
Reclassification adjustment for gains included in net income (3) |
|
(0.5 |
) |
0.1 |
|
(0.4 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
1.0 |
|
(0.4 |
) |
0.6 |
| |||
|
Net unrealized gains on derivative instruments |
|
33.1 |
|
(11.1 |
) |
22.0 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Foreign currency translation adjustment |
|
55.1 |
|
(0.7 |
) |
54.4 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
21.2 |
|
(7.4 |
) |
13.8 |
| |||
|
Net unrecognized postretirement benefit obligation |
|
21.2 |
|
(7.4 |
) |
13.8 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Other comprehensive loss |
|
$ |
(54.6 |
) |
$ |
34.2 |
|
$ |
(20.4 |
) |
|
|
|
For the three months ended March 31, 2012 |
| |||||||
|
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
| |||
|
|
|
(in millions) |
| |||||||
|
Net unrealized gains on available-for-sale securities during the period |
|
$ |
333.1 |
|
$ |
(112.2 |
) |
$ |
220.9 |
|
|
Reclassification adjustment for losses included in net income (1) |
|
10.5 |
|
(3.9 |
) |
6.6 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
(55.5 |
) |
19.4 |
|
(36.1 |
) | |||
|
Adjustments for assumed changes in policyholder liabilities |
|
(52.0 |
) |
21.9 |
|
(30.1 |
) | |||
|
Net unrealized gains on available-for-sale securities |
|
236.1 |
|
(74.8 |
) |
161.3 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
(4.9 |
) |
1.6 |
|
(3.3 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
3.8 |
|
(1.4 |
) |
2.4 |
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
(1.1 |
) |
0.2 |
|
(0.9 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net unrealized losses on derivative instruments during the period |
|
(43.8 |
) |
15.3 |
|
(28.5 |
) | |||
|
Reclassification adjustment for losses included in net income (3) |
|
9.7 |
|
(3.4 |
) |
6.3 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
28.8 |
|
(10.1 |
) |
18.7 |
| |||
|
Net unrealized losses on derivative instruments |
|
(5.3 |
) |
1.8 |
|
(3.5 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Foreign currency translation adjustment |
|
55.7 |
|
3.9 |
|
59.6 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
13.4 |
|
(4.7 |
) |
8.7 |
| |||
|
Net unrecognized postretirement benefit obligation |
|
13.4 |
|
(4.7 |
) |
8.7 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Other comprehensive income |
|
$ |
298.8 |
|
$ |
(73.6 |
) |
$ |
225.2 |
|
(1) Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations.
(2) Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI.
(3) See Note 5, Derivative Financial Instruments — Cash Flow Hedges, for further details.
(4) Pre-tax amortization of prior service cost and actuarial loss included in net periodic benefit cost, which is comprised of amortization of prior service cost (benefit); recognized net actuarial (gain) loss and amounts recognized due to special events, is reported in operating expenses on the consolidated statements of operations. See Note 7, Employee and Agent Benefits — Components of Net Periodic Benefit Cost, for further details.
Accumulated Other Comprehensive Income
|
|
|
|
|
Noncredit |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
Net unrealized |
|
component of |
|
Net unrealized |
|
Foreign |
|
Unrecognized |
|
Accumulated |
| ||||||
|
|
|
gains on |
|
impairment losses |
|
gains (losses) on |
|
currency |
|
postretirement |
|
other |
| ||||||
|
|
|
available-for-sale |
|
on fixed maturities |
|
derivative |
|
translation |
|
benefit |
|
comprehensive |
| ||||||
|
|
|
securities |
|
available-for-sale |
|
instruments |
|
adjustment |
|
obligation |
|
income |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Balances at January 1, 2012 |
|
$ |
860.7 |
|
$ |
(167.2 |
) |
$ |
34.9 |
|
$ |
(95.9 |
) |
$ |
(361.1 |
) |
$ |
271.4 |
|
|
Other comprehensive income during the period, net of adjustments |
|
154.7 |
|
(0.9 |
) |
(9.8 |
) |
58.8 |
|
— |
|
202.8 |
| ||||||
|
Amounts reclassified from AOCI |
|
6.6 |
|
— |
|
6.3 |
|
— |
|
8.7 |
|
21.6 |
| ||||||
|
Other comprehensive income |
|
161.3 |
|
(0.9 |
) |
(3.5 |
) |
58.8 |
|
8.7 |
|
224.4 |
| ||||||
|
Balances at March 31, 2012 |
|
$ |
1,022.0 |
|
$ |
(168.1 |
) |
$ |
31.4 |
|
$ |
(37.1 |
) |
$ |
(352.4 |
) |
$ |
495.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Balances at January 1, 2013 |
|
$ |
1,418.3 |
|
$ |
(173.9 |
) |
$ |
(8.7 |
) |
$ |
(106.9 |
) |
$ |
(488.5 |
) |
$ |
640.3 |
|
|
Other comprehensive income during the period, net of adjustments |
|
(121.7 |
) |
(11.3 |
) |
22.4 |
|
55.5 |
|
— |
|
(55.1 |
) | ||||||
|
Amounts reclassified from AOCI |
|
22.4 |
|
— |
|
(0.4 |
) |
— |
|
13.8 |
|
35.8 |
| ||||||
|
Other comprehensive loss |
|
(99.3 |
) |
(11.3 |
) |
22.0 |
|
55.5 |
|
13.8 |
|
(19.3 |
) | ||||||
|
Balances at March 31, 2013 |
|
$ |
1,319.0 |
|
$ |
(185.2 |
) |
$ |
13.3 |
|
$ |
(51.4 |
) |
$ |
(474.7 |
) |
$ |
621.0 |
|
Noncontrolling Interest
Interest held by unaffiliated parties in consolidated entities are reflected in noncontrolling interest, which represents the noncontrolling partners’ share of the underlying net assets of our consolidated subsidiaries. Noncontrolling interest that is not redeemable is reported in the equity section of the consolidated statements of financial position.
The noncontrolling interest holders in certain of our subsidiaries maintain an equity interest that is redeemable at the option of the holder, which may be exercised on varying dates beginning in 2014. Since redemption of the noncontrolling interest is outside of our control, this interest is presented on the consolidated statements of financial position line item titled “Redeemable noncontrolling interest.” If the interest were to be redeemed, we would be required to purchase such interest at a redemption value based on a formula that management intended to reasonably approximate fair value based on a fixed multiple of earnings over a measurement period. As such, the carrying value of the redeemable noncontrolling interest is compared to the redemption value at each reporting period. Any adjustments to the carrying amount of the redeemable noncontrolling interest for changes in redemption value prior to exercise of the redemption option are determined after the attribution of net income or loss of the subsidiary and are recorded in retained earnings.
Following is a reconciliation of the changes in the redeemable noncontrolling interest (in millions):
|
Balance at January 1, 2012 |
|
$ |
22.2 |
|
|
Net income attributable to redeemable noncontrolling interest |
|
0.2 |
| |
|
Foreign currency translation adjustment |
|
0.7 |
| |
|
Balance at March 31, 2012 |
|
$ |
23.1 |
|
|
|
|
|
| |
|
Balance at January 1, 2013 |
|
$ |
60.4 |
|
|
Net income attributable to redeemable noncontrolling interest |
|
0.1 |
| |
|
Distributions to redeemable noncontrolling interest |
|
(0.6 |
) | |
|
Foreign currency translation adjustment |
|
(1.0 |
) | |
|
Balance at March 31, 2013 |
|
$ |
58.9 |
|
|
|||
10. Fair Value Measurements
We use fair value measurements to record fair value of certain assets and liabilities and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value. Certain financial instruments, particularly policyholder liabilities other than investment-type insurance contracts, are excluded from these fair value disclosure requirements.
Valuation Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety considering factors specific to the asset or liability.
· Level 1 — Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities primarily include exchange traded equity securities, mutual funds and U.S. Treasury bonds.
· Level 2 — Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Our Level 2 assets and liabilities primarily include fixed maturities (including public and private bonds), equity securities, over-the-counter derivatives and other investments for which public quotations are not available but that are priced by third-party pricing services or internal models using substantially all observable inputs.
· Level 3 — Fair values are based on significant unobservable inputs for the asset or liability. Our Level 3 assets and liabilities include certain assets and liabilities priced using broker quotes or other valuation methods that utilize at least one significant unobservable input. These include fixed maturities, private equity securities, real estate and commercial mortgage loan investments of our separate accounts, commercial mortgage loan investments and obligations of consolidated VIEs for which the fair value option was elected, complex derivatives, embedded derivatives and an equity method real estate investment for which the fair value option was elected.
Determination of Fair Value
The following discussion describes the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis or disclosed at fair value. The techniques utilized in estimating the fair values of financial instruments are reliant on the assumptions used. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.
Fair value estimates are made based on available market information and judgments about the financial instrument at a specific point in time. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. We validate prices through an investment analyst review process, which includes validation through direct interaction with external sources, review of recent trade activity or use of internal models. In circumstances where broker quotes are used to value an instrument, we generally receive one non-binding quote. Broker quotes are validated through an investment analyst review process, which includes validation through direct interaction with external sources and use of internal models or other relevant information. We did not make any significant changes to our valuation processes during 2013.
Fixed Maturities
Fixed maturities include bonds, redeemable preferred stock, asset-backed securities and certain nonredeemable preferred stock. When available, the fair value of fixed maturities is based on quoted prices of identical assets in active markets. These are reflected in Level 1 and primarily include U.S. Treasury bonds and actively traded redeemable corporate preferred securities.
When quoted prices of identical assets in active markets are not available, our first priority is to obtain prices from third party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information. Their methodologies vary by asset class and include inputs such as estimated cash flows, benchmark yields, reported trades, broker quotes, credit quality, industry events and economic events. Fixed maturities with validated prices from pricing services, which includes the majority of our public fixed maturities in all asset classes, are generally reflected in Level 2. Also included in Level 2 are corporate bonds where quoted market prices are not available, for which an internal model using substantially all observable inputs or a matrix pricing valuation approach is used. In the matrix approach, securities are grouped into pricing categories that vary by sector, rating and average life. Each pricing category is assigned a risk spread based on studies of observable public market data from the investment professionals assigned to specific security classes. The expected cash flows of the security are then discounted back at the current Treasury curve plus the appropriate risk spread. Although the matrix valuation approach provides a fair valuation of each pricing category, the valuation of an individual security within each pricing category may actually be impacted by company specific factors.
If we are unable to price a fixed maturity security using prices from third party pricing vendors or other sources specific to the asset class, we may obtain a broker quote or utilize an internal pricing model specific to the asset utilizing relevant market information, to the extent available and where at least one significant unobservable input is utilized, which are reflected in Level 3 and can include fixed maturities across all asset classes. As of March 31, 2013, less than 1% of our fixed maturities were valued using internal pricing models, which were classified as Level 3 assets accordingly.
The primary inputs, by asset class, for valuations of the majority of our Level 2 investments from third party pricing vendors or our internal pricing valuation approach are described below.
U.S. Government and Agencies/Non-U.S. Governments. Inputs include recently executed market transactions, interest rate yield curves, maturity dates, market price quotations and credit spreads relating to similar instruments.
State and Political Subdivisions. Inputs include Municipal Securities Rulemaking Board reported trades, U.S. Treasury and other benchmark curves, material event notices, new issue data and obligor credit ratings.
Corporate. Inputs include recently executed transactions, market price quotations, benchmark yields, issuer spreads and observations of equity and credit default swap curves related to the issuer. For private placement corporate securities valued through the matrix valuation approach inputs include the current Treasury curve and risk spreads based on sector, rating and average life of the issuance.
RMBS, CMBS, Collateralized Debt Obligations and Other Debt Obligations. Inputs include cash flows, priority of the tranche in the capital structure, expected time to maturity for the specific tranche, reinvestment period remaining and performance of the underlying collateral including prepayments, defaults, deferrals, loss severity of defaulted collateral and, for RMBS, prepayment speed assumptions. Other inputs include market indices and recently executed market transactions.
Equity Securities
Equity securities include mutual funds, common stock, nonredeemable preferred stock and mandatory regulatory required investments. Fair values of equity securities are determined using quoted prices in active markets for identical assets when available, which are reflected in Level 1. When quoted prices are not available, we may utilize internal valuation methodologies appropriate for the specific asset that use observable inputs such as underlying share prices, which are reflected in Level 2. Fair values might also be determined using broker quotes or through the use of internal models or analysis that incorporate significant assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities, which are reflected in Level 3.
Derivatives
The fair values of exchange-traded derivatives are determined through quoted market prices, which are reflected in Level 1. Exchange-traded derivatives include interest rate and equity futures that are settled daily such that their fair value is not reflected in the consolidated statements of financial position. The fair values of over-the-counter derivative instruments are determined using either pricing valuation models that utilize market observable inputs or broker quotes. The majority of our over-the-counter derivatives are valued with models that use market observable inputs, which are reflected in Level 2. Significant inputs include contractual terms, interest rates, currency exchange rates, credit spread curves, equity prices and volatilities. These valuation models consider projected discounted cash flows, relevant swap curves and appropriate implied volatilities. Certain over-the-counter derivatives utilize unobservable market data, primarily independent broker quotes that are nonbinding quotes based on models that do not reflect the result of market transactions, which are reflected in Level 3.
Our derivative contracts are generally documented under ISDA Master Agreements, which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Collateral arrangements are bilateral and based on current ratings of each entity. We utilize the LIBOR interest rate curve to value our positions, which includes a credit spread. This credit spread incorporates an appropriate level of nonperformance risk into our valuations given the current ratings of our counterparties, as well as the collateral agreements in place. Counterparty credit risk is routinely monitored to ensure our adjustment for non-performance risk is appropriate.
Interest Rate Contracts. We use discounted cash flow valuation techniques to determine the fair value of interest rate swaps using observable swap curves as the inputs. These are reflected in Level 2. In addition, we have a limited number of complex inflation-linked interest rate swaps, interest rate collars and swaptions that are valued using broker quotes. These are reflected in Level 3.
Foreign Exchange Contracts. We use discounted cash flow valuation techniques that utilize observable swap curves and exchange rates as the inputs to determine the fair value of foreign currency swaps. These are reflected in Level 2. Currency forwards are valued using observable market inputs, including forward currency exchange rates. These are reflected in Level 2. In addition, we have a limited number of currency options and non-standard currency swaps that are valued using broker quotes. These are reflected within Level 3.
Equity Contracts. We use an option pricing model using observable implied volatilities, dividend yields, index prices and swap curves as the inputs to determine the fair value of equity options. These are reflected in Level 2.
Credit Contracts. We use either the ISDA Credit Default Swap Standard discounted cash flow model that utilizes observable default probabilities and recovery rates as inputs or broker prices to determine the fair value of credit default swaps. These are reflected in Level 3. In addition, we have a limited number of total return swaps that are valued based on the observable quoted price of underlying equity indices. These are reflected in Level 2.
Other Investments
Other investments reported at fair value primarily include seed money investments, for which the fair value is determined using the net asset value of the fund. The net asset value of the fund represents the price at which we feel we would be able to initiate a transaction. Seed money investments in mutual funds for which the net asset value is published are reflected in Level 1. Seed money investments in mutual funds or other investment funds in markets that do not have a published net asset value are reflected in Level 2.
Other investments reported at fair value also include commercial mortgage loans of consolidated VIEs and an equity method real estate investment for which the fair value option was elected, which are reflected in Level 3. Fair value of the commercial mortgage loans is computed utilizing a discount rate based on the current market. The market discount rate is then adjusted based on various factors that differentiate it from our pool of loans. The equity method real estate investment consists of underlying real estate and debt. The real estate fair value is estimated using a discounted cash flow valuation model that utilizes public real estate market data inputs such as transaction prices, market rents, vacancy levels, leasing absorption, market cap rates and discount rates. The debt fair value is estimated using a discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements.
Cash and Cash Equivalents
Certain cash equivalents are reported at fair value on a recurring basis and include money market instruments and other short-term investments with maturities of less than three months. Fair values of these cash equivalents may be determined using public quotations, when available, which are reflected in Level 1. When public quotations are not available, because of the highly liquid nature of these assets, carrying amounts may be used to approximate fair values, which are reflected in Level 2.
Separate Account Assets
Separate account assets include equity securities, debt securities and derivative instruments, for which fair values are determined as previously described, and are reflected in Level 1, Level 2 and Level 3. Separate account assets also include commercial mortgage loans, for which the fair value is estimated by discounting the expected total cash flows using market rates that are applicable to the yield, credit quality and maturity of the loans. The market clearing spreads vary based on mortgage type, weighted average life, rating and liquidity. These are reflected in Level 3. Finally, separate account assets include real estate, for which the fair value is estimated using discounted cash flow valuation models that utilize public real estate market data inputs such as transaction prices, market rents, vacancy levels, leasing absorption, market cap rates and discount rates. In addition, each property is appraised annually by an independent appraiser. The real estate included in separate account assets is recorded net of related mortgage encumbrances for which the fair value is estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. The real estate within the separate accounts is reflected in Level 3.
Investment-Type Insurance Contracts
Certain annuity contracts and other investment-type insurance contracts include embedded derivatives that have been bifurcated from the host contract and that are measured at fair value on a recurring basis, which are reflected in Level 3. The key assumptions for calculating the fair value of the embedded derivative liabilities are market assumptions (such as equity market returns, interest rate levels, market volatility and correlations) and policyholder behavior assumptions (such as lapse, mortality, utilization and withdrawal patterns). They are valued using a combination of historical data and actuarial judgment. Stochastic models are used to value the embedded derivatives that incorporate a spread reflecting our own creditworthiness and risk margins.
The assumption for our own non-performance risk for investment-type insurance contracts and any embedded derivatives bifurcated from certain annuity and investment-type insurance contracts is based on the current market credit spreads for debt-like instruments that we have issued and are available in the market.
Other Liabilities
Certain obligations reported in other liabilities include embedded derivatives to deliver underlying securities of structured investments to third parties. The fair value of the embedded derivatives is calculated based on the value of the underlying securities that are valued based on prices obtained from third party pricing vendors as utilized and described in our discussion of how fair value is determined for fixed maturities, which are reflected in Level 2.
Additionally, obligations of consolidated VIEs for which the fair value option was elected are included in other liabilities. These obligations are valued either based on prices obtained from third party pricing vendors as utilized and described in our discussion of how fair value is determined for fixed maturities, which are reflected in Level 2, or broker quotes, which are reflected in Level 3.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below.
|
|
|
As of March 31, 2013 |
| ||||||||||
|
|
|
Assets/ |
|
|
|
|
|
|
| ||||
|
|
|
(liabilities) |
|
|
|
|
|
|
| ||||
|
|
|
measured at |
|
Fair value hierarchy level |
| ||||||||
|
|
|
fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
| ||||
|
U.S. government and agencies |
|
$ |
953.3 |
|
$ |
297.5 |
|
$ |
655.8 |
|
$ |
— |
|
|
Non-U.S. governments |
|
1,179.7 |
|
— |
|
1,139.3 |
|
40.4 |
| ||||
|
States and political subdivisions |
|
3,491.8 |
|
— |
|
3,489.9 |
|
1.9 |
| ||||
|
Corporate |
|
34,102.8 |
|
74.2 |
|
33,861.0 |
|
167.6 |
| ||||
|
Residential mortgage-backed securities |
|
3,123.2 |
|
— |
|
3,123.2 |
|
— |
| ||||
|
Commercial mortgage-backed securities |
|
3,990.7 |
|
— |
|
3,990.7 |
|
— |
| ||||
|
Collateralized debt obligations |
|
394.0 |
|
— |
|
318.8 |
|
75.2 |
| ||||
|
Other debt obligations |
|
3,848.6 |
|
— |
|
3,832.7 |
|
15.9 |
| ||||
|
Total fixed maturities, available-for-sale |
|
51,084.1 |
|
371.7 |
|
50,411.4 |
|
301.0 |
| ||||
|
Fixed maturities, trading |
|
628.9 |
|
— |
|
459.4 |
|
169.5 |
| ||||
|
Equity securities, available-for-sale |
|
147.0 |
|
62.1 |
|
68.8 |
|
16.1 |
| ||||
|
Equity securities, trading |
|
732.2 |
|
107.5 |
|
624.7 |
|
— |
| ||||
|
Derivative assets (1) |
|
840.9 |
|
— |
|
773.7 |
|
67.2 |
| ||||
|
Other investments (2) |
|
288.9 |
|
41.8 |
|
136.2 |
|
110.9 |
| ||||
|
Cash equivalents (3) |
|
757.4 |
|
2.4 |
|
755.0 |
|
— |
| ||||
|
Sub-total excluding separate account assets |
|
54,479.4 |
|
585.5 |
|
53,229.2 |
|
664.7 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Separate account assets |
|
120,906.1 |
|
58,020.6 |
|
58,226.3 |
|
4,659.2 |
| ||||
|
Total assets |
|
$ |
175,385.5 |
|
$ |
58,606.1 |
|
$ |
111,455.5 |
|
$ |
5,323.9 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Investments-type insurance contracts (4) |
|
$ |
(117.8 |
) |
$ |
— |
|
$ |
— |
|
$ |
(117.8 |
) |
|
Derivative liabilities (1) |
|
(1,198.1 |
) |
— |
|
(1,122.5 |
) |
(75.6 |
) | ||||
|
Other liabilities (4) |
|
(271.8 |
) |
— |
|
(217.6 |
) |
(54.2 |
) | ||||
|
Total liabilities |
|
$ |
(1,587.7 |
) |
$ |
— |
|
$ |
(1,340.1 |
) |
$ |
(247.6 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net assets (liabilities) |
|
$ |
173,797.8 |
|
$ |
58,606.1 |
|
$ |
110,115.4 |
|
$ |
5,076.3 |
|
|
|
|
As of December 31, 2012 |
| ||||||||||
|
|
|
Assets/ |
|
|
|
|
|
|
| ||||
|
|
|
(liabilities) |
|
|
|
|
|
|
| ||||
|
|
|
measured at |
|
Fair value hierarchy level |
| ||||||||
|
|
|
fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
| ||||
|
U.S. government and agencies |
|
$ |
944.3 |
|
$ |
203.5 |
|
$ |
740.8 |
|
$ |
— |
|
|
Non-U.S. governments |
|
1,208.3 |
|
— |
|
1,164.0 |
|
44.3 |
| ||||
|
States and political subdivisions |
|
3,178.8 |
|
— |
|
3,176.9 |
|
1.9 |
| ||||
|
Corporate |
|
34,325.4 |
|
85.9 |
|
34,065.0 |
|
174.5 |
| ||||
|
Residential mortgage-backed securities |
|
3,226.7 |
|
— |
|
3,226.7 |
|
— |
| ||||
|
Commercial mortgage-backed securities |
|
3,897.4 |
|
— |
|
3,897.4 |
|
— |
| ||||
|
Collateralized debt obligations |
|
379.2 |
|
— |
|
301.6 |
|
77.6 |
| ||||
|
Other debt obligations |
|
3,779.2 |
|
— |
|
3,764.5 |
|
14.7 |
| ||||
|
Total fixed maturities, available-for-sale |
|
50,939.3 |
|
289.4 |
|
50,336.9 |
|
313.0 |
| ||||
|
Fixed maturities, trading |
|
626.7 |
|
9.4 |
|
450.5 |
|
166.8 |
| ||||
|
Equity securities, available-for-sale |
|
136.5 |
|
54.4 |
|
66.8 |
|
15.3 |
| ||||
|
Equity securities, trading |
|
252.8 |
|
99.8 |
|
153.0 |
|
— |
| ||||
|
Derivative assets (1) |
|
1,016.7 |
|
— |
|
941.6 |
|
75.1 |
| ||||
|
Other investments (2) |
|
272.1 |
|
64.1 |
|
94.1 |
|
113.9 |
| ||||
|
Cash equivalents (3) |
|
1,772.6 |
|
561.4 |
|
1,211.2 |
|
— |
| ||||
|
Sub-total excluding separate account assets |
|
55,016.7 |
|
1,078.5 |
|
53,254.1 |
|
684.1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Separate account assets |
|
81,653.8 |
|
54,010.1 |
|
23,027.7 |
|
4,616.0 |
| ||||
|
Total assets |
|
$ |
136,670.5 |
|
$ |
55,088.6 |
|
$ |
76,281.8 |
|
$ |
5,300.1 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Investments-type insurance contracts (4) |
|
$ |
(170.5 |
) |
$ |
— |
|
$ |
— |
|
$ |
(170.5 |
) |
|
Derivative liabilities (1) |
|
(1,205.1 |
) |
— |
|
(1,102.5 |
) |
(102.6 |
) | ||||
|
Other liabilities (4) |
|
(237.4 |
) |
— |
|
(197.8 |
) |
(39.6 |
) | ||||
|
Total liabilities |
|
$ |
(1,613.0 |
) |
$ |
— |
|
$ |
(1,300.3 |
) |
$ |
(312.7 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net assets (liabilities) |
|
$ |
135,057.5 |
|
$ |
55,088.6 |
|
$ |
74,981.5 |
|
$ |
4,987.4 |
|
(1) Within the consolidated statements of financial position, derivative assets are reported with other investments and derivative liabilities are reported with other liabilities. Refer to Note 5, Derivative Financial Instruments, for further information on fair value by class of derivative instruments. Our derivatives are primarily Level 2, with the exception of certain credit default swaps and other swaps that are Level 3.
(2) Primarily includes seed money investments, commercial mortgage loans of consolidated VIEs and an equity method investment reported at fair value.
(3) Includes money market instruments and short-term investments with a maturity date of three months or less when purchased.
(4) Includes bifurcated embedded derivatives that are reported at fair value within the same line item in the consolidated statements of financial position in which the host contract is reported. Other liabilities also include obligations of consolidated VIEs reported at fair value.
Changes in Level 3 Fair Value Measurements
The reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are summarized as follows:
|
|
|
For the three months ended March 31, 2013 |
|
Changes in |
| ||||||||||||||||||||
|
|
|
Beginning |
|
|
|
|
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
| ||||||||
|
|
|
asset/ |
|
Total realized/unrealized |
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
| ||||||||||
|
|
|
(liability) |
|
gains (losses) |
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
| ||||||||||
|
|
|
balance |
|
|
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
| ||||||||
|
|
|
as of |
|
Included in |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
| ||||||||
|
|
|
December 31, |
|
net income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
March 31, |
|
positions still |
| ||||||||
|
|
|
2012 |
|
(1) |
|
income |
|
(4) |
|
Level 3 |
|
Level 3 |
|
2013 |
|
held (1) |
| ||||||||
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| ||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Non-U.S. governments |
|
$ |
44.3 |
|
$ |
— |
|
$ |
0.3 |
|
$ |
(4.2 |
) |
$ |
— |
|
$ |
— |
|
$ |
40.4 |
|
$ |
— |
|
|
State and political subdivisions |
|
1.9 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1.9 |
|
— |
| ||||||||
|
Corporate |
|
174.5 |
|
(3.1 |
) |
(10.1 |
) |
(17.6 |
) |
47.5 |
|
(23.6 |
) |
167.6 |
|
(3.1 |
) | ||||||||
|
Collateralized debt obligations |
|
77.6 |
|
2.1 |
|
7.1 |
|
(33.0 |
) |
21.4 |
|
— |
|
75.2 |
|
— |
| ||||||||
|
Other debt obligations |
|
14.7 |
|
— |
|
1.7 |
|
(0.5 |
) |
— |
|
— |
|
15.9 |
|
— |
| ||||||||
|
Total fixed maturities, available-for-sale |
|
313.0 |
|
(1.0 |
) |
(1.0 |
) |
(55.3 |
) |
68.9 |
|
(23.6 |
) |
301.0 |
|
(3.1 |
) | ||||||||
|
Fixed maturities, trading |
|
166.8 |
|
2.7 |
|
— |
|
— |
|
— |
|
— |
|
169.5 |
|
2.8 |
| ||||||||
|
Equity securities, available-for-sale |
|
15.3 |
|
— |
|
0.8 |
|
— |
|
— |
|
— |
|
16.1 |
|
— |
| ||||||||
|
Derivative assets |
|
75.1 |
|
(11.5 |
) |
— |
|
3.6 |
|
— |
|
— |
|
67.2 |
|
(11.0 |
) | ||||||||
|
Other investments |
|
113.9 |
|
(0.6 |
) |
— |
|
(2.4 |
) |
— |
|
— |
|
110.9 |
|
(0.6 |
) | ||||||||
|
Separate account assets (2) |
|
4,616.0 |
|
119.0 |
|
(0.2 |
) |
(77.0 |
) |
1.4 |
|
— |
|
4,659.2 |
|
117.2 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Investments-type insurance contracts |
|
(170.5 |
) |
51.7 |
|
— |
|
1.0 |
|
— |
|
— |
|
(117.8 |
) |
50.9 |
| ||||||||
|
Derivative liabilities |
|
(102.6 |
) |
25.8 |
|
0.3 |
|
0.9 |
|
— |
|
— |
|
(75.6 |
) |
25.7 |
| ||||||||
|
Other liabilities (3) |
|
(39.6 |
) |
(14.6 |
) |
— |
|
— |
|
— |
|
— |
|
(54.2 |
) |
(14.6 |
) | ||||||||
|
|
|
For the three months ended March 31, 2012 |
|
Changes in |
| ||||||||||||||||||||
|
|
|
Beginning |
|
|
|
|
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
| ||||||||
|
|
|
asset/ |
|
Total realized/unrealized |
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
| ||||||||||
|
|
|
(liability) |
|
gains (losses) |
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
| ||||||||||
|
|
|
balance |
|
Included in |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
| ||||||||
|
|
|
as of |
|
net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
| ||||||||
|
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
March 31, |
|
positions still |
| ||||||||
|
|
|
2011 |
|
(1) |
|
income |
|
(4) |
|
Level 3 |
|
Level 3 |
|
2012 |
|
held (1) |
| ||||||||
|
|
|
(in millions) |
| ||||||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Non-U.S. governments |
|
$ |
22.9 |
|
$ |
— |
|
$ |
(0.3 |
) |
$ |
(0.3 |
) |
$ |
14.5 |
|
$ |
— |
|
$ |
36.8 |
|
$ |
— |
|
|
Corporate |
|
297.0 |
|
(2.6 |
) |
2.0 |
|
(16.6 |
) |
3.4 |
|
(80.5 |
) |
202.7 |
|
(2.7 |
) | ||||||||
|
Collateralized debt obligations |
|
102.5 |
|
(0.1 |
) |
3.1 |
|
0.5 |
|
— |
|
(27.0 |
) |
79.0 |
|
(0.1 |
) | ||||||||
|
Other debt obligations |
|
27.3 |
|
(0.7 |
) |
(1.3 |
) |
(25.2 |
) |
6.0 |
|
— |
|
6.1 |
|
— |
| ||||||||
|
Total fixed maturities, available-for-sale |
|
449.7 |
|
(3.4 |
) |
3.5 |
|
(41.6 |
) |
23.9 |
|
(107.5 |
) |
324.6 |
|
(2.8 |
) | ||||||||
|
Fixed maturities, trading |
|
220.8 |
|
3.6 |
|
— |
|
(18.2 |
) |
— |
|
— |
|
206.2 |
|
(2.4 |
) | ||||||||
|
Equity securities, available-for-sale |
|
18.0 |
|
— |
|
(0.5 |
) |
— |
|
— |
|
— |
|
17.5 |
|
— |
| ||||||||
|
Derivative assets |
|
60.2 |
|
(14.6 |
) |
— |
|
1.7 |
|
— |
|
— |
|
47.3 |
|
(13.6 |
) | ||||||||
|
Other investments |
|
97.5 |
|
(0.9 |
) |
— |
|
(6.8 |
) |
— |
|
— |
|
89.8 |
|
(0.8 |
) | ||||||||
|
Separate account assets (2) |
|
4,198.2 |
|
86.1 |
|
0.1 |
|
(2.7 |
) |
0.3 |
|
(1.7 |
) |
4,280.3 |
|
76.9 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Investment-type insurance contracts |
|
(195.8 |
) |
68.8 |
|
— |
|
(2.0 |
) |
— |
|
— |
|
(129.0 |
) |
68.1 |
| ||||||||
|
Derivative liabilities |
|
(177.1 |
) |
25.4 |
|
1.3 |
|
8.1 |
|
— |
|
— |
|
(142.3 |
) |
26.4 |
| ||||||||
|
Other liabilities (3) |
|
(24.2 |
) |
(16.5 |
) |
— |
|
— |
|
— |
|
— |
|
(40.7 |
) |
(16.5 |
) | ||||||||
(1) Both realized gains (losses) and mark-to-market unrealized gains (losses) are generally reported in net realized capital gains (losses) within the consolidated statements of operations. Realized and unrealized gains (losses) on certain fixed maturities, trading and certain derivatives used in relation to certain trading portfolios are reported in net investment income within the consolidated statements of operation.
(2) Gains and losses for separate account assets do not impact net income as the change in value of separate account assets is offset by a change in value of separate account liabilities. Foreign currency translation adjustments related to the Principal International segment separate account assets are recorded in AOCI and are offset by foreign currency translation adjustments of the corresponding separate account liabilities.
(3) Certain embedded derivatives reported in other liabilities are part of a cash flow hedge, with the effective portion of the unrealized gains (losses) recorded in AOCI.
(4) Gross purchases, sales, issuances and settlements were:
|
|
|
For the three months ended March 31, 2013 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Net purchases, |
| |||||
|
|
|
|
|
|
|
|
|
|
|
sales, issuances |
| |||||
|
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Non-U.S. governments |
|
$ |
— |
|
$ |
(3.9 |
) |
$ |
— |
|
$ |
(0.3 |
) |
$ |
(4.2 |
) |
|
Corporate |
|
4.2 |
|
(9.4 |
) |
— |
|
(12.4 |
) |
(17.6 |
) | |||||
|
Collateralized debt obligations |
|
— |
|
(32.4 |
) |
— |
|
(0.6 |
) |
(33.0 |
) | |||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.5 |
) |
(0.5 |
) | |||||
|
Total fixed maturities, available-for-sale |
|
4.2 |
|
(45.7 |
) |
— |
|
(13.8 |
) |
(55.3 |
) | |||||
|
Derivative assets |
|
6.7 |
|
(3.1 |
) |
— |
|
— |
|
3.6 |
| |||||
|
Other investments |
|
0.2 |
|
— |
|
— |
|
(2.6 |
) |
(2.4 |
) | |||||
|
Separate account assets (5) |
|
66.5 |
|
(136.8 |
) |
(4.5 |
) |
(2.2 |
) |
(77.0 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Investment-type insurance contracts |
|
— |
|
— |
|
(0.3 |
) |
1.3 |
|
1.0 |
| |||||
|
Derivative liabilities |
|
(1.6 |
) |
2.5 |
|
— |
|
— |
|
0.9 |
| |||||
|
|
|
For the three months ended March 31, 2012 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Net purchases, |
| |||||
|
|
|
|
|
|
|
|
|
|
|
sales, issuances |
| |||||
|
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Non-U.S. governments |
|
$ |
3.9 |
|
$ |
(3.9 |
) |
$ |
— |
|
$ |
(0.3 |
) |
$ |
(0.3 |
) |
|
Corporate |
|
12.3 |
|
(26.6 |
) |
— |
|
(2.3 |
) |
(16.6 |
) | |||||
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
0.5 |
|
0.5 |
| |||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
(25.2 |
) |
(25.2 |
) | |||||
|
Total fixed maturities, available-for-sale |
|
16.2 |
|
(30.5 |
) |
— |
|
(27.3 |
) |
(41.6 |
) | |||||
|
Fixed maturities, trading |
|
— |
|
(0.9 |
) |
— |
|
(17.3 |
) |
(18.2 |
) | |||||
|
Derivative assets |
|
2.5 |
|
(0.8 |
) |
— |
|
— |
|
1.7 |
| |||||
|
Other investments |
|
— |
|
— |
|
— |
|
(6.8 |
) |
(6.8 |
) | |||||
|
Separate account assets (5) |
|
127.5 |
|
(90.3 |
) |
(134.9 |
) |
95.0 |
|
(2.7 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Investment-type insurance contracts |
|
— |
|
— |
|
(3.3 |
) |
1.3 |
|
(2.0 |
) | |||||
|
Derivative liabilities |
|
(0.7 |
) |
8.8 |
|
— |
|
— |
|
8.1 |
| |||||
(5) Issuances and settlements include amounts related to mortgage encumbrances associated with real estate in our separate accounts.
Transfers
Transfers of assets and liabilities measured at fair value on a recurring basis between fair value hierarchy levels are summarized below.
|
|
|
For the three months ended March 31, 2013 |
| ||||||||||||||||
|
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
| ||||||
|
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
| ||||||
|
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
47.5 |
|
$ |
— |
|
$ |
23.6 |
|
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
21.4 |
|
— |
|
— |
| ||||||
|
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
68.9 |
|
— |
|
23.6 |
| ||||||
|
Separate account assets |
|
243.4 |
|
— |
|
4.6 |
|
1.4 |
|
— |
|
— |
| ||||||
|
|
|
For the three months ended March 31, 2012 |
| ||||||||||||||||
|
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
| ||||||
|
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
| ||||||
|
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
14.5 |
|
$ |
— |
|
$ |
— |
|
|
Corporate |
|
— |
|
— |
|
— |
|
3.4 |
|
— |
|
80.5 |
| ||||||
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
27.0 |
| ||||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
6.0 |
|
— |
|
— |
| ||||||
|
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
23.9 |
|
— |
|
107.5 |
| ||||||
|
Separate account assets |
|
— |
|
0.3 |
|
— |
|
— |
|
— |
|
1.7 |
| ||||||
Transfers between fair value hierarchy levels are recognized at the beginning of the reporting period.
Assets transferred into Level 3 during the three months ended March 31, 2013 and 2012, primarily included those assets for which we are now unable to obtain pricing from a recognized third party pricing vendor as well as assets that were previously priced using a matrix valuation approach that may no longer be relevant when applied to asset-specific situations. The majority of assets transferred into level 3 have been priced based on a broker quote.
Assets transferred out of Level 3 during the three months ended March 31, 2013 and 2012, included those for which we are now able to obtain pricing from a recognized third party pricing vendor or from internal models using substantially all market observable information.
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs used for recurring fair value measurements categorized within Level 3, excluding assets and liabilities for which significant quantitative unobservable inputs are not developed internally, which primarily consists of those valued using broker quotes. Refer to “Assets and liabilities measured at fair value on a recurring basis” for a complete valuation hierarchy summary.
|
|
|
As of March 31, 2013 |
| |||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
| |
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
| |
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
| |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
| |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| |
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |
|
Non-U.S. governments |
|
$ |
13.0 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.8% |
|
1.8% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
| |
|
Corporate |
|
31.4 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.7%-22.0% |
|
11.4% |
| |
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization multiple |
|
0x-4.8x |
|
3.1x |
| |
|
|
|
|
|
|
|
Probability of default |
|
0%-100% |
|
65.1% |
| |
|
|
|
|
|
|
|
Potential loss severity |
|
0%-30% |
|
14.4% |
| |
|
Collateralized debt obligations |
|
35.6 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-2.7% |
|
2.1% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-400bps |
|
150bps |
| |
|
Other debt obligations |
|
15.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
6.5%-15.0% |
|
10.4% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
27bps |
| |
|
Fixed maturities, trading |
|
37.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.3%-62.1% |
|
4.0% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-1,400bps |
|
390bps |
| |
|
|
|
110.4 |
|
See note (2) |
|
|
|
|
|
|
| |
|
|
|
As of March 31, 2013 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Other investments |
|
77.2 |
|
Discounted cash flow - commercial mortgage loans of consolidated VIEs |
|
Discount rate (1) |
|
3.7% |
|
3.7% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
272bps |
|
272bps |
|
|
|
|
33.7 |
|
Discounted cash flow - equity method real estate investment |
|
Discount rate (1) |
|
9.0% |
|
9.0% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
5.5% |
|
5.5% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.6% |
|
3.6% |
|
|
|
|
|
|
Discounted cash flow - equity method real estate investment debt |
|
Loan to value |
|
48.4% |
|
48.4% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
3.3% |
|
3.3% |
|
|
Separate account assets |
|
4,510.9 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
0.8%-9.4% |
|
3.3% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
20bps |
|
|
|
|
|
|
|
|
Credit spread rate |
|
47bps-880bps |
|
240bps |
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
6.5%-16.0% |
|
7.9% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.8%-9.0% |
|
6.8% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
1.9%-5.6% |
|
3.5% |
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
16.1%-85.8% |
|
54.2% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.4%-5.1% |
|
3.3% |
|
|
|
|
As of March 31, 2013 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Investment-type insurance contracts |
|
(117.8 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
2.8%-3.0% (3) |
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
16.1%-37.8% |
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.2%-1.5% |
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.6% |
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (5) |
|
|
|
|
Derivative liabilities |
|
(46.2 |
) |
See note (2) |
|
|
|
|
|
|
|
|
Other liabilities |
|
(54.2 |
) |
See note (2) |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012 |
| |||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
| |
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
| |
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
| |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
| |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| |
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |
|
Non-U.S. governments |
|
$ |
12.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.6% |
|
1.6% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
| |
|
Corporate |
|
66.6 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.7%-29.0% |
|
8.4% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-100bps |
|
39bps |
| |
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization multiple |
|
0x-3.5x |
|
0.2x |
| |
|
|
|
|
|
|
|
Probability of default |
|
0%-100% |
|
6.4% |
| |
|
|
|
|
|
|
|
Potential loss severity |
|
0%-30% |
|
1.9% |
| |
|
Collateralized debt obligations |
|
38.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.0%-19.8% |
|
13.3% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
400bps-1,000bps |
|
791bps |
| |
|
|
|
As of December 31, 2012 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
14.7 |
|
Discounted cash flow |
|
Discount rate (1) |
|
6.5%-20.0% |
|
11.8% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
30bps |
|
|
Fixed maturities, trading |
|
35.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-60.5% |
|
4.1% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-1,400bps |
|
390bps |
|
|
|
|
110.4 |
|
See note (2) |
|
|
|
|
|
|
|
|
Other investments |
|
80.3 |
|
Discounted cash flow - commercial mortgage loans of consolidated VIEs |
|
Discount rate (1) |
|
3.5 |
% |
3.5% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
287bps |
|
287bps |
|
|
|
|
33.6 |
|
Discounted cash flow - equity method real estate investment |
|
Discount rate (1) |
|
9.3 |
% |
9.3% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
5.5 |
% |
5.5% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.6 |
% |
3.6% |
|
|
|
|
|
|
Discounted cash flow - equity method real estate investment debt |
|
Loan to value |
|
49.4 |
% |
49.4% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
3.3 |
% |
3.3% |
|
|
|
|
As of December 31, 2012 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Separate account assets |
|
4,449.0 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
0.8%-10.4% |
|
3.3% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
20bps |
|
|
|
|
|
|
|
|
Credit spread rate |
|
44bps-975bps |
|
286bps |
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
6.5%-16.0% |
|
8.3% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.8%-9.0% |
|
7.2% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
2.3%-5.5% |
|
3.3% |
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
17.0%-86.0% |
|
54.8% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.6%-5.3% |
|
3.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Investment-type insurance contracts |
|
(170.5 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
2.6%-2.8% (3) |
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
16.1%-38.3% |
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.3%-1.6% |
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.6% |
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (5) |
|
|
|
|
Derivative liabilities |
|
(65.1 |
) |
See note (2) |
|
|
|
|
|
|
|
|
Other liabilities |
|
(39.6 |
) |
See note (2) |
|
|
|
|
|
|
|
(1) Represents market comparable interest rate or an index adjusted rate used as the base rate in the discounted cash flow analysis prior to any credit spread, illiquidity or other adjustments, where applicable.
(2) Relates to a consolidated collateralized private investment vehicle that is a VIE. Fixed maturities, trading represents the underlying collateral of the investment structure and consists of high-grade fixed maturity investments, which are over-collateralized based on outstanding notes priced at par. The derivative liability represents credit default swaps that are valued using a correlation model to the credit default swap (“CDS”) Index (“CDX”) and inputs to the valuation are based on observable market data such as the end of period swap curve, CDS constituents of the index and spread levels of the index, as well as CDX tranche spreads. The other liabilities represent obligations to third party note holders due at maturity or termination of the trust. The value of the obligations reflect the third parties’ interest in the investment structure.
(3) Represents the range of rate curves used in the valuation analysis that we have determined market participants would use when pricing the instrument. Derived from interpolation between observable 20 and 30-year swap rates.
(4) This input factor is the number of contractholders taking withdrawals as well as the amount and timing of the withdrawals and a range does not provide a meaningful presentation.
(5) This input is based on an appropriate industry mortality table and a range does not provide a meaningful presentation.
Market comparable discount rates are used as the base rate in the discounted cash flows used to determine the fair value of certain assets. Increases or decreases in the credit spreads on the comparable assets could cause the fair value of the assets to significantly decrease or increase, respectively. Additionally, we may adjust the base discount rate or the modeled price by applying an illiquidity premium given the highly structured nature of certain assets. Increases or decreases in this illiquidity premium could cause significant decreases or increases, respectively, in the fair value of the asset.
Embedded derivatives can be either assets or liabilities within the investment-type insurance contracts line item, depending on certain inputs at the reporting date. Increases to an asset or decreases to a liability are described as increases to fair value. Increases or decreases in market volatilities could cause significant decreases or increases, respectively, in the fair value of embedded derivatives in investment-type insurance contracts. Long duration interest rates are used as the mean return when projecting the growth in the value of associated account value and impact the discount rate used in the discounted future cash flows valuation. The amount of claims will increase if account value is not sufficient to cover guaranteed withdrawals. Increases or decreases in risk free rates could cause the fair value of the embedded derivative to significantly increase or decrease, respectively. Increases or decreases in our own credit risks, which impact the rates used to discount future cash flows, could significantly increase or decrease, respectively, the fair value of the embedded derivative. All of these changes in fair value would impact net income.
Decreases or increases in the mortality rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. Decreases or increases in the overall lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The lapse rate assumption varies dynamically based on the relationship of the guarantee and associated account value. A stronger or weaker dynamic lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The utilization rate assumption includes how many contractholders will take withdrawals, when they will take them and how much of their benefit they will take. Increases or decreases in the assumption of the number of contractholders taking withdrawals could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take withdrawals earlier or later could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take more or less of their benefit could cause the fair value of the embedded derivative to decrease or increase, respectively.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. During the three months ended March 31, 2013, certain mortgage loans had been marked to fair value of $64.2 million. The net impact of impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $3.6 million for the three months ended March 31, 2013, that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs. The fair value of the underlying collateral is determined based on a discounted cash flow valuation either from an external broker opinion of value or an internal model. Significant inputs used in the discounted cash flow calculation include: a discount rate, terminal capitalization rate and average market rent growth. The ranges of inputs used in the fair value measurements for the mortgage loans marked to fair value during the three months ended March 31, 2013, were:
Discount rate = 10.3% - 20.0%
Terminal capitalization rate = 8.0% - 10.5%
Average market rent growth = 1.0% - 5.0%
During the three months ended March 31, 2013, certain mortgage servicing rights had been marked to fair value of $6.9 million. The net impact of impairments and subsequent improvements in estimated fair value of previously impaired mortgage servicing rights resulted in a net gain of $0.2 million for the three months ended March 31, 2013, that was recorded in operating expenses. These mortgage servicing rights are a Level 3 fair value measurement, as fair value is determined by calculating the present value of the future servicing cash flows from the underlying mortgage loans. The discount rate used in calculating the present value of the future servicing cash flows was 3.2% for the three months ended March 31, 2013.
During the three months ended March 31, 2012, certain mortgage loans had been marked to fair value of $126.5 million. The net impact of impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $7.9 million for the three months ended March 31, 2012, that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs.
Discount rate = 8.0% - 13.0%
Terminal capitalization rate = 6.3% - 10.3%
Average market rent growth = 8.0% - 13.0%
During the three months ended March 31, 2012, certain mortgage servicing rights had been written down to fair value of $4.4 million. The net impact of impairments and improvements in estimated fair value of previously impaired mortgage servicing rights resulted in a net gain of $0.1 million for the three months ended March 31, 2012, that was recorded in operating expenses. These mortgage servicing rights are a Level 3 fair value measurement, as fair value is determined by calculating the present value of the future servicing cash flows from the underlying mortgage loans. The discount rate used in calculating the present value of the future servicing cash flows was 3.3% for the three months ended March 31, 2012.
Fair Value Option
We elected fair value accounting for certain assets and liabilities of consolidated VIEs for which it was not practicable for us to determine the carrying value. The fair value option was elected for commercial mortgage loans reported with other investments and obligations reported with other liabilities in the consolidated statements of financial position. The changes in fair value of these items are reported in net realized capital gains (losses) on the consolidated statements of operations.
The fair value and aggregate contractual principal amounts of commercial mortgage loans for which the fair value option has been elected were $77.2 million and $73.8 million as of March 31, 2013, and $80.3 million and $76.4 million as of December 31, 2012, respectively. The change in fair value of the loans resulted in a $0.5 million and $0.8 million pre-tax loss for the three months ended March 31, 2013 and 2012, respectively, none of which related to instrument-specific credit risk. None of these loans were more than 90 days past due or in nonaccrual status. Interest income on these commercial mortgage loans is included in net investment income on the consolidated statements of operations and is recorded based on the effective interest rates as determined at the closing of the loan. Interest income recorded on these commercial mortgage loans was $1.5 million and $1.8 million for the three months ended March 31, 2013 and 2012, respectively.
The fair value and aggregate unpaid principal amounts of obligations for which the fair value option has been elected were $96.5 million and $184.2 million as of March 31, 2013, and $85.0 million and $186.8 million as of December 31, 2012, respectively. For the three months ended March 31, 2013 and 2012, the change in fair value of the obligations resulted in a pre-tax loss of $14.2 million and $16.0 million, which includes a pre-tax loss of $14.6 million and $16.5 million related to instrument-specific credit risk that is estimated based on credit spreads and quality ratings, respectively. Interest expense recorded on these obligations is included in operating expenses on the consolidated statements of operations and was $1.0 million and $1.4 million for the three months ended March 31, 2013 and 2012, respectively.
We invest in real estate ventures for the purpose of earning investment returns and for capital appreciation. We elected the fair value option for a venture entered into during the third quarter of 2012 that is subject to the equity method of accounting because the nature of the investment is to add value to the property and generate income from the operations of the property. Other equity method real estate investments are not fair valued because the investments mainly generate income from the operations of the underlying properties. This investment is reported with other investments in the consolidated statements of financial position. The change in fair value is reported in net investment income on the consolidated statements of operations. The fair value of the equity method investment for which the fair value option has been elected was $33.7 million and $33.6 million as of March 31, 2013 and December 31, 2012, respectively. The change in fair value of the investment resulted in a $0.1 million pre-tax loss for the three months ended March 31, 2013.
Financial Instruments Not Reported at Fair Value
The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed at fair value were as follows:
|
|
|
March 31, 2013 |
| |||||||||||||
|
|
|
|
|
|
|
Fair value hierarchy level |
| |||||||||
|
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Mortgage loans |
|
$ |
11,577.9 |
|
$ |
12,350.1 |
|
$ |
— |
|
$ |
— |
|
$ |
12,350.1 |
|
|
Policy loans |
|
866.5 |
|
1,051.9 |
|
— |
|
— |
|
1,051.9 |
| |||||
|
Other investments |
|
231.7 |
|
233.2 |
|
— |
|
146.0 |
|
87.2 |
| |||||
|
Cash and cash equivalents |
|
903.8 |
|
903.8 |
|
903.8 |
|
— |
|
— |
| |||||
|
Investments-type insurance contracts |
|
(30,791.6 |
) |
(31,405.9 |
) |
— |
|
(6,822.7 |
) |
(24,583.2 |
) | |||||
|
Short-term debt |
|
(46.5 |
) |
(46.5 |
) |
— |
|
(46.5 |
) |
— |
| |||||
|
Long-term debt |
|
(2,790.5 |
) |
(3,090.4 |
) |
— |
|
(3,057.3 |
) |
(33.1 |
) | |||||
|
Separate account liabilities |
|
(111,716.3 |
) |
(110,268.8 |
) |
— |
|
— |
|
(110,268.8 |
) | |||||
|
Bank deposits |
|
(2,181.6 |
) |
(2,225.5 |
) |
(1,433.4 |
) |
(792.1 |
) |
— |
| |||||
|
Cash collateral payable |
|
(75.0 |
) |
(75.0 |
) |
(75.0 |
) |
— |
|
— |
| |||||
|
|
|
December 31, 2012 |
| |||||||||||||
|
|
|
|
|
|
|
Fair value hierarchy level |
| |||||||||
|
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Mortgage loans |
|
$ |
11,519.7 |
|
$ |
12,163.7 |
|
$ |
— |
|
$ |
— |
|
$ |
12,163.7 |
|
|
Policy loans |
|
864.9 |
|
1,056.8 |
|
— |
|
— |
|
1,056.8 |
| |||||
|
Other investments |
|
280.1 |
|
280.5 |
|
— |
|
195.3 |
|
85.2 |
| |||||
|
Cash and cash equivalents |
|
2,404.6 |
|
2,404.6 |
|
2,364.6 |
|
40.0 |
|
— |
| |||||
|
Investments-type insurance contracts |
|
(31,953.1 |
) |
(32,531.6 |
) |
— |
|
(7,367.4 |
) |
(25,164.2 |
) | |||||
|
Short-term debt |
|
(40.8 |
) |
(40.8 |
) |
— |
|
(40.8 |
) |
— |
| |||||
|
Long-term debt |
|
(2,671.3 |
) |
(2,951.4 |
) |
— |
|
(2,921.7 |
) |
(29.7 |
) | |||||
|
Separate account liabilities |
|
(73,096.0 |
) |
(72,173.8 |
) |
— |
|
— |
|
(72,173.8 |
) | |||||
|
Bank deposits |
|
(2,174.7 |
) |
(2,177.7 |
) |
(1,404.4 |
) |
(773.3 |
) |
— |
| |||||
|
Cash collateral payable |
|
(205.6 |
) |
(205.6 |
) |
(205.6 |
) |
— |
|
— |
| |||||
Mortgage Loans
Fair values of commercial and residential mortgage loans are primarily determined by discounting the expected cash flows at current treasury rates plus an applicable risk spread, which reflects credit quality and maturity of the loans. The risk spread is based on market clearing levels for loans with comparable credit quality, maturities and risk. The fair value of mortgage loans may also be based on the fair value of the underlying real estate collateral less cost to sell, which is estimated using appraised values. These are reflected in Level 3.
Policy Loans
Fair values of policy loans are estimated by discounting expected cash flows using a risk-free rate based on the Treasury curve. The expected cash flows reflect an estimate of timing of the repayment of the loans. These are reflected in Level 3.
Other Investments
The fair value of commercial loans and certain consumer loans included in other investments is calculated by discounting scheduled cash flows through the estimated maturity date using market interest rates that reflect the credit and interest rate risk inherent in the loans. The estimate of term to maturity is based on historical experience, adjusted as required, for current economic and lending conditions. The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate. These are reflected in Level 3. The carrying value of the remaining investments reported in this line item approximate their fair value and are of a short-term nature. These are reflected in Level 2.
Cash and Cash Equivalents
Certain cash equivalents not reported at fair value include short-term investments with maturities of less than three months for which public quotations are not available to use in determining fair value. Because of the highly liquid nature of these assets, carrying amounts are used to approximate fair value, which are reflected in Level 2. The carrying amounts of the remaining cash and cash equivalents that are not reported at fair value on a recurring basis approximate their fair value, which are reflected in Level 1 given the nature of cash.
Investment-Type Insurance Contracts
The fair values of our reserves and liabilities for investment-type insurance contracts are determined via a third party pricing vendor or using discounted cash flow analyses when we are unable to find a price from third party pricing vendors. Third party pricing on various outstanding medium-term notes and funding agreements is based on observable inputs such as benchmark yields and spreads based on reported trades for our medium-term notes and funding agreement issuances. These are reflected in Level 2. The discounted cash flow analyses for the remaining contracts is based on current interest rates, including non-performance risk, being offered for similar contracts with maturities consistent with those remaining for the investment-type contracts being valued. These are reflected in Level 3. Investment-type insurance contracts include insurance, annuity and other policy contracts that do not involve significant mortality or morbidity risk and are only a portion of the policyholder liabilities appearing in the consolidated statements of financial position. Insurance contracts include insurance, annuity and other policy contracts that do involve significant mortality or morbidity risk. The fair values for our insurance contracts, other than investment-type contracts, are not required to be disclosed.
Short-Term Debt
The carrying amount of short-term debt approximates its fair value because of the relatively short time between origination of the debt instrument and its maturity, which is reflected in Level 2.
Long-Term Debt
Long-term debt primarily includes senior note issuances for which the fair values are determined using inputs that are observable in the market or that can be derived from or corroborated with observable market data. These are reflected in Level 2. Additionally, our long-term debt includes non-recourse mortgages and notes payable that are primarily financings for real estate developments for which the fair values are estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. These are reflected in Level 3.
Separate Account Liabilities
Fair values of separate account liabilities, excluding insurance-related elements, are estimated based on market assumptions around what a potential acquirer would pay for the associated block of business, including both the separate account assets and liabilities. As the applicable separate account assets are already reflected at fair value, any adjustment to the fair value of the block is an assumed adjustment to the separate account liabilities. To compute fair value, the separate account liabilities are originally set to equal separate account assets because these are pass-through contracts. The separate account liabilities are reduced by the amount of future fees expected to be collected that are intended to offset upfront acquisition costs already incurred that a potential acquirer would not have to pay. The estimated future fees are adjusted by an adverse deviation discount and the amount is then discounted at a risk-free rate as measured by the yield on Treasury securities at maturities aligned with the estimated timing of fee collection. These are reflected in Level 3.
Bank Deposits
The fair value of deposits of our Principal Bank subsidiary with no stated maturity, such as demand deposits, savings, and interest-bearing demand accounts, is equal to the amount payable on demand (i.e., their carrying amounts). These are reflected in Level 1. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount is estimated using the rates currently offered for deposits of similar remaining maturities. These are reflected in Level 2.
Cash Collateral Payable
The carrying amount of the payable associated with our obligation to return the cash collateral received under derivative credit support annex (collateral) agreements approximates its fair value, which is reflected in Level 1.
|
|||
11. Segment Information
We provide financial products and services through the following segments: Retirement and Investor Services, Principal Global Investors, Principal International and U.S. Insurance Solutions. In addition, there is a Corporate segment. The segments are managed and reported separately because they provide different products and services, have different strategies or have different markets and distribution channels.
The Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals.
The Principal Global Investors segment provides asset management services to our asset accumulation business, our insurance operations, the Corporate segment and third-party clients.
The Principal International segment has operations in Brazil, Chile, China, Hong Kong Special Administrative Region, India, Mexico and Southeast Asia. We focus on countries with large middle classes, favorable demographics and growing long-term savings, ideally with defined contribution markets. We entered these countries through acquisitions, start-up operations and joint ventures.
The U.S. Insurance Solutions segment provides individual life insurance and specialty benefits, which consists of group dental and vision insurance, individual and group disability insurance, group life insurance, wellness services and non-medical fee-for-service claims administration, throughout the United States.
The Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect our financing activities (including interest expense and preferred stock dividends), income on capital not allocated to other segments, inter-segment eliminations, U.S. income tax risks and certain income, expenses and other after-tax adjustments not allocated to the segments based on the nature of such items. Results of our exited group medical insurance business are reported in this segment.
Management uses segment operating earnings in goal setting, as a basis for determining employee compensation and in evaluating performance on a basis comparable to that used by securities analysts. We determine segment operating earnings by adjusting U.S. GAAP net income for net realized capital gains (losses), as adjusted, and other after-tax adjustments which management believes are not indicative of overall operating trends. Net realized capital gains (losses), as adjusted, are net of income taxes, related changes in the amortization pattern of DAC and other actuarial balances, recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services, amortization of hedge accounting book value adjustments for certain discontinued hedges, net realized capital gains and losses distributed, noncontrolling interest capital gains and losses and certain market value adjustments to fee revenues. Net realized capital gains (losses), as adjusted, exclude periodic settlements and accruals on derivative instruments not designated as hedging instruments and exclude certain market value adjustments of embedded derivatives and realized capital gains (losses) associated with our exited group medical insurance business. Segment operating revenues exclude net realized capital gains (losses) (except periodic settlements and accruals on derivatives not designated as hedging instruments), including their impact on recognition of front-end fee revenues, certain market value adjustments to fee revenues and amortization of hedge accounting book value adjustments for certain discontinued hedges, and revenue from our exited group medical insurance business. Segment operating revenues include operating revenues from real estate properties that qualify for discontinued operations. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of segment operating earnings enhances the understanding of our results of operations by highlighting earnings attributable to the normal, ongoing operations of the business.
The accounting policies of the segments are consistent with the accounting policies for the consolidated financial statements, with the exception of income tax allocation. The Corporate segment functions to absorb the risk inherent in interpreting and applying tax law. The segments are allocated tax adjustments consistent with the positions we took on tax returns. The Corporate segment results reflect any differences between the U.S. tax returns and the estimated resolution of any disputes.
The following tables summarize select financial information by segment and reconcile segment totals to those reported in the consolidated financial statements:
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
|
|
|
|
|
| ||
|
Assets: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
120,416.2 |
|
$ |
117,399.5 |
|
|
Principal Global Investors |
|
1,207.2 |
|
1,282.2 |
| ||
|
Principal International |
|
56,122.5 |
|
19,170.9 |
| ||
|
U.S. Insurance Solutions |
|
19,518.6 |
|
19,017.2 |
| ||
|
Corporate |
|
3,498.4 |
|
4,960.4 |
| ||
|
Total consolidated assets |
|
$ |
200,762.9 |
|
$ |
161,830.2 |
|
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Operating revenues by segment: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
1,102.3 |
|
$ |
1,055.1 |
|
|
Principal Global Investors |
|
153.7 |
|
138.1 |
| ||
|
Principal International |
|
247.5 |
|
262.5 |
| ||
|
U.S. Insurance Solutions |
|
778.0 |
|
697.0 |
| ||
|
Corporate |
|
(43.2 |
) |
(45.3 |
) | ||
|
Total segment operating revenues |
|
2,238.3 |
|
2,107.4 |
| ||
|
Net realized capital losses, net of related revenue adjustments |
|
(75.2 |
) |
(30.4 |
) | ||
|
Exited group medical insurance business |
|
3.6 |
|
18.9 |
| ||
|
Total revenues per consolidated statements of operations |
|
$ |
2,166.7 |
|
$ |
2,095.9 |
|
|
Operating earnings (loss) by segment, net of related income taxes: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
170.0 |
|
$ |
143.6 |
|
|
Principal Global Investors |
|
20.3 |
|
16.2 |
| ||
|
Principal International |
|
44.6 |
|
44.1 |
| ||
|
U.S. Insurance Solutions |
|
35.7 |
|
50.2 |
| ||
|
Corporate |
|
(37.3 |
) |
(38.8 |
) | ||
|
Total segment operating earnings, net of related income taxes |
|
233.3 |
|
215.3 |
| ||
|
Net realized capital losses, as adjusted (1) |
|
(56.4 |
) |
(9.9 |
) | ||
|
Other after-tax adjustments (2) |
|
1.4 |
|
(1.5 |
) | ||
|
Net income available to common stockholders per consolidated statements of operations |
|
$ |
178.3 |
|
$ |
203.9 |
|
(1) Net realized capital gains (losses), as adjusted, is derived as follows:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Net realized capital losses: |
|
|
|
|
| ||
|
Net realized capital losses |
|
$ |
(50.9 |
) |
$ |
(6.7 |
) |
|
Certain derivative and hedging-related adjustments |
|
(24.1 |
) |
(23.3 |
) | ||
|
Recognition of front-end fee revenue |
|
(0.2 |
) |
(0.4 |
) | ||
|
Net realized capital losses, net of related revenue adjustments |
|
(75.2 |
) |
(30.4 |
) | ||
|
Amortization of deferred acquisition costs and other actuarial balances |
|
3.1 |
|
32.8 |
| ||
|
Capital gains distributed |
|
(6.1 |
) |
(7.5 |
) | ||
|
Certain market value adjustments of embedded derivatives |
|
0.1 |
|
(1.9 |
) | ||
|
Net realized capital losses associated with exited group medical insurance business |
|
— |
|
0.1 |
| ||
|
Noncontrolling interest capital gains |
|
— |
|
(8.1 |
) | ||
|
Income tax effect |
|
21.7 |
|
5.1 |
| ||
|
Net realized capital losses, as adjusted |
|
$ |
(56.4 |
) |
$ |
(9.9 |
) |
(2) For the three months ended March 31, 2013, other after-tax adjustments included the positive effect of gains associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP.
For the three months ended March 31, 2012, other after-tax adjustments included the negative effect of losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP.
The following table summarizes operating revenues for our products and services:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Retirement and Investor Services: |
|
|
|
|
| ||
|
Full service accumulation |
|
$ |
351.7 |
|
$ |
332.7 |
|
|
Principal Funds |
|
180.6 |
|
147.1 |
| ||
|
Individual annuities |
|
268.2 |
|
272.3 |
| ||
|
Bank and trust services |
|
24.9 |
|
24.5 |
| ||
|
Eliminations |
|
(34.4 |
) |
(29.2 |
) | ||
|
Total Accumulation |
|
791.0 |
|
747.4 |
| ||
|
Investment only |
|
92.4 |
|
115.3 |
| ||
|
Full service payout |
|
218.9 |
|
192.4 |
| ||
|
Total Guaranteed |
|
311.3 |
|
307.7 |
| ||
|
Total Retirement and Investor Services |
|
1,102.3 |
|
1,055.1 |
| ||
|
Principal Global Investors (1) |
|
153.7 |
|
138.1 |
| ||
|
Principal International |
|
247.5 |
|
262.5 |
| ||
|
U.S. Insurance Solutions: |
|
|
|
|
| ||
|
Individual life insurance |
|
379.5 |
|
313.5 |
| ||
|
Specialty benefits insurance |
|
398.5 |
|
383.5 |
| ||
|
Total U.S. Insurance Solutions |
|
778.0 |
|
697.0 |
| ||
|
Corporate |
|
(43.2 |
) |
(45.3 |
) | ||
|
Total operating revenues |
|
$ |
2,238.3 |
|
$ |
2,107.4 |
|
|
Total operating revenues |
|
$ |
2,238.3 |
|
$ |
2,107.4 |
|
|
Net realized capital losses (except periodic settlements and accruals on non-hedge derivatives), including recognition of front-end fee revenues and certain market value adjustments to fee revenues |
|
(75.2 |
) |
(30.4 |
) | ||
|
Exited group medical insurance business |
|
3.6 |
|
18.9 |
| ||
|
Total revenues per consolidated statements of operations |
|
$ |
2,166.7 |
|
$ |
2,095.9 |
|
(1) Reflects inter-segment revenues of $58.6 million and $52.6 million for the three months ended March 31, 2013 and 2012, respectively. These revenues are eliminated within the Corporate segment.
|
|||
12. Stock-Based Compensation Plans
As of March 31, 2013, we have the Amended and Restated 2010 Stock Incentive Plan, the Employee Stock Purchase Plan, the 2005 Directors Stock Plan, the Stock Incentive Plan, the Directors Stock Plan and the Long-Term Performance Plan (“Stock-Based Compensation Plans”). As of May 17, 2005, no new grants will be made under the Stock Incentive Plan, the Directors Stock Plan or the Long-Term Performance Plan. Under the terms of the Amended and Restated 2010 Stock Incentive Plan, grants may be nonqualified stock options, incentive stock options qualifying under Section 422 of the Internal Revenue Code, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units or other stock-based awards. The 2005 Directors Stock Plan provides for the grant of nonqualified stock options, restricted stock, restricted stock units or other stock-based awards to our nonemployee directors. To date, we have not granted any incentive stock options, restricted stock or performance units.
As of March 31, 2013, the maximum number of new shares of common stock that were available for grant under the Amended and Restated 2010 Stock Incentive Plan and the 2005 Directors Stock Plan was 6.4 million.
For awards with graded vesting, we use an accelerated expense attribution method. The compensation cost that was charged against income for stock-based awards granted under the Stock-Based Compensation Plans was as follows:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Compensation cost |
|
$ |
15.6 |
|
$ |
15.2 |
|
|
Related income tax benefit |
|
4.7 |
|
4.6 |
| ||
|
Capitalized as part of an asset |
|
0.6 |
|
0.7 |
| ||
Nonqualified Stock Options
Nonqualified stock options were granted to certain employees under the Amended and Restated 2010 Stock Incentive Plan. Total options granted were 0.8 million for the three months ended March 31, 2013. The fair value of these options was determined using the Black-Scholes option valuation model assuming a weighted-average dividend yield of 3.0 percent, a weighted-average expected volatility of 53.3 percent, a weighted-average risk-free interest rate of 1.1 percent and a weighted-average expected term of 6.5 years. The weighted-average estimated fair value of stock options granted during the three months ended March 31, 2013, was $11.95 per share.
We previously determined expected volatility based on, among other factors, historical volatility using daily price observations. Beginning with nonqualified stock options granted in 2013, we determine expected volatility based on a combination of historical volatility using daily price observations and implied volatility from traded options on our common stock. We believe that incorporating both historical and implied volatility into our expected volatility assumption calculation better reflects market expectations.
As of March 31, 2013, there was $10.6 million of total unrecognized compensation cost related to nonvested stock options. The cost is expected to be recognized over a weighted-average service period of approximately 1.6 years.
Performance Share Awards
Performance share awards were granted to certain employees under the Amended and Restated 2010 Stock Incentive Plan. Total performance share awards granted were 0.3 million for the three months ended March 31, 2013. The performance share awards granted represent initial target awards and do not reflect potential increases or decreases resulting from the final performance results to be determined at the end of the performance period. The actual number of shares to be awarded at the end of each performance period will range between 0% and 150% of the initial target awards. The fair value of performance share awards is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant date fair value of these performance share awards granted was $30.70 per common share.
As of March 31, 2013, there was $13.2 million of total unrecognized compensation cost related to nonvested performance share awards granted. The cost is expected to be recognized over a weighted-average service period of approximately 1.6 years.
Restricted Stock Units
Restricted stock units were issued to certain employees and agents pursuant to the Amended and Restated 2010 Stock Incentive Plan. Total restricted stock units granted were 1.2 million for the three months ended March 31, 2013. The fair value of restricted stock units is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant date fair value of these restricted stock units granted was $30.70 per common share.
As of March 31, 2013, there was $60.3 million of total unrecognized compensation cost related to nonvested restricted stock unit awards granted. The cost is expected to be recognized over a weighted-average period of approximately 2.2 years.
|
|||
14. Condensed Consolidating Financial Information
Principal Life has established special purpose entities to issue secured medium-term notes. Under the program, the payment obligations of principal and interest on the notes are secured by funding agreements issued by Principal Life. Principal Life’s payment obligations on the funding agreements are fully and unconditionally guaranteed by PFG. All of the outstanding stock of Principal Life is indirectly owned by PFG and PFG is the only guarantor of the payment obligations of the funding agreements.
The following tables set forth condensed consolidating financial information of (i) PFG, (ii) Principal Life, (iii) Principal Financial Services, Inc. (“PFS”) and all other direct and indirect subsidiaries of PFG on a combined basis and (iv) the eliminations necessary to arrive at the information for PFG on a consolidated basis as of March 31, 2013 and December 31, 2012, and for the three months ended March 31, 2013 and 2012.
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in PFS, (ii) Principal Life’s interest in all direct subsidiaries of Principal Life and (iii) PFS’s interest in Principal Life even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, Principal Life and PFS and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities.
Condensed Consolidating Statements of Financial Position
March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
44,789.5 |
|
$ |
6,661.0 |
|
$ |
(366.4 |
) |
$ |
51,084.1 |
|
|
Fixed maturities, trading |
|
— |
|
279.2 |
|
349.7 |
|
— |
|
628.9 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
130.0 |
|
17.0 |
|
— |
|
147.0 |
| |||||
|
Equity securities, trading |
|
— |
|
0.3 |
|
731.9 |
|
— |
|
732.2 |
| |||||
|
Mortgage loans |
|
— |
|
10,107.7 |
|
1,801.3 |
|
(331.1 |
) |
11,577.9 |
| |||||
|
Real estate |
|
— |
|
8.3 |
|
1,193.7 |
|
— |
|
1,202.0 |
| |||||
|
Policy loans |
|
— |
|
833.5 |
|
33.0 |
|
— |
|
866.5 |
| |||||
|
Investment in unconsolidated entities |
|
12,036.1 |
|
3,321.2 |
|
4,666.1 |
|
(19,142.0 |
) |
881.4 |
| |||||
|
Other investments |
|
9.0 |
|
2,504.8 |
|
1,358.1 |
|
(1,566.1 |
) |
2,305.8 |
| |||||
|
Cash and cash equivalents |
|
112.7 |
|
711.1 |
|
751.9 |
|
85.5 |
|
1,661.2 |
| |||||
|
Accrued investment income |
|
— |
|
518.2 |
|
68.0 |
|
(1.7 |
) |
584.5 |
| |||||
|
Premiums due and other receivables |
|
— |
|
1,020.6 |
|
1,460.9 |
|
(1,306.3 |
) |
1,175.2 |
| |||||
|
Deferred acquisition costs |
|
— |
|
2,504.7 |
|
210.8 |
|
— |
|
2,715.5 |
| |||||
|
Property and equipment |
|
— |
|
395.2 |
|
77.4 |
|
— |
|
472.6 |
| |||||
|
Goodwill |
|
— |
|
54.3 |
|
1,143.1 |
|
— |
|
1,197.4 |
| |||||
|
Other intangibles |
|
— |
|
27.6 |
|
1,562.7 |
|
— |
|
1,590.3 |
| |||||
|
Separate account assets |
|
— |
|
73,423.6 |
|
47,482.5 |
|
— |
|
120,906.1 |
| |||||
|
Other assets |
|
66.2 |
|
983.3 |
|
1,660.8 |
|
(1,676.0 |
) |
1,034.3 |
| |||||
|
Total assets |
|
$ |
12,224.0 |
|
$ |
141,613.1 |
|
$ |
71,229.9 |
|
$ |
(24,304.1 |
) |
$ |
200,762.9 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
35,868.5 |
|
$ |
1,113.9 |
|
$ |
(280.8 |
) |
$ |
36,701.6 |
|
|
Future policy benefits and claims |
|
— |
|
18,048.2 |
|
4,854.2 |
|
(212.9 |
) |
22,689.5 |
| |||||
|
Other policyholder funds |
|
— |
|
767.4 |
|
44.1 |
|
(0.3 |
) |
811.2 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
46.5 |
|
— |
|
46.5 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
99.4 |
|
573.6 |
|
(331.1 |
) |
2,790.5 |
| |||||
|
Income taxes currently payable |
|
— |
|
— |
|
82.2 |
|
(72.4 |
) |
9.8 |
| |||||
|
Deferred income taxes |
|
— |
|
230.6 |
|
686.8 |
|
(126.0 |
) |
791.4 |
| |||||
|
Separate account liabilities |
|
— |
|
73,423.6 |
|
47,482.5 |
|
— |
|
120,906.1 |
| |||||
|
Other liabilities |
|
51.8 |
|
5,531.5 |
|
4,143.6 |
|
(3,596.1 |
) |
6,130.8 |
| |||||
|
Total liabilities |
|
2,500.4 |
|
133,969.2 |
|
59,027.4 |
|
(4,619.6 |
) |
190,877.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
58.9 |
|
— |
|
58.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.6 |
|
2.5 |
|
— |
|
(2.5 |
) |
4.6 |
| |||||
|
Additional paid-in capital |
|
9,771.5 |
|
5,745.0 |
|
9,394.8 |
|
(15,139.8 |
) |
9,771.5 |
| |||||
|
Retained earnings |
|
4,971.7 |
|
1,318.0 |
|
1,986.1 |
|
(3,304.1 |
) |
4,971.7 |
| |||||
|
Accumulated other comprehensive income |
|
621.0 |
|
578.4 |
|
655.2 |
|
(1,233.6 |
) |
621.0 |
| |||||
|
Treasury stock, at cost |
|
(5,645.3 |
) |
— |
|
— |
|
— |
|
(5,645.3 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,723.6 |
|
7,643.9 |
|
12,036.1 |
|
(19,680.0 |
) |
9,723.6 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
107.5 |
|
(4.5 |
) |
103.0 |
| |||||
|
Total stockholders’ equity |
|
9,723.6 |
|
7,643.9 |
|
12,143.6 |
|
(19,684.5 |
) |
9,826.6 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,224.0 |
|
$ |
141,613.1 |
|
$ |
71,229.9 |
|
$ |
(24,304.1 |
) |
$ |
200,762.9 |
|
Condensed Consolidating Statements of Financial Position
December 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
44,614.6 |
|
$ |
6,681.7 |
|
$ |
(357.0 |
) |
$ |
50,939.3 |
|
|
Fixed maturities, trading |
|
10.5 |
|
284.4 |
|
331.8 |
|
— |
|
626.7 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
131.3 |
|
5.2 |
|
— |
|
136.5 |
| |||||
|
Equity securities, trading |
|
— |
|
0.3 |
|
252.5 |
|
— |
|
252.8 |
| |||||
|
Mortgage loans |
|
— |
|
10,054.2 |
|
1,775.5 |
|
(310.0 |
) |
11,519.7 |
| |||||
|
Real estate |
|
— |
|
8.4 |
|
1,171.9 |
|
— |
|
1,180.3 |
| |||||
|
Policy loans |
|
— |
|
834.0 |
|
30.9 |
|
— |
|
864.9 |
| |||||
|
Investment in unconsolidated entities |
|
11,853.3 |
|
3,309.2 |
|
4,808.3 |
|
(19,101.8 |
) |
869.0 |
| |||||
|
Other investments |
|
11.1 |
|
2,834.0 |
|
1,208.4 |
|
(1,631.4 |
) |
2,422.1 |
| |||||
|
Cash and cash equivalents |
|
207.1 |
|
1,698.4 |
|
2,286.9 |
|
(15.2 |
) |
4,177.2 |
| |||||
|
Accrued investment income |
|
— |
|
521.6 |
|
64.5 |
|
(1.7 |
) |
584.4 |
| |||||
|
Premiums due and other receivables |
|
0.1 |
|
916.7 |
|
1,327.1 |
|
(1,159.5 |
) |
1,084.4 |
| |||||
|
Deferred acquisition costs |
|
— |
|
2,394.8 |
|
195.2 |
|
— |
|
2,590.0 |
| |||||
|
Property and equipment |
|
— |
|
402.2 |
|
62.0 |
|
— |
|
464.2 |
| |||||
|
Goodwill |
|
— |
|
54.3 |
|
489.1 |
|
— |
|
543.4 |
| |||||
|
Other intangibles |
|
— |
|
27.9 |
|
886.8 |
|
— |
|
914.7 |
| |||||
|
Separate account assets |
|
— |
|
69,217.8 |
|
12,436.0 |
|
— |
|
81,653.8 |
| |||||
|
Other assets |
|
78.0 |
|
947.8 |
|
1,567.7 |
|
(1,586.7 |
) |
1,006.8 |
| |||||
|
Total assets |
|
$ |
12,160.1 |
|
$ |
138,251.9 |
|
$ |
35,581.5 |
|
$ |
(24,163.3 |
) |
$ |
161,830.2 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
37,053.3 |
|
$ |
1,011.9 |
|
$ |
(278.7 |
) |
$ |
37,786.5 |
|
|
Future policy benefits and claims |
|
— |
|
17,944.9 |
|
4,679.6 |
|
(188.3 |
) |
22,436.2 |
| |||||
|
Other policyholder funds |
|
— |
|
676.5 |
|
40.3 |
|
(0.4 |
) |
716.4 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
40.8 |
|
— |
|
40.8 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
99.4 |
|
433.3 |
|
(310.0 |
) |
2,671.3 |
| |||||
|
Income taxes currently payable |
|
— |
|
— |
|
84.7 |
|
(69.4 |
) |
15.3 |
| |||||
|
Deferred income taxes |
|
— |
|
324.5 |
|
378.4 |
|
(102.9 |
) |
600.0 |
| |||||
|
Separate account liabilities |
|
— |
|
69,217.8 |
|
12,436.0 |
|
— |
|
81,653.8 |
| |||||
|
Other liabilities |
|
28.1 |
|
5,375.1 |
|
4,538.4 |
|
(3,795.5 |
) |
6,146.1 |
| |||||
|
Total liabilities |
|
2,476.7 |
|
130,691.5 |
|
23,643.4 |
|
(4,745.2 |
) |
152,066.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
60.4 |
|
— |
|
60.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.5 |
|
2.5 |
|
— |
|
(2.5 |
) |
4.5 |
| |||||
|
Additional paid-in capital |
|
9,730.9 |
|
5,747.6 |
|
9,393.8 |
|
(15,141.4 |
) |
9,730.9 |
| |||||
|
Retained earnings |
|
4,862.0 |
|
1,167.7 |
|
1,783.4 |
|
(2,951.1 |
) |
4,862.0 |
| |||||
|
Accumulated other comprehensive income |
|
640.3 |
|
642.6 |
|
676.1 |
|
(1,318.7 |
) |
640.3 |
| |||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
— |
|
— |
|
— |
|
(5,554.4 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,683.4 |
|
7,560.4 |
|
11,853.3 |
|
(19,413.7 |
) |
9,683.4 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
24.4 |
|
(4.4 |
) |
20.0 |
| |||||
|
Total stockholders’ equity |
|
9,683.4 |
|
7,560.4 |
|
11,877.7 |
|
(19,418.1 |
) |
9,703.4 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,160.1 |
|
$ |
138,251.9 |
|
$ |
35,581.5 |
|
$ |
(24,163.3 |
) |
$ |
161,830.2 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
605.1 |
|
$ |
89.6 |
|
$ |
— |
|
$ |
694.7 |
|
|
Fees and other revenues |
|
— |
|
413.2 |
|
404.3 |
|
(83.9 |
) |
733.6 |
| |||||
|
Net investment income |
|
— |
|
602.0 |
|
179.9 |
|
7.4 |
|
789.3 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
6.3 |
|
(304.9 |
) |
272.1 |
|
0.1 |
|
(26.4 |
) | |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(44.2 |
) |
(0.5 |
) |
— |
|
(44.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
20.1 |
|
0.1 |
|
— |
|
20.2 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
(24.1 |
) |
(0.4 |
) |
— |
|
(24.5 |
) | |||||
|
Net realized capital gains (losses) |
|
6.3 |
|
(329.0 |
) |
271.7 |
|
0.1 |
|
(50.9 |
) | |||||
|
Total revenues |
|
6.3 |
|
1,291.3 |
|
945.5 |
|
(76.4 |
) |
2,166.7 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
950.3 |
|
147.3 |
|
(3.1 |
) |
1,094.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
48.3 |
|
— |
|
— |
|
48.3 |
| |||||
|
Operating expenses |
|
35.0 |
|
470.7 |
|
362.5 |
|
(72.5 |
) |
795.7 |
| |||||
|
Total expenses |
|
35.0 |
|
1,469.3 |
|
509.8 |
|
(75.6 |
) |
1,938.5 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.7 |
) |
(178.0 |
) |
435.7 |
|
(0.8 |
) |
228.2 |
| |||||
|
Income taxes (benefits) |
|
(11.5 |
) |
(88.4 |
) |
138.2 |
|
(0.1 |
) |
38.2 |
| |||||
|
Equity in the net income (loss) of subsidiaries |
|
203.7 |
|
240.6 |
|
(90.3 |
) |
(354.0 |
) |
— |
| |||||
|
Net income |
|
186.5 |
|
151.0 |
|
207.2 |
|
(354.7 |
) |
190.0 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Net income attributable to PFG |
|
186.5 |
|
151.0 |
|
203.7 |
|
(354.7 |
) |
186.5 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
178.3 |
|
$ |
151.0 |
|
$ |
203.7 |
|
$ |
(354.7 |
) |
$ |
178.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
186.5 |
|
$ |
151.0 |
|
$ |
207.2 |
|
$ |
(354.7 |
) |
$ |
190.0 |
|
|
Other comprehensive income (loss) |
|
(81.3 |
) |
(65.9 |
) |
59.7 |
|
67.1 |
|
(20.4 |
) | |||||
|
Comprehensive income |
|
$ |
105.2 |
|
$ |
85.1 |
|
$ |
266.9 |
|
$ |
(287.6 |
) |
$ |
169.6 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
583.4 |
|
$ |
96.4 |
|
$ |
— |
|
$ |
679.8 |
|
|
Fees and other revenues |
|
0.1 |
|
343.8 |
|
329.7 |
|
(75.6 |
) |
598.0 |
| |||||
|
Net investment income |
|
1.0 |
|
626.8 |
|
195.4 |
|
1.6 |
|
824.8 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
(350.5 |
) |
389.3 |
|
(16.7 |
) |
22.1 |
| |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(33.0 |
) |
(0.7 |
) |
— |
|
(33.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
4.5 |
|
0.4 |
|
— |
|
4.9 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
(28.5 |
) |
(0.3 |
) |
— |
|
(28.8 |
) | |||||
|
Net realized capital gains (losses) |
|
— |
|
(379.0 |
) |
389.0 |
|
(16.7 |
) |
(6.7 |
) | |||||
|
Total revenues |
|
1.1 |
|
1,175.0 |
|
1,010.5 |
|
(90.7 |
) |
2,095.9 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
1,034.5 |
|
181.2 |
|
(3.2 |
) |
1,212.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
50.3 |
|
— |
|
— |
|
50.3 |
| |||||
|
Operating expenses |
|
29.9 |
|
282.0 |
|
309.1 |
|
(65.9 |
) |
555.1 |
| |||||
|
Total expenses |
|
29.9 |
|
1,366.8 |
|
490.3 |
|
(69.1 |
) |
1,817.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.8 |
) |
(191.8 |
) |
520.2 |
|
(21.6 |
) |
278.0 |
| |||||
|
Income taxes (benefits) |
|
(11.3 |
) |
(84.9 |
) |
153.1 |
|
(0.2 |
) |
56.7 |
| |||||
|
Equity in the net income (loss) of subsidiaries |
|
229.6 |
|
275.1 |
|
(128.3 |
) |
(376.4 |
) |
— |
| |||||
|
Net income |
|
212.1 |
|
168.2 |
|
238.8 |
|
(397.8 |
) |
221.3 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
9.2 |
|
— |
|
9.2 |
| |||||
|
Net income attributable to PFG |
|
212.1 |
|
168.2 |
|
229.6 |
|
(397.8 |
) |
212.1 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
203.9 |
|
$ |
168.2 |
|
$ |
229.6 |
|
$ |
(397.8 |
) |
$ |
203.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
212.1 |
|
$ |
168.2 |
|
$ |
238.8 |
|
$ |
(397.8 |
) |
$ |
221.3 |
|
|
Other comprehensive income |
|
180.6 |
|
141.5 |
|
91.2 |
|
(188.1 |
) |
225.2 |
| |||||
|
Comprehensive income |
|
$ |
392.7 |
|
$ |
309.7 |
|
$ |
330.0 |
|
$ |
(585.9 |
) |
$ |
446.5 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
28.0 |
|
$ |
812.7 |
|
$ |
(385.0 |
) |
$ |
140.2 |
|
$ |
595.9 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
(2,242.7 |
) |
(206.4 |
) |
2.0 |
|
(2,447.1 |
) | |||||
|
Sales |
|
— |
|
392.7 |
|
128.7 |
|
(18.3 |
) |
503.1 |
| |||||
|
Maturities |
|
— |
|
1,596.0 |
|
194.9 |
|
— |
|
1,790.9 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
(573.2 |
) |
(59.8 |
) |
22.1 |
|
(610.9 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
519.3 |
|
79.2 |
|
(42.7 |
) |
555.8 |
| |||||
|
Real estate acquired |
|
— |
|
0.1 |
|
(23.5 |
) |
— |
|
(23.4 |
) | |||||
|
Net (purchases) sales of property and equipment |
|
— |
|
(2.0 |
) |
8.7 |
|
— |
|
6.7 |
| |||||
|
Purchases of interests in subsidiaries, net of cash acquired |
|
— |
|
— |
|
(1,268.3 |
) |
— |
|
(1,268.3 |
) | |||||
|
Dividends and returns of capital received from (contributions to) unconsolidated entities |
|
18.8 |
|
25.4 |
|
15.8 |
|
(60.0 |
) |
— |
| |||||
|
Net change in other investments |
|
(3.0 |
) |
56.3 |
|
(104.0 |
) |
18.5 |
|
(32.2 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
15.8 |
|
(228.1 |
) |
(1,234.7 |
) |
(78.4 |
) |
(1,525.4 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
20.3 |
|
— |
|
— |
|
— |
|
20.3 |
| |||||
|
Acquisition of treasury stock |
|
(90.9 |
) |
— |
|
— |
|
— |
|
(90.9 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
14.3 |
|
— |
|
— |
|
14.3 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
(12.7 |
) |
— |
|
— |
|
(12.7 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
1.3 |
|
2.5 |
|
— |
|
3.8 |
| |||||
|
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(30.6 |
) |
— |
|
(30.6 |
) | |||||
|
Dividends to common stockholders |
|
(67.6 |
) |
— |
|
— |
|
— |
|
(67.6 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
20.7 |
|
(21.1 |
) |
(0.4 |
) | |||||
|
Capital received from (dividends and capital paid to) parent |
|
— |
|
(15.8 |
) |
(44.2 |
) |
60.0 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
1,292.1 |
|
127.6 |
|
— |
|
1,419.7 |
| |||||
|
Investment contract withdrawals |
|
— |
|
(2,850.3 |
) |
(1.7 |
) |
— |
|
(2,852.0 |
) | |||||
|
Net increase in banking operation deposits |
|
— |
|
— |
|
6.9 |
|
— |
|
6.9 |
| |||||
|
Other |
|
— |
|
(0.8 |
) |
— |
|
— |
|
(0.8 |
) | |||||
|
Net cash provided by (used in) financing activities |
|
(138.2 |
) |
(1,571.9 |
) |
84.7 |
|
38.9 |
|
(1,586.5 |
) | |||||
|
Net decrease in cash and cash equivalents |
|
(94.4 |
) |
(987.3 |
) |
(1,535.0 |
) |
100.7 |
|
(2,516.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
207.1 |
|
1,698.4 |
|
2,286.9 |
|
(15.2 |
) |
4,177.2 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
112.7 |
|
$ |
711.1 |
|
$ |
751.9 |
|
$ |
85.5 |
|
$ |
1,661.2 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
79.9 |
|
$ |
930.6 |
|
$ |
(217.8 |
) |
$ |
109.0 |
|
$ |
901.7 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
(1,749.5 |
) |
(329.5 |
) |
18.5 |
|
(2,060.5 |
) | |||||
|
Sales |
|
— |
|
412.3 |
|
23.6 |
|
(7.4 |
) |
428.5 |
| |||||
|
Maturities |
|
— |
|
1,352.1 |
|
260.0 |
|
— |
|
1,612.1 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
(887.1 |
) |
(32.5 |
) |
— |
|
(919.6 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
389.7 |
|
81.5 |
|
(109.8 |
) |
361.4 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(21.3 |
) |
— |
|
(21.3 |
) | |||||
|
Net purchases of property and equipment |
|
— |
|
(11.8 |
) |
(5.5 |
) |
— |
|
(17.3 |
) | |||||
|
Dividends and returns of capital received from unconsolidated entities |
|
189.3 |
|
140.0 |
|
189.2 |
|
(518.5 |
) |
— |
| |||||
|
Net change in other investments |
|
— |
|
(29.6 |
) |
(25.9 |
) |
(18.3 |
) |
(73.8 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
189.3 |
|
(383.9 |
) |
139.6 |
|
(635.5 |
) |
(690.5 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
9.1 |
|
— |
|
— |
|
— |
|
9.1 |
| |||||
|
Acquisition of treasury stock |
|
(64.2 |
) |
— |
|
— |
|
— |
|
(64.2 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
20.4 |
|
— |
|
— |
|
20.4 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
(16.2 |
) |
— |
|
— |
|
(16.2 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
4.8 |
|
5.1 |
|
— |
|
9.9 |
| |||||
|
Dividends to common stockholders |
|
(54.3 |
) |
— |
|
— |
|
— |
|
(54.3 |
) | |||||
|
Dividends to preferred stockholders |
|
(8.2 |
) |
— |
|
— |
|
— |
|
(8.2 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
1.0 |
|
— |
|
1.0 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(9.0 |
) |
8.2 |
|
(0.8 |
) | |||||
|
Net repayments of short-term borrowings |
|
— |
|
— |
|
(7.5 |
) |
— |
|
(7.5 |
) | |||||
|
Dividends and capital paid to parent |
|
— |
|
(189.2 |
) |
(329.3 |
) |
518.5 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
1,522.7 |
|
95.9 |
|
— |
|
1,618.6 |
| |||||
|
Investment contract withdrawals |
|
— |
|
(2,885.4 |
) |
(0.5 |
) |
— |
|
(2,885.9 |
) | |||||
|
Net decrease in banking operation deposits |
|
— |
|
— |
|
(13.4 |
) |
— |
|
(13.4 |
) | |||||
|
Other |
|
— |
|
(1.7 |
) |
— |
|
— |
|
(1.7 |
) | |||||
|
Net cash used in financing activities |
|
(117.6 |
) |
(1,544.6 |
) |
(257.7 |
) |
526.7 |
|
(1,393.2 |
) | |||||
|
Net increase (decrease) in cash and cash equivalents |
|
151.6 |
|
(997.9 |
) |
(335.9 |
) |
0.2 |
|
(1,182.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
226.7 |
|
1,344.5 |
|
1,277.6 |
|
(14.9 |
) |
2,833.9 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
378.3 |
|
$ |
346.6 |
|
$ |
941.7 |
|
$ |
(14.7 |
) |
$ |
1,651.9 |
|
On May 24, 2011, our shelf registration statement was filed with the SEC and became effective. The shelf registration replaces the shelf registration that had been in effect since June 2008, as it was scheduled to expire in June 2011. Under our current shelf registration, we have the ability to issue unsecured senior debt securities or subordinated debt securities, junior subordinated debt, preferred stock, common stock, warrants, depository shares, stock purchase contracts and stock purchase units of PFG, trust preferred securities of three subsidiary trusts and guarantees by PFG of these trust preferred securities. Our wholly owned subsidiary, PFS, may guarantee, fully and unconditionally or otherwise, our obligations with respect to any non-convertible securities, other than common stock, described in the shelf registration statement.
The following tables set forth condensed consolidating financial information of (i) PFG, (ii) PFS, (iii) Principal Life and all other direct and indirect subsidiaries of PFG on a combined basis and (iv) the eliminations necessary to arrive at the information for PFG on a consolidated basis as of March 31, 2013 and December 31, 2012, and for the three months ended March 31, 2013 and 2012.
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in PFS and (ii) PFS’s interest in Principal Life and all other subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, PFS and Principal Life and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities.
Condensed Consolidating Statements of Financial Position
March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
51,084.1 |
|
$ |
— |
|
$ |
51,084.1 |
|
|
Fixed maturities, trading |
|
— |
|
— |
|
628.9 |
|
— |
|
628.9 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
— |
|
147.0 |
|
— |
|
147.0 |
| |||||
|
Equity securities, trading |
|
— |
|
— |
|
732.2 |
|
— |
|
732.2 |
| |||||
|
Mortgage loans |
|
— |
|
— |
|
11,577.9 |
|
— |
|
11,577.9 |
| |||||
|
Real estate |
|
— |
|
— |
|
1,202.0 |
|
— |
|
1,202.0 |
| |||||
|
Policy loans |
|
— |
|
— |
|
866.5 |
|
— |
|
866.5 |
| |||||
|
Investment in unconsolidated entities |
|
12,036.1 |
|
10,819.4 |
|
872.7 |
|
(22,846.8 |
) |
881.4 |
| |||||
|
Other investments |
|
9.0 |
|
52.1 |
|
2,244.7 |
|
— |
|
2,305.8 |
| |||||
|
Cash and cash equivalents |
|
112.7 |
|
584.8 |
|
1,755.9 |
|
(792.2 |
) |
1,661.2 |
| |||||
|
Accrued investment income |
|
— |
|
— |
|
584.5 |
|
— |
|
584.5 |
| |||||
|
Premiums due and other receivables |
|
— |
|
990.8 |
|
2,176.4 |
|
(1,992.0 |
) |
1,175.2 |
| |||||
|
Deferred acquisition costs |
|
— |
|
— |
|
2,715.5 |
|
— |
|
2,715.5 |
| |||||
|
Property and equipment |
|
— |
|
— |
|
472.6 |
|
— |
|
472.6 |
| |||||
|
Goodwill |
|
— |
|
— |
|
1,197.4 |
|
— |
|
1,197.4 |
| |||||
|
Other intangibles |
|
— |
|
— |
|
1,590.3 |
|
— |
|
1,590.3 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
120,906.1 |
|
— |
|
120,906.1 |
| |||||
|
Other assets |
|
66.2 |
|
82.8 |
|
1,071.0 |
|
(185.7 |
) |
1,034.3 |
| |||||
|
Total assets |
|
$ |
12,224.0 |
|
$ |
12,529.9 |
|
$ |
201,825.7 |
|
$ |
(25,816.7 |
) |
$ |
200,762.9 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
36,701.6 |
|
$ |
— |
|
$ |
36,701.6 |
|
|
Future policy benefits and claims |
|
— |
|
— |
|
22,689.5 |
|
— |
|
22,689.5 |
| |||||
|
Other policyholder funds |
|
— |
|
— |
|
811.2 |
|
— |
|
811.2 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
2,353.4 |
|
(2,306.9 |
) |
46.5 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
— |
|
341.9 |
|
— |
|
2,790.5 |
| |||||
|
Income taxes currently payable |
|
— |
|
18.3 |
|
49.1 |
|
(57.6 |
) |
9.8 |
| |||||
|
Deferred income taxes |
|
— |
|
— |
|
899.8 |
|
(108.4 |
) |
791.4 |
| |||||
|
Separate account liabilities |
|
— |
|
— |
|
120,906.1 |
|
— |
|
120,906.1 |
| |||||
|
Other liabilities |
|
51.8 |
|
475.5 |
|
6,091.8 |
|
(488.3 |
) |
6,130.8 |
| |||||
|
Total liabilities |
|
2,500.4 |
|
493.8 |
|
190,844.4 |
|
(2,961.2 |
) |
190,877.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
58.9 |
|
— |
|
58.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.6 |
|
— |
|
17.8 |
|
(17.8 |
) |
4.6 |
| |||||
|
Additional paid-in capital |
|
9,771.5 |
|
9,394.8 |
|
8,306.5 |
|
(17,701.3 |
) |
9,771.5 |
| |||||
|
Retained earnings |
|
4,971.7 |
|
1,986.1 |
|
1,854.8 |
|
(3,840.9 |
) |
4,971.7 |
| |||||
|
Accumulated other comprehensive income |
|
621.0 |
|
655.2 |
|
642.3 |
|
(1,297.5 |
) |
621.0 |
| |||||
|
Treasury stock, at cost |
|
(5,645.3 |
) |
— |
|
(2.0 |
) |
2.0 |
|
(5,645.3 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,723.6 |
|
12,036.1 |
|
10,819.4 |
|
(22,855.5 |
) |
9,723.6 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
103.0 |
|
— |
|
103.0 |
| |||||
|
Total stockholders’ equity |
|
9,723.6 |
|
12,036.1 |
|
10,922.4 |
|
(22,855.5 |
) |
9,826.6 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,224.0 |
|
$ |
12,529.9 |
|
$ |
201,825.7 |
|
$ |
(25,816.7 |
) |
$ |
200,762.9 |
|
Condensed Consolidating Statements of Financial Position
December 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
50,939.3 |
|
$ |
— |
|
$ |
50,939.3 |
|
|
Fixed maturities, trading |
|
10.5 |
|
— |
|
616.2 |
|
— |
|
626.7 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
— |
|
136.5 |
|
— |
|
136.5 |
| |||||
|
Equity securities, trading |
|
— |
|
— |
|
252.8 |
|
— |
|
252.8 |
| |||||
|
Mortgage loans |
|
— |
|
— |
|
11,519.7 |
|
— |
|
11,519.7 |
| |||||
|
Real estate |
|
— |
|
— |
|
1,180.3 |
|
— |
|
1,180.3 |
| |||||
|
Policy loans |
|
— |
|
— |
|
864.9 |
|
— |
|
864.9 |
| |||||
|
Investment in unconsolidated entities |
|
11,853.3 |
|
10,632.1 |
|
860.2 |
|
(22,476.6 |
) |
869.0 |
| |||||
|
Other investments |
|
11.1 |
|
39.6 |
|
2,371.4 |
|
— |
|
2,422.1 |
| |||||
|
Cash and cash equivalents |
|
207.1 |
|
612.5 |
|
4,241.3 |
|
(883.7 |
) |
4,177.2 |
| |||||
|
Accrued investment income |
|
— |
|
— |
|
584.4 |
|
— |
|
584.4 |
| |||||
|
Premiums due and other receivables |
|
0.1 |
|
1,122.1 |
|
2,206.7 |
|
(2,244.5 |
) |
1,084.4 |
| |||||
|
Deferred acquisition costs |
|
— |
|
— |
|
2,590.0 |
|
— |
|
2,590.0 |
| |||||
|
Property and equipment |
|
— |
|
— |
|
464.2 |
|
— |
|
464.2 |
| |||||
|
Goodwill |
|
— |
|
— |
|
543.4 |
|
— |
|
543.4 |
| |||||
|
Other intangibles |
|
— |
|
— |
|
914.7 |
|
— |
|
914.7 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
81,653.8 |
|
— |
|
81,653.8 |
| |||||
|
Other assets |
|
78.0 |
|
51.0 |
|
1,003.5 |
|
(125.7 |
) |
1,006.8 |
| |||||
|
Total assets |
|
$ |
12,160.1 |
|
$ |
12,457.3 |
|
$ |
162,943.3 |
|
$ |
(25,730.5 |
) |
$ |
161,830.2 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
37,786.5 |
|
$ |
— |
|
$ |
37,786.5 |
|
|
Future policy benefits and claims |
|
— |
|
— |
|
22,436.2 |
|
— |
|
22,436.2 |
| |||||
|
Other policyholder funds |
|
— |
|
— |
|
716.4 |
|
— |
|
716.4 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
2,564.1 |
|
(2,523.3 |
) |
40.8 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
— |
|
222.7 |
|
— |
|
2,671.3 |
| |||||
|
Income taxes currently payable |
|
— |
|
0.1 |
|
47.2 |
|
(32.0 |
) |
15.3 |
| |||||
|
Deferred income taxes |
|
— |
|
— |
|
686.1 |
|
(86.1 |
) |
600.0 |
| |||||
|
Separate account liabilities |
|
— |
|
— |
|
81,653.8 |
|
— |
|
81,653.8 |
| |||||
|
Other liabilities |
|
28.1 |
|
603.9 |
|
6,117.8 |
|
(603.7 |
) |
6,146.1 |
| |||||
|
Total liabilities |
|
2,476.7 |
|
604.0 |
|
152,230.8 |
|
(3,245.1 |
) |
152,066.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
60.4 |
|
— |
|
60.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.5 |
|
— |
|
17.8 |
|
(17.8 |
) |
4.5 |
| |||||
|
Additional paid-in capital |
|
9,730.9 |
|
9,393.8 |
|
8,287.7 |
|
(17,681.5 |
) |
9,730.9 |
| |||||
|
Retained earnings |
|
4,862.0 |
|
1,783.4 |
|
1,666.7 |
|
(3,450.1 |
) |
4,862.0 |
| |||||
|
Accumulated other comprehensive income |
|
640.3 |
|
676.1 |
|
661.9 |
|
(1,338.0 |
) |
640.3 |
| |||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
— |
|
(2.0 |
) |
2.0 |
|
(5,554.4 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,683.4 |
|
11,853.3 |
|
10,632.1 |
|
(22,485.4 |
) |
9,683.4 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
20.0 |
|
— |
|
20.0 |
| |||||
|
Total stockholders’ equity |
|
9,683.4 |
|
11,853.3 |
|
10,652.1 |
|
(22,485.4 |
) |
9,703.4 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,160.1 |
|
$ |
12,457.3 |
|
$ |
162,943.3 |
|
$ |
(25,730.5 |
) |
$ |
161,830.2 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
694.7 |
|
$ |
— |
|
$ |
694.7 |
|
|
Fees and other revenues |
|
— |
|
— |
|
733.7 |
|
(0.1 |
) |
733.6 |
| |||||
|
Net investment income |
|
— |
|
0.7 |
|
788.5 |
|
0.1 |
|
789.3 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
6.3 |
|
2.1 |
|
(34.8 |
) |
— |
|
(26.4 |
) | |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(44.7 |
) |
— |
|
(44.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
20.2 |
|
— |
|
20.2 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(24.5 |
) |
— |
|
(24.5 |
) | |||||
|
Net realized capital gains (losses) |
|
6.3 |
|
2.1 |
|
(59.3 |
) |
— |
|
(50.9 |
) | |||||
|
Total revenues |
|
6.3 |
|
2.8 |
|
2,157.6 |
|
— |
|
2,166.7 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
1,094.5 |
|
— |
|
1,094.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
— |
|
48.3 |
|
— |
|
48.3 |
| |||||
|
Operating expenses |
|
35.0 |
|
8.2 |
|
752.5 |
|
— |
|
795.7 |
| |||||
|
Total expenses |
|
35.0 |
|
8.2 |
|
1,895.3 |
|
— |
|
1,938.5 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.7 |
) |
(5.4 |
) |
262.3 |
|
— |
|
228.2 |
| |||||
|
Income taxes (benefits) |
|
(11.5 |
) |
(1.0 |
) |
50.7 |
|
— |
|
38.2 |
| |||||
|
Equity in the net income of subsidiaries |
|
203.7 |
|
208.1 |
|
— |
|
(411.8 |
) |
— |
| |||||
|
Net income |
|
186.5 |
|
203.7 |
|
211.6 |
|
(411.8 |
) |
190.0 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Net income attributable to PFG |
|
186.5 |
|
203.7 |
|
208.1 |
|
(411.8 |
) |
186.5 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
178.3 |
|
$ |
203.7 |
|
$ |
208.1 |
|
$ |
(411.8 |
) |
$ |
178.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
186.5 |
|
$ |
203.7 |
|
$ |
211.6 |
|
$ |
(411.8 |
) |
$ |
190.0 |
|
|
Other comprehensive loss |
|
(81.3 |
) |
(21.9 |
) |
(21.0 |
) |
103.8 |
|
(20.4 |
) | |||||
|
Comprehensive income |
|
$ |
105.2 |
|
$ |
181.8 |
|
$ |
190.6 |
|
$ |
(308.0 |
) |
$ |
169.6 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
679.8 |
|
$ |
— |
|
$ |
679.8 |
|
|
Fees and other revenues |
|
0.1 |
|
— |
|
598.2 |
|
(0.3 |
) |
598.0 |
| |||||
|
Net investment income |
|
1.0 |
|
— |
|
823.5 |
|
0.3 |
|
824.8 |
| |||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
— |
|
— |
|
22.1 |
|
— |
|
22.1 |
| |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(33.7 |
) |
— |
|
(33.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
4.9 |
|
— |
|
4.9 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(28.8 |
) |
— |
|
(28.8 |
) | |||||
|
Net realized capital losses |
|
— |
|
— |
|
(6.7 |
) |
— |
|
(6.7 |
) | |||||
|
Total revenues |
|
1.1 |
|
— |
|
2,094.8 |
|
— |
|
2,095.9 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
1,212.5 |
|
— |
|
1,212.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
— |
|
50.3 |
|
— |
|
50.3 |
| |||||
|
Operating expenses |
|
29.9 |
|
0.4 |
|
524.8 |
|
— |
|
555.1 |
| |||||
|
Total expenses |
|
29.9 |
|
0.4 |
|
1,787.6 |
|
— |
|
1,817.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.8 |
) |
(0.4 |
) |
307.2 |
|
— |
|
278.0 |
| |||||
|
Income taxes (benefits) |
|
(11.3 |
) |
(1.7 |
) |
69.7 |
|
— |
|
56.7 |
| |||||
|
Equity in the net income of subsidiaries |
|
229.6 |
|
228.3 |
|
— |
|
(457.9 |
) |
— |
| |||||
|
Net income |
|
212.1 |
|
229.6 |
|
237.5 |
|
(457.9 |
) |
221.3 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
9.2 |
|
— |
|
9.2 |
| |||||
|
Net income attributable to PFG |
|
212.1 |
|
229.6 |
|
228.3 |
|
(457.9 |
) |
212.1 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
203.9 |
|
$ |
229.6 |
|
$ |
228.3 |
|
$ |
(457.9 |
) |
$ |
203.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
212.1 |
|
$ |
229.6 |
|
$ |
237.5 |
|
$ |
(457.9 |
) |
$ |
221.3 |
|
|
Other comprehensive income |
|
180.6 |
|
224.3 |
|
224.9 |
|
(404.6 |
) |
225.2 |
| |||||
|
Comprehensive income |
|
$ |
392.7 |
|
$ |
453.9 |
|
$ |
462.4 |
|
$ |
(862.5 |
) |
$ |
446.5 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
28.0 |
|
$ |
(19.8 |
) |
$ |
712.4 |
|
$ |
(124.7 |
) |
$ |
595.9 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
— |
|
(2,447.1 |
) |
— |
|
(2,447.1 |
) | |||||
|
Sales |
|
— |
|
— |
|
503.1 |
|
— |
|
503.1 |
| |||||
|
Maturities |
|
— |
|
— |
|
1,790.9 |
|
— |
|
1,790.9 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
— |
|
(610.9 |
) |
— |
|
(610.9 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
— |
|
555.8 |
|
— |
|
555.8 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(23.4 |
) |
— |
|
(23.4 |
) | |||||
|
Net sales of property and equipment |
|
— |
|
— |
|
6.7 |
|
— |
|
6.7 |
| |||||
|
Purchases of interests in subsidiaries, net of cash acquired |
|
— |
|
— |
|
(1,268.3 |
) |
— |
|
(1,268.3 |
) | |||||
|
Dividends and returns of capital received from (contributions to) unconsolidated entities |
|
18.8 |
|
21.4 |
|
— |
|
(40.2 |
) |
— |
| |||||
|
Net change in other investments |
|
(3.0 |
) |
(10.5 |
) |
(18.7 |
) |
— |
|
(32.2 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
15.8 |
|
10.9 |
|
(1,511.9 |
) |
(40.2 |
) |
(1,525.4 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
20.3 |
|
— |
|
— |
|
— |
|
20.3 |
| |||||
|
Acquisition of treasury stock |
|
(90.9 |
) |
— |
|
— |
|
— |
|
(90.9 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
— |
|
14.3 |
|
— |
|
14.3 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
— |
|
(12.7 |
) |
— |
|
(12.7 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
— |
|
3.8 |
|
— |
|
3.8 |
| |||||
|
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(30.6 |
) |
— |
|
(30.6 |
) | |||||
|
Dividends to common stockholders |
|
(67.6 |
) |
— |
|
— |
|
— |
|
(67.6 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(0.4 |
) |
— |
|
(0.4 |
) | |||||
|
Net repayments of short-term borrowings |
|
— |
|
— |
|
(216.2 |
) |
216.2 |
|
— |
| |||||
|
Capital received from (dividends and capital paid to) parent |
|
— |
|
(18.8 |
) |
(21.4 |
) |
40.2 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
— |
|
1,419.7 |
|
— |
|
1,419.7 |
| |||||
|
Investment contract withdrawals |
|
— |
|
— |
|
(2,852.0 |
) |
— |
|
(2,852.0 |
) | |||||
|
Net increase in banking operation deposits |
|
— |
|
— |
|
6.9 |
|
— |
|
6.9 |
| |||||
|
Other |
|
— |
|
— |
|
(0.8 |
) |
— |
|
(0.8 |
) | |||||
|
Net cash used in financing activities |
|
(138.2 |
) |
(18.8 |
) |
(1,685.9 |
) |
256.4 |
|
(1,586.5 |
) | |||||
|
Net decrease in cash and cash equivalents |
|
(94.4 |
) |
(27.7 |
) |
(2,485.4 |
) |
91.5 |
|
(2,516.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
207.1 |
|
612.5 |
|
4,241.3 |
|
(883.7 |
) |
4,177.2 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
112.7 |
|
$ |
584.8 |
|
$ |
1,755.9 |
|
$ |
(792.2 |
) |
$ |
1,661.2 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
79.9 |
|
$ |
(56.7 |
) |
$ |
824.3 |
|
$ |
54.2 |
|
$ |
901.7 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
— |
|
(2,060.5 |
) |
— |
|
(2,060.5 |
) | |||||
|
Sales |
|
— |
|
— |
|
428.5 |
|
— |
|
428.5 |
| |||||
|
Maturities |
|
— |
|
— |
|
1,612.1 |
|
— |
|
1,612.1 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
— |
|
(919.6 |
) |
— |
|
(919.6 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
— |
|
361.4 |
|
— |
|
361.4 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(21.3 |
) |
— |
|
(21.3 |
) | |||||
|
Net purchases of property and equipment |
|
— |
|
— |
|
(17.3 |
) |
— |
|
(17.3 |
) | |||||
|
Dividends and returns of capital received from unconsolidated entities |
|
189.3 |
|
165.5 |
|
— |
|
(354.8 |
) |
— |
| |||||
|
Net change in other investments |
|
— |
|
— |
|
(73.8 |
) |
— |
|
(73.8 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
189.3 |
|
165.5 |
|
(690.5 |
) |
(354.8 |
) |
(690.5 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
9.1 |
|
— |
|
— |
|
— |
|
9.1 |
| |||||
|
Acquisition of treasury stock |
|
(64.2 |
) |
— |
|
— |
|
— |
|
(64.2 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
— |
|
20.4 |
|
— |
|
20.4 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
— |
|
(16.2 |
) |
— |
|
(16.2 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
— |
|
9.9 |
|
— |
|
9.9 |
| |||||
|
Dividends to common stockholders |
|
(54.3 |
) |
— |
|
— |
|
— |
|
(54.3 |
) | |||||
|
Dividends to preferred stockholders |
|
(8.2 |
) |
— |
|
— |
|
— |
|
(8.2 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
1.0 |
|
— |
|
1.0 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(0.8 |
) |
— |
|
(0.8 |
) | |||||
|
Net proceeds from (repayments of) short-term borrowings |
|
— |
|
— |
|
98.9 |
|
(106.4 |
) |
(7.5 |
) | |||||
|
Dividends and capital paid to parent |
|
— |
|
(189.3 |
) |
(165.5 |
) |
354.8 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
— |
|
1,618.6 |
|
— |
|
1,618.6 |
| |||||
|
Investment contract withdrawals |
|
— |
|
— |
|
(2,885.9 |
) |
— |
|
(2,885.9 |
) | |||||
|
Net decrease in banking operation deposits |
|
— |
|
— |
|
(13.4 |
) |
— |
|
(13.4 |
) | |||||
|
Other |
|
— |
|
— |
|
(1.7 |
) |
— |
|
(1.7 |
) | |||||
|
Net cash used in financing activities |
|
(117.6 |
) |
(189.3 |
) |
(1,334.7 |
) |
248.4 |
|
(1,393.2 |
) | |||||
|
Net increase (decrease) in cash and cash equivalents |
|
151.6 |
|
(80.5 |
) |
(1,200.9 |
) |
(52.2 |
) |
(1,182.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
226.7 |
|
702.4 |
|
2,787.9 |
|
(883.1 |
) |
2,833.9 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
378.3 |
|
$ |
621.9 |
|
$ |
1,587.0 |
|
$ |
(935.3 |
) |
$ |
1,651.9 |
|
|
|||
Separate Accounts
The separate accounts are legally segregated and are not subject to the claims that arise out of any of our other business. The client, rather than us, directs the investments and bears the investment risk of these funds. The separate account assets represent the fair value of funds that are separately administered by us for contracts with equity, real estate and fixed income investments and are presented as a summary total within the consolidated statements of financial position. An equivalent amount is reported as separate account liabilities, which represent the obligation to return the monies to the client. We receive fees for mortality, withdrawal and expense risks, as well as administrative, maintenance and investment advisory services that are included in the consolidated statements of operations. Net deposits, net investment income and realized and unrealized capital gains and losses of the separate accounts are not reflected in the consolidated statements of operations. Separate account assets and separate account liabilities include certain non-domestic retirement accumulation products where the segregated funds and associated obligation to the client are consolidated within our financial statements. We have determined that summary totals are the most meaningful presentation for these funds.
At March 31, 2013 and December 31, 2012, the separate account assets include a separate account valued at $171.5 million and $148.3 million, respectively, which primarily includes shares of our stock that were allocated and issued to eligible participants of qualified employee benefit plans administered by us as part of the policy credits issued under our 2001 demutualization. These shares are included in both basic and diluted earnings per share calculations. In the consolidated statements of financial position, the separate account shares are recorded at fair value and are reported as separate account assets with a corresponding separate account liability to eligible participants of the qualified plan. Changes in fair value of the separate account shares are reflected in both the separate account assets and separate account liabilities and do not impact our results of operations.
|
|||
Consolidated Statements of Financial Position
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale |
|
$ |
50,939.3 |
|
$ |
50,939.3 |
|
$ |
49,006.7 |
|
$ |
49,006.7 |
|
|
Fixed maturities, trading |
|
626.7 |
|
626.7 |
|
971.7 |
|
971.7 |
| ||||
|
Equity securities, available-for-sale |
|
136.5 |
|
136.5 |
|
77.1 |
|
77.1 |
| ||||
|
Equity securities, trading |
|
252.8 |
|
252.8 |
|
404.8 |
|
404.8 |
| ||||
|
Mortgage loans |
|
11,519.7 |
|
11,519.7 |
|
10,727.2 |
|
10,727.2 |
| ||||
|
Real estate |
|
1,180.3 |
|
1,180.3 |
|
1,092.9 |
|
1,092.9 |
| ||||
|
Policy loans |
|
864.9 |
|
864.9 |
|
885.1 |
|
885.1 |
| ||||
|
Other investments |
|
3,291.1 |
|
3,291.1 |
|
2,985.8 |
|
2,985.8 |
| ||||
|
Total investments |
|
68,811.3 |
|
68,811.3 |
|
66,151.3 |
|
66,151.3 |
| ||||
|
Cash and cash equivalents |
|
4,177.2 |
|
4,177.2 |
|
2,833.9 |
|
2,833.9 |
| ||||
|
Accrued investment income |
|
584.4 |
|
584.4 |
|
615.2 |
|
615.2 |
| ||||
|
Premiums due and other receivables |
|
1,084.4 |
|
1,084.4 |
|
1,196.5 |
|
1,196.5 |
| ||||
|
Deferred acquisition costs |
|
2,673.8 |
|
2,590.0 |
|
2,428.0 |
|
2,358.1 |
| ||||
|
Property and equipment |
|
464.2 |
|
464.2 |
|
457.2 |
|
457.2 |
| ||||
|
Goodwill |
|
543.4 |
|
543.4 |
|
482.3 |
|
482.3 |
| ||||
|
Other intangibles |
|
927.2 |
|
914.7 |
|
890.6 |
|
870.3 |
| ||||
|
Separate account assets |
|
81,653.8 |
|
81,653.8 |
|
71,364.4 |
|
71,364.4 |
| ||||
|
Other assets |
|
1,006.8 |
|
1,006.8 |
|
942.3 |
|
942.3 |
| ||||
|
Total assets |
|
$ |
161,926.5 |
|
$ |
161,830.2 |
|
$ |
147,361.7 |
|
$ |
147,271.5 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Contractholder funds |
|
$ |
37,786.5 |
|
$ |
37,786.5 |
|
$ |
37,676.4 |
|
$ |
37,676.4 |
|
|
Future policy benefits and claims |
|
22,436.2 |
|
22,436.2 |
|
20,210.4 |
|
20,210.4 |
| ||||
|
Other policyholder funds |
|
716.4 |
|
716.4 |
|
548.6 |
|
548.6 |
| ||||
|
Short-term debt |
|
40.8 |
|
40.8 |
|
105.2 |
|
105.2 |
| ||||
|
Long-term debt |
|
2,671.3 |
|
2,671.3 |
|
1,564.8 |
|
1,564.8 |
| ||||
|
Income taxes currently payable |
|
15.3 |
|
15.3 |
|
3.1 |
|
3.1 |
| ||||
|
Deferred income taxes |
|
626.5 |
|
600.0 |
|
208.7 |
|
184.0 |
| ||||
|
Separate account liabilities |
|
81,653.8 |
|
81,653.8 |
|
71,364.4 |
|
71,364.4 |
| ||||
|
Other liabilities |
|
6,146.1 |
|
6,146.1 |
|
6,286.2 |
|
6,286.2 |
| ||||
|
Total liabilities |
|
152,092.9 |
|
152,066.4 |
|
137,967.8 |
|
137,943.1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Redeemable noncontrolling interest |
|
60.4 |
|
60.4 |
|
22.2 |
|
22.2 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
| ||||
|
Series A preferred stock, par value |
|
— |
|
— |
|
— |
|
— |
| ||||
|
Series B preferred stock, par value |
|
0.1 |
|
0.1 |
|
0.1 |
|
0.1 |
| ||||
|
Common stock, par value |
|
4.5 |
|
4.5 |
|
4.5 |
|
4.5 |
| ||||
|
Additional paid-in capital |
|
9,730.9 |
|
9,730.9 |
|
9,634.7 |
|
9,634.7 |
| ||||
|
Retained earnings |
|
4,940.2 |
|
4,862.0 |
|
4,402.3 |
|
4,323.4 |
| ||||
|
Accumulated other comprehensive income |
|
631.9 |
|
640.3 |
|
258.0 |
|
271.4 |
| ||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
(5,554.4 |
) |
(5,281.7 |
) |
(5,281.7 |
) | ||||
|
Total stockholders’ equity attributable to Principal Financial Group, Inc. |
|
9,753.2 |
|
9,683.4 |
|
9,017.9 |
|
8,952.4 |
| ||||
|
Noncontrolling interest |
|
20.0 |
|
20.0 |
|
353.8 |
|
353.8 |
| ||||
|
Total stockholders’ equity |
|
9,773.2 |
|
9,703.4 |
|
9,371.7 |
|
9,306.2 |
| ||||
|
Total liabilities and stockholders’ equity |
|
$ |
161,926.5 |
|
$ |
161,830.2 |
|
$ |
147,361.7 |
|
$ |
147,271.5 |
|
Consolidated Statements of Operations
|
|
|
For the year ended |
|
For the year ended |
| ||||||||
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions, except per share data) |
| ||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||
|
Premiums and other considerations |
|
$ |
3,219.4 |
|
$ |
3,219.4 |
|
$ |
2,891.0 |
|
$ |
2,891.0 |
|
|
Fees and other revenues |
|
2,626.7 |
|
2,626.7 |
|
2,526.7 |
|
2,526.7 |
| ||||
|
Net investment income |
|
3,254.9 |
|
3,254.9 |
|
3,375.3 |
|
3,375.3 |
| ||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
232.7 |
|
232.7 |
|
75.0 |
|
75.0 |
| ||||
|
Total other-than-temporary impairment losses on available-for- sale securities |
|
(135.9 |
) |
(135.9 |
) |
(147.6 |
) |
(147.6 |
) | ||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income |
|
17.3 |
|
17.3 |
|
(49.7 |
) |
(49.7 |
) | ||||
|
Net impairment losses on available-for-sale securities |
|
(118.6 |
) |
(118.6 |
) |
(197.3 |
) |
(197.3 |
) | ||||
|
Net realized capital gains (losses) |
|
114.1 |
|
114.1 |
|
(122.3 |
) |
(122.3 |
) | ||||
|
Total revenues |
|
9,215.1 |
|
9,215.1 |
|
8,670.7 |
|
8,670.7 |
| ||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||
|
Benefits, claims and settlement expenses |
|
5,123.9 |
|
5,123.9 |
|
4,616.6 |
|
4,616.6 |
| ||||
|
Dividends to policyholders |
|
197.7 |
|
197.7 |
|
210.2 |
|
210.2 |
| ||||
|
Operating expenses |
|
2,934.1 |
|
2,933.5 |
|
2,950.8 |
|
2,971.1 |
| ||||
|
Total expenses |
|
8,255.7 |
|
8,255.1 |
|
7,777.6 |
|
7,797.9 |
| ||||
|
Income before income taxes |
|
959.4 |
|
960.0 |
|
893.1 |
|
872.8 |
| ||||
|
Income taxes |
|
134.7 |
|
134.6 |
|
204.2 |
|
198.3 |
| ||||
|
Net income |
|
824.7 |
|
825.4 |
|
688.9 |
|
674.5 |
| ||||
|
Net income attributable to noncontrolling interest |
|
18.8 |
|
18.8 |
|
36.2 |
|
36.2 |
| ||||
|
Net income attributable to Principal Financial Group, Inc. |
|
805.9 |
|
806.6 |
|
652.7 |
|
638.3 |
| ||||
|
Preferred stock dividends |
|
33.0 |
|
33.0 |
|
33.0 |
|
33.0 |
| ||||
|
Net income available to common stockholders |
|
$ |
772.9 |
|
$ |
773.6 |
|
$ |
619.7 |
|
$ |
605.3 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per common share |
|
$ |
2.60 |
|
$ |
2.60 |
|
$ |
1.97 |
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per common share |
|
$ |
2.57 |
|
$ |
2.58 |
|
$ |
1.95 |
|
$ |
1.91 |
|
|
|
|
For the six months ended |
|
For the nine months ended |
| ||||||||
|
|
|
June 30, 2012 |
|
September 30, 2012 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions, except per share data) |
| ||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||
|
Premiums and other considerations |
|
$ |
1,361.1 |
|
$ |
1,361.1 |
|
$ |
2,519.3 |
|
$ |
2,519.3 |
|
|
Fees and other revenues |
|
1,234.1 |
|
1,234.1 |
|
1,909.1 |
|
1,909.1 |
| ||||
|
Net investment income |
|
1,625.8 |
|
1,625.8 |
|
2,409.6 |
|
2,409.6 |
| ||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
54.3 |
|
54.3 |
|
176.4 |
|
176.4 |
| ||||
|
Total other-than-temporary impairment losses on available-for- sale securities |
|
(82.8 |
) |
(82.8 |
) |
(126.4 |
) |
(126.4 |
) | ||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
22.0 |
|
22.0 |
|
31.2 |
|
31.2 |
| ||||
|
Net impairment losses on available-for-sale securities |
|
(60.8 |
) |
(60.8 |
) |
(95.2 |
) |
(95.2 |
) | ||||
|
Net realized capital gains (losses) |
|
(6.5 |
) |
(6.5 |
) |
81.2 |
|
81.2 |
| ||||
|
Total revenues |
|
4,214.5 |
|
4,214.5 |
|
6,919.2 |
|
6,919.2 |
| ||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||
|
Benefits, claims and settlement expenses |
|
2,322.5 |
|
2,322.5 |
|
3,969.5 |
|
3,969.5 |
| ||||
|
Dividends to policyholders |
|
99.8 |
|
99.8 |
|
149.5 |
|
149.5 |
| ||||
|
Operating expenses |
|
1,280.1 |
|
1,284.7 |
|
2,106.7 |
|
2,101.1 |
| ||||
|
Total expenses |
|
3,702.4 |
|
3,707.0 |
|
6,225.7 |
|
6,220.1 |
| ||||
|
Income before income taxes |
|
512.1 |
|
507.5 |
|
693.5 |
|
699.1 |
| ||||
|
Income taxes |
|
109.1 |
|
107.6 |
|
99.2 |
|
100.4 |
| ||||
|
Net income |
|
403.0 |
|
399.9 |
|
594.3 |
|
598.7 |
| ||||
|
Net income attributable to noncontrolling interest |
|
11.9 |
|
11.9 |
|
15.3 |
|
15.3 |
| ||||
|
Net income attributable to Principal Financial Group, Inc. |
|
391.1 |
|
388.0 |
|
579.0 |
|
583.4 |
| ||||
|
Preferred stock dividends |
|
16.5 |
|
16.5 |
|
24.7 |
|
24.7 |
| ||||
|
Net income available to common stockholders |
|
$ |
374.6 |
|
$ |
371.5 |
|
$ |
554.3 |
|
$ |
558.7 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per common share |
|
$ |
1.25 |
|
$ |
1.24 |
|
$ |
1.86 |
|
$ |
1.87 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per common share |
|
$ |
1.24 |
|
$ |
1.22 |
|
$ |
1.84 |
|
$ |
1.85 |
|
|
|
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
| ||||||||||||||||
|
|
|
March 31, 2012 |
|
June 30, 2012 |
|
September 30, 2012 |
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||||||
|
|
|
(in millions, except per share data) |
| ||||||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Premiums and other considerations |
|
$ |
679.8 |
|
$ |
679.8 |
|
$ |
681.3 |
|
$ |
681.3 |
|
$ |
1,158.2 |
|
$ |
1,158.2 |
|
$ |
700.1 |
|
$ |
700.1 |
|
|
Fees and other revenues |
|
598.0 |
|
598.0 |
|
636.1 |
|
636.1 |
|
675.0 |
|
675.0 |
|
717.6 |
|
717.6 |
| ||||||||
|
Net investment income |
|
824.8 |
|
824.8 |
|
801.0 |
|
801.0 |
|
783.8 |
|
783.8 |
|
845.3 |
|
845.3 |
| ||||||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
22.1 |
|
22.1 |
|
32.2 |
|
32.2 |
|
122.1 |
|
122.1 |
|
56.3 |
|
56.3 |
| ||||||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
(33.7 |
) |
(33.7 |
) |
(49.1 |
) |
(49.1 |
) |
(43.6 |
) |
(43.6 |
) |
(9.5 |
) |
(9.5 |
) | ||||||||
|
Other-than-temporary impairment losses on fixed maturities, available-for- sale reclassified to (from) other comprehensive income |
|
4.9 |
|
4.9 |
|
17.1 |
|
17.1 |
|
9.2 |
|
9.2 |
|
(13.9 |
) |
(13.9 |
) | ||||||||
|
Net impairment losses on available-for-sale securities |
|
(28.8 |
) |
(28.8 |
) |
(32.0 |
) |
(32.0 |
) |
(34.4 |
) |
(34.4 |
) |
(23.4 |
) |
(23.4 |
) | ||||||||
|
Net realized capital gains (losses) |
|
(6.7 |
) |
(6.7 |
) |
0.2 |
|
0.2 |
|
87.7 |
|
87.7 |
|
32.9 |
|
32.9 |
| ||||||||
|
Total revenues |
|
2,095.9 |
|
2,095.9 |
|
2,118.6 |
|
2,118.6 |
|
2,704.7 |
|
2,704.7 |
|
2,295.9 |
|
2,295.9 |
| ||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Benefits, claims and settlement expenses |
|
1,212.5 |
|
1,212.5 |
|
1,110.0 |
|
1,110.0 |
|
1,647.0 |
|
1,647.0 |
|
1,154.4 |
|
1,154.4 |
| ||||||||
|
Dividends to policyholders |
|
50.3 |
|
50.3 |
|
49.5 |
|
49.5 |
|
49.7 |
|
49.7 |
|
48.2 |
|
48.2 |
| ||||||||
|
Operating expenses |
|
556.0 |
|
555.1 |
|
724.1 |
|
729.6 |
|
826.6 |
|
816.4 |
|
827.4 |
|
832.4 |
| ||||||||
|
Total expenses |
|
1,818.8 |
|
1,817.9 |
|
1,883.6 |
|
1,889.1 |
|
2,523.3 |
|
2,513.1 |
|
2,030.0 |
|
2,035.0 |
| ||||||||
|
Income before income taxes |
|
277.1 |
|
278.0 |
|
235.0 |
|
229.5 |
|
181.4 |
|
191.6 |
|
265.9 |
|
260.9 |
| ||||||||
|
Income taxes (benefits) |
|
58.2 |
|
56.7 |
|
50.9 |
|
50.9 |
|
(9.9 |
) |
(7.2 |
) |
35.5 |
|
34.2 |
| ||||||||
|
Net income |
|
218.9 |
|
221.3 |
|
184.1 |
|
178.6 |
|
191.3 |
|
198.8 |
|
230.4 |
|
226.7 |
| ||||||||
|
Net income attributable to noncontrolling interest |
|
9.2 |
|
9.2 |
|
2.7 |
|
2.7 |
|
3.4 |
|
3.4 |
|
3.5 |
|
3.5 |
| ||||||||
|
Net income attributable to Principal Financial Group, Inc. |
|
209.7 |
|
212.1 |
|
181.4 |
|
175.9 |
|
187.9 |
|
195.4 |
|
226.9 |
|
223.2 |
| ||||||||
|
Preferred stock dividends |
|
8.2 |
|
8.2 |
|
8.3 |
|
8.3 |
|
8.2 |
|
8.2 |
|
8.3 |
|
8.3 |
| ||||||||
|
Net income available to common stockholders |
|
$ |
201.5 |
|
$ |
203.9 |
|
$ |
173.1 |
|
$ |
167.6 |
|
$ |
179.7 |
|
$ |
187.2 |
|
$ |
218.6 |
|
$ |
214.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Basic earnings per common share |
|
$ |
0.67 |
|
$ |
0.68 |
|
$ |
0.58 |
|
$ |
0.56 |
|
$ |
0.61 |
|
$ |
0.64 |
|
$ |
0.74 |
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Diluted earnings per common share |
|
$ |
0.66 |
|
$ |
0.68 |
|
$ |
0.58 |
|
$ |
0.56 |
|
$ |
0.60 |
|
$ |
0.63 |
|
$ |
0.74 |
|
$ |
0.72 |
|
Consolidated Statements of Comprehensive Income
|
|
|
For the year ended |
|
For the year ended |
| ||||||||
|
|
|
December 31, 2012 |
|
December 31, 2011 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Net income |
|
$ |
824.7 |
|
$ |
825.4 |
|
$ |
688.9 |
|
$ |
674.5 |
|
|
Other comprehensive income (loss), net: |
|
|
|
|
|
|
|
|
| ||||
|
Net unrealized gains on available-for-sale securities |
|
557.6 |
|
557.6 |
|
208.6 |
|
208.6 |
| ||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(6.7 |
) |
(6.7 |
) |
31.0 |
|
31.0 |
| ||||
|
Net unrealized gains (losses) on derivative instruments |
|
(43.6 |
) |
(43.6 |
) |
23.6 |
|
23.6 |
| ||||
|
Foreign currency translation adjustment |
|
(4.8 |
) |
(9.8 |
) |
(139.5 |
) |
(130.9 |
) | ||||
|
Net unrecognized postretirement benefit obligation |
|
(127.4 |
) |
(127.4 |
) |
(172.9 |
) |
(172.9 |
) | ||||
|
Other comprehensive income (loss) |
|
375.1 |
|
370.1 |
|
(49.2 |
) |
(40.6 |
) | ||||
|
Comprehensive income |
|
1,199.8 |
|
1,195.5 |
|
639.7 |
|
633.9 |
| ||||
|
Comprehensive income attributable to noncontrolling interest |
|
20.0 |
|
20.0 |
|
35.7 |
|
35.7 |
| ||||
|
Comprehensive income attributable to Principal Financial Group, Inc. |
|
$ |
1,179.8 |
|
$ |
1,175.5 |
|
$ |
604.0 |
|
$ |
598.2 |
|
|
|
|
For the six months ended |
|
For the nine months ended |
| ||||||||
|
|
|
June 30, 2012 |
|
September 30, 2012 |
| ||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Net income |
|
$ |
403.0 |
|
$ |
399.9 |
|
$ |
594.3 |
|
$ |
598.7 |
|
|
Other comprehensive income, net: |
|
|
|
|
|
|
|
|
| ||||
|
Net unrealized gains on available-for-sale securities |
|
262.0 |
|
262.0 |
|
558.0 |
|
558.0 |
| ||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(10.8 |
) |
(10.8 |
) |
(14.8 |
) |
(14.8 |
) | ||||
|
Net unrealized gains on derivative instruments |
|
45.4 |
|
45.4 |
|
27.2 |
|
27.2 |
| ||||
|
Foreign currency translation adjustment |
|
(21.4 |
) |
(23.9 |
) |
27.2 |
|
21.5 |
| ||||
|
Net unrecognized postretirement benefit obligation |
|
17.5 |
|
17.5 |
|
26.2 |
|
26.2 |
| ||||
|
Other comprehensive income |
|
292.7 |
|
290.2 |
|
623.8 |
|
618.1 |
| ||||
|
Comprehensive income |
|
695.7 |
|
690.1 |
|
1,218.1 |
|
1,216.8 |
| ||||
|
Comprehensive income attributable to noncontrolling interest |
|
12.1 |
|
12.1 |
|
16.3 |
|
16.3 |
| ||||
|
Comprehensive income attributable to Principal Financial Group, Inc. |
|
$ |
683.6 |
|
$ |
678.0 |
|
$ |
1,201.8 |
|
$ |
1,200.5 |
|
|
|
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
|
For the three months ended |
| ||||||||||||||||
|
|
|
March 31, 2012 |
|
June 30, 2012 |
|
September 30, 2012 |
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
|
As originally |
|
|
| ||||||||
|
|
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
|
reported |
|
As adjusted |
| ||||||||
|
|
|
(in millions) |
| ||||||||||||||||||||||
|
Net income |
|
$ |
218.9 |
|
$ |
221.3 |
|
$ |
184.1 |
|
$ |
178.6 |
|
$ |
191.3 |
|
$ |
198.8 |
|
$ |
230.4 |
|
$ |
226.7 |
|
|
Other comprehensive income (loss) net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Net unrealized gains (losses) on available-for-sale securities |
|
161.3 |
|
161.3 |
|
100.7 |
|
100.7 |
|
296.0 |
|
296.0 |
|
(0.4 |
) |
(0.4 |
) | ||||||||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(0.9 |
) |
(0.9 |
) |
(9.9 |
) |
(9.9 |
) |
(4.0 |
) |
(4.0 |
) |
8.1 |
|
8.1 |
| ||||||||
|
Net unrealized gains (losses) on derivative instruments |
|
(3.5 |
) |
(3.5 |
) |
48.9 |
|
48.9 |
|
(18.2 |
) |
(18.2 |
) |
(70.8 |
) |
(70.8 |
) | ||||||||
|
Foreign currency translation adjustment |
|
65.3 |
|
59.6 |
|
(86.7 |
) |
(83.5 |
) |
48.6 |
|
45.4 |
|
(32.0 |
) |
(31.3 |
) | ||||||||
|
Net unrecognized postretirement benefit obligation |
|
8.7 |
|
8.7 |
|
8.8 |
|
8.8 |
|
8.7 |
|
8.7 |
|
(153.6 |
) |
(153.6 |
) | ||||||||
|
Other comprehensive income (loss) |
|
230.9 |
|
225.2 |
|
61.8 |
|
65.0 |
|
331.1 |
|
327.9 |
|
(248.7 |
) |
(248.0 |
) | ||||||||
|
Comprehensive income (loss) |
|
449.8 |
|
446.5 |
|
245.9 |
|
243.6 |
|
522.4 |
|
526.7 |
|
(18.3 |
) |
(21.3 |
) | ||||||||
|
Comprehensive income attributable to noncontrolling interest |
|
10.0 |
|
10.0 |
|
2.1 |
|
2.1 |
|
4.2 |
|
4.2 |
|
3.7 |
|
3.7 |
| ||||||||
|
Comprehensive income (loss) attributable to Principal Financial Group, Inc. |
|
$ |
439.8 |
|
$ |
436.5 |
|
$ |
243.8 |
|
$ |
241.5 |
|
$ |
518.2 |
|
$ |
522.5 |
|
$ |
(22.0 |
) |
$ |
(25.0 |
) |
|
|||
A summary of the fair values of the net assets acquired as of February 4, 2013, based upon current valuation estimates, is as follows (in millions):
|
Assets |
|
|
| |
|
Equity securities, available-for-sale |
|
$ |
3.2 |
|
|
Equity securities, trading |
|
340.5 |
| |
|
Real estate |
|
1.9 |
| |
|
Other investments |
|
5.3 |
| |
|
Cash and cash equivalents |
|
3.5 |
| |
|
Premiums due and other receivables |
|
1.4 |
| |
|
Property and equipment |
|
19.6 |
| |
|
Goodwill |
|
646.3 |
| |
|
Other intangibles |
|
678.7 |
| |
|
Separate account assets |
|
33,919.4 |
| |
|
Other assets |
|
27.3 |
| |
|
Total assets |
|
35,647.1 |
| |
|
Liabilities |
|
|
| |
|
Short-term debt |
|
5.0 |
| |
|
Long-term debt |
|
114.6 |
| |
|
Separate account liabilities |
|
33,919.4 |
| |
|
Other liabilities |
|
231.0 |
| |
|
Total liabilities |
|
34,270.0 |
| |
|
Noncontrolling interest |
|
113.6 |
| |
|
Net assets acquired |
|
$ |
1,263.5 |
|
|
|
|
For the three months ended, |
| ||||
|
|
|
March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions, except per share data) |
| ||||
|
|
|
|
|
|
| ||
|
Total revenues |
|
$ |
2,216.6 |
|
$ |
2,159.1 |
|
|
Net income |
|
217.6 |
|
250.2 |
| ||
|
Basic earnings per common share |
|
0.74 |
|
0.83 |
| ||
|
Diluted earnings per common share |
|
0.73 |
|
0.82 |
| ||
|
|
|
For the three months ended, |
| |
|
|
|
March 31, 2013 |
| |
|
|
|
(in millions) |
| |
|
Total revenues |
|
$ |
18.3 |
|
|
Net income |
|
9.3 |
| |
|
|||
|
|
|
|
|
Collateralized |
|
|
|
Mandatory |
|
|
| |||||
|
|
|
|
|
private investment |
|
|
|
retirement |
|
|
| |||||
|
|
|
Grantor trusts |
|
vehicles |
|
CMBS |
|
savings |
|
Total |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
220.3 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
220.3 |
|
|
Fixed maturities, trading |
|
— |
|
110.4 |
|
— |
|
— |
|
110.4 |
| |||||
|
Other investments |
|
— |
|
— |
|
77.2 |
|
— |
|
77.2 |
| |||||
|
Accrued investment income |
|
0.5 |
|
— |
|
0.5 |
|
— |
|
1.0 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
— |
|
33,892.2 |
|
33,892.2 |
| |||||
|
Total assets |
|
$ |
220.8 |
|
$ |
110.4 |
|
$ |
77.7 |
|
$ |
33,892.2 |
|
$ |
34,301.1 |
|
|
Deferred income taxes |
|
$ |
1.8 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1.8 |
|
|
Separate account liabilities |
|
— |
|
— |
|
— |
|
33,892.2 |
|
33,892.2 |
| |||||
|
Other liabilities (1) |
|
175.3 |
|
100.4 |
|
42.6 |
|
— |
|
318.3 |
| |||||
|
Total liabilities |
|
$ |
177.1 |
|
$ |
100.4 |
|
$ |
42.6 |
|
$ |
33,892.2 |
|
$ |
34,212.3 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
194.6 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
194.6 |
|
|
Fixed maturities, trading |
|
— |
|
110.4 |
|
— |
|
— |
|
110.4 |
| |||||
|
Other investments |
|
— |
|
— |
|
80.3 |
|
— |
|
80.3 |
| |||||
|
Accrued investment income |
|
0.5 |
|
— |
|
0.6 |
|
— |
|
1.1 |
| |||||
|
Total assets |
|
$ |
195.1 |
|
$ |
110.4 |
|
$ |
80.9 |
|
$ |
— |
|
$ |
386.4 |
|
|
Deferred income taxes |
|
$ |
1.8 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1.8 |
|
|
Other liabilities (1) |
|
152.4 |
|
104.8 |
|
45.7 |
|
— |
|
302.9 |
| |||||
|
Total liabilities |
|
$ |
154.2 |
|
$ |
104.8 |
|
$ |
45.7 |
|
$ |
— |
|
$ |
304.7 |
|
(1) Grantor trusts contain an embedded derivative of a forecasted transaction to deliver the underlying securities; collateralized private investment vehicles include derivative liabilities and obligation to redeem notes at maturity or termination of the trust; CMBS includes obligation to the bondholders; and hedge funds include liabilities to securities brokers.
|
|
|
|
|
Maximum exposure to |
| ||
|
|
|
Asset carrying value |
|
loss (1) |
| ||
|
|
|
(in millions) |
| ||||
|
March 31, 2013 |
|
|
|
|
| ||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Corporate |
|
$ |
527.9 |
|
$ |
408.9 |
|
|
Residential mortgage-backed pass-through securities |
|
3,123.2 |
|
2,950.3 |
| ||
|
Commercial mortgage-backed securities |
|
3,990.7 |
|
4,110.9 |
| ||
|
Collateralized debt obligations |
|
394.0 |
|
431.7 |
| ||
|
Other debt obligations |
|
3,848.6 |
|
3,808.4 |
| ||
|
Fixed maturities, trading: |
|
|
|
|
| ||
|
Residential mortgage-backed pass-through securities |
|
71.5 |
|
71.5 |
| ||
|
Commercial mortgage-backed securities |
|
3.1 |
|
3.1 |
| ||
|
Collateralized debt obligations |
|
59.2 |
|
59.2 |
| ||
|
Other debt obligations |
|
1.9 |
|
1.9 |
| ||
|
Other investments: |
|
|
|
|
| ||
|
Other limited partnership interests |
|
128.4 |
|
128.4 |
| ||
|
|
|
|
|
|
| ||
|
December 31, 2012 |
|
|
|
|
| ||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Corporate |
|
$ |
523.2 |
|
$ |
403.7 |
|
|
Residential mortgage-backed pass-through securities |
|
3,226.7 |
|
3,022.7 |
| ||
|
Commercial mortgage-backed securities |
|
3,897.4 |
|
4,094.8 |
| ||
|
Collateralized debt obligations |
|
379.2 |
|
428.8 |
| ||
|
Other debt obligations |
|
3,779.2 |
|
3,756.9 |
| ||
|
Fixed maturities, trading: |
|
|
|
|
| ||
|
Residential mortgage-backed pass-through securities |
|
77.7 |
|
77.7 |
| ||
|
Commercial mortgage-backed securities |
|
2.8 |
|
2.8 |
| ||
|
Collateralized debt obligations |
|
56.4 |
|
56.4 |
| ||
|
Other debt obligations |
|
3.2 |
|
3.2 |
| ||
|
Other investments: |
|
|
|
|
| ||
|
Other limited partnership interests |
|
136.2 |
|
136.2 |
| ||
(1) Our risk of loss is limited to our initial investment measured at amortized cost for fixed maturities, available-for-sale and other investments. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading.
|
|||
|
|
|
|
|
|
|
|
|
|
|
Other-than- |
| |||||
|
|
|
|
|
Gross |
|
Gross |
|
|
|
temporary |
| |||||
|
|
|
Amortized |
|
unrealized |
|
unrealized |
|
|
|
impairments in |
| |||||
|
|
|
cost |
|
gains |
|
losses |
|
Fair value |
|
AOCI (1) |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
U.S. government and agencies |
|
$ |
930.4 |
|
$ |
29.0 |
|
$ |
6.1 |
|
$ |
953.3 |
|
$ |
— |
|
|
Non-U.S. government and agencies |
|
903.9 |
|
278.9 |
|
3.1 |
|
1,179.7 |
|
— |
| |||||
|
States and political subdivisions |
|
3,260.8 |
|
234.8 |
|
3.8 |
|
3,491.8 |
|
— |
| |||||
|
Corporate |
|
31,510.2 |
|
2,881.9 |
|
289.3 |
|
34,102.8 |
|
20.4 |
| |||||
|
Residential mortgage-backed pass-through securities |
|
2,950.3 |
|
176.8 |
|
3.9 |
|
3,123.2 |
|
— |
| |||||
|
Commercial mortgage-backed securities |
|
4,110.9 |
|
251.7 |
|
371.9 |
|
3,990.7 |
|
217.8 |
| |||||
|
Collateralized debt obligations |
|
431.7 |
|
8.6 |
|
46.3 |
|
394.0 |
|
3.1 |
| |||||
|
Other debt obligations |
|
3,808.4 |
|
75.4 |
|
35.2 |
|
3,848.6 |
|
80.9 |
| |||||
|
Total fixed maturities, available-for-sale |
|
$ |
47,906.6 |
|
$ |
3,937.1 |
|
$ |
759.6 |
|
$ |
51,084.1 |
|
$ |
322.2 |
|
|
Total equity securities, available-for-sale |
|
$ |
138.9 |
|
$ |
14.1 |
|
$ |
6.0 |
|
$ |
147.0 |
|
|
| |
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
U.S. government and agencies |
|
$ |
911.4 |
|
$ |
33.2 |
|
$ |
0.3 |
|
$ |
944.3 |
|
$ |
— |
|
|
Non-U.S. government and agencies |
|
944.9 |
|
264.3 |
|
0.9 |
|
1,208.3 |
|
— |
| |||||
|
States and political subdivisions |
|
2,940.4 |
|
241.1 |
|
2.7 |
|
3,178.8 |
|
— |
| |||||
|
Corporate |
|
31,615.4 |
|
3,029.9 |
|
319.9 |
|
34,325.4 |
|
19.5 |
| |||||
|
Residential mortgage-backed pass-through securities |
|
3,022.7 |
|
204.4 |
|
0.4 |
|
3,226.7 |
|
— |
| |||||
|
Commercial mortgage-backed securities |
|
4,094.8 |
|
241.7 |
|
439.1 |
|
3,897.4 |
|
195.4 |
| |||||
|
Collateralized debt obligations |
|
428.8 |
|
7.0 |
|
56.6 |
|
379.2 |
|
4.3 |
| |||||
|
Other debt obligations |
|
3,756.9 |
|
73.5 |
|
51.2 |
|
3,779.2 |
|
82.8 |
| |||||
|
Total fixed maturities, available-for-sale |
|
$ |
47,715.3 |
|
$ |
4,095.1 |
|
$ |
871.1 |
|
$ |
50,939.3 |
|
$ |
302.0 |
|
|
Total equity securities, available-for-sale |
|
$ |
132.4 |
|
$ |
12.6 |
|
$ |
8.5 |
|
$ |
136.5 |
|
|
| |
(1) Excludes $127.9 million and $95.0 million as of March 31, 2013 and December 31, 2012, respectively, of net unrealized gains on impaired fixed maturities, available-for-sale related to changes in fair value subsequent to the impairment date, which are included in gross unrealized gains and gross unrealized losses.
|
|
|
Amortized cost |
|
Fair value |
| ||
|
|
|
(in millions) |
| ||||
|
Due in one year or less |
|
$ |
3,516.1 |
|
$ |
3,573.7 |
|
|
Due after one year through five years |
|
12,817.9 |
|
13,553.1 |
| ||
|
Due after five years through ten years |
|
8,817.9 |
|
9,801.2 |
| ||
|
Due after ten years |
|
11,453.4 |
|
12,799.6 |
| ||
|
Subtotal |
|
36,605.3 |
|
39,727.6 |
| ||
|
Mortgage-backed and other asset-backed securities |
|
11,301.3 |
|
11,356.5 |
| ||
|
Total |
|
$ |
47,906.6 |
|
$ |
51,084.1 |
|
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
| ||
|
Gross gains |
|
$ |
15.5 |
|
$ |
15.3 |
|
|
Gross losses |
|
(50.7 |
) |
(36.1 |
) | ||
|
Other-than-temporary impairment losses reclassified to OCI |
|
20.2 |
|
4.9 |
| ||
|
Hedging, net |
|
(29.0 |
) |
(16.7 |
) | ||
|
Fixed maturities, trading |
|
0.1 |
|
3.0 |
| ||
|
Equity securities, available-for-sale: |
|
|
|
|
| ||
|
Gross gains |
|
— |
|
0.1 |
| ||
|
Equity securities, trading |
|
6.3 |
|
34.2 |
| ||
|
Mortgage loans |
|
(6.2 |
) |
(11.1 |
) | ||
|
Derivatives |
|
18.2 |
|
27.6 |
| ||
|
Other |
|
(25.3 |
) |
(27.9 |
) | ||
|
Net realized capital losses |
|
$ |
(50.9 |
) |
$ |
(6.7 |
) |
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale |
|
$ |
(44.7 |
) |
$ |
(33.7 |
) |
|
Equity securities, available-for-sale |
|
— |
|
— |
| ||
|
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities |
|
(44.7 |
) |
(33.7 |
) | ||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to OCI (1) |
|
20.2 |
|
4.9 |
| ||
|
Net impairment losses on available-for-sale securities |
|
$ |
(24.5 |
) |
$ |
(28.8 |
) |
(1) Represents the net impact of (a) gains resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI and (b) losses resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold.
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Beginning balance |
|
$ |
(335.2 |
) |
$ |
(434.8 |
) |
|
Credit losses for which an other-than-temporary impairment was not previously recognized |
|
(4.3 |
) |
(7.4 |
) | ||
|
Credit losses for which an other-than-temporary impairment was previously recognized |
|
(18.3 |
) |
(20.8 |
) | ||
|
Reduction for credit losses previously recognized on fixed maturities now sold or intended to be sold |
|
35.8 |
|
57.3 |
| ||
|
Net reduction for positive changes in cash flows expected to be collected and amortization (1) |
|
3.4 |
|
1.0 |
| ||
|
Ending balance |
|
$ |
(318.6 |
) |
$ |
(404.7 |
) |
(1) Amounts are recognized in net investment income.
|
|
|
March 31, 2013 |
| ||||||||||||||||
|
|
|
Less than |
|
Greater than or |
|
|
| ||||||||||||
|
|
|
twelve months |
|
equal to twelve months |
|
Total |
| ||||||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
| ||||||
|
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
| ||||||
|
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U.S. government and agencies |
|
$ |
233.0 |
|
$ |
6.1 |
|
$ |
— |
|
$ |
— |
|
$ |
233.0 |
|
$ |
6.1 |
|
|
Non-U.S. governments |
|
30.0 |
|
1.3 |
|
11.6 |
|
1.8 |
|
41.6 |
|
3.1 |
| ||||||
|
States and political subdivisions |
|
342.9 |
|
3.3 |
|
8.7 |
|
0.5 |
|
351.6 |
|
3.8 |
| ||||||
|
Corporate |
|
1,318.1 |
|
21.1 |
|
1,619.7 |
|
268.2 |
|
2,937.8 |
|
289.3 |
| ||||||
|
Residential mortgage-backed pass- through securities |
|
349.6 |
|
3.8 |
|
2.1 |
|
0.1 |
|
351.7 |
|
3.9 |
| ||||||
|
Commercial mortgage-backed securities |
|
96.3 |
|
1.4 |
|
687.1 |
|
370.5 |
|
783.4 |
|
371.9 |
| ||||||
|
Collateralized debt obligations |
|
30.2 |
|
0.1 |
|
92.4 |
|
46.2 |
|
122.6 |
|
46.3 |
| ||||||
|
Other debt obligations |
|
396.5 |
|
2.9 |
|
275.9 |
|
32.3 |
|
672.4 |
|
35.2 |
| ||||||
|
Total fixed maturities, available-for-sale |
|
$ |
2,796.6 |
|
$ |
40.0 |
|
$ |
2,697.5 |
|
$ |
719.6 |
|
$ |
5,494.1 |
|
$ |
759.6 |
|
|
Total equity securities, available-for-sale |
|
$ |
5.0 |
|
$ |
— |
|
$ |
55.4 |
|
$ |
6.0 |
|
$ |
60.4 |
|
$ |
6.0 |
|
|
|
|
December 31, 2012 |
| ||||||||||||||||
|
|
|
Less than |
|
Greater than or |
|
|
| ||||||||||||
|
|
|
twelve months |
|
equal to twelve months |
|
Total |
| ||||||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
| ||||||
|
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
| ||||||
|
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
U.S. government and agencies |
|
$ |
115.4 |
|
$ |
0.3 |
|
$ |
— |
|
$ |
— |
|
$ |
115.4 |
|
$ |
0.3 |
|
|
Non-U.S. governments |
|
17.3 |
|
0.2 |
|
13.4 |
|
0.7 |
|
30.7 |
|
0.9 |
| ||||||
|
States and political subdivisions |
|
235.3 |
|
2.1 |
|
8.8 |
|
0.6 |
|
244.1 |
|
2.7 |
| ||||||
|
Corporate |
|
831.8 |
|
10.6 |
|
1,961.7 |
|
309.3 |
|
2,793.5 |
|
319.9 |
| ||||||
|
Residential mortgage-backed pass-through securities |
|
70.4 |
|
0.3 |
|
2.4 |
|
0.1 |
|
72.8 |
|
0.4 |
| ||||||
|
Commercial mortgage-backed securities |
|
98.9 |
|
3.3 |
|
785.0 |
|
435.8 |
|
883.9 |
|
439.1 |
| ||||||
|
Collateralized debt obligations |
|
72.2 |
|
1.0 |
|
133.8 |
|
55.6 |
|
206.0 |
|
56.6 |
| ||||||
|
Other debt obligations |
|
235.6 |
|
2.0 |
|
414.9 |
|
49.2 |
|
650.5 |
|
51.2 |
| ||||||
|
Total fixed maturities, available-for-sale |
|
$ |
1,676.9 |
|
$ |
19.8 |
|
$ |
3,320.0 |
|
$ |
851.3 |
|
$ |
4,996.9 |
|
$ |
871.1 |
|
|
Total equity securities, available-for-sale |
|
$ |
5.8 |
|
$ |
0.1 |
|
$ |
52.9 |
|
$ |
8.4 |
|
$ |
58.7 |
|
$ |
8.5 |
|
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Net unrealized gains on fixed maturities, available-for-sale (1) |
|
$ |
3,495.7 |
|
$ |
3,562.5 |
|
|
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(322.2 |
) |
(302.0 |
) | ||
|
Net unrealized gains on equity securities, available-for-sale |
|
8.1 |
|
4.1 |
| ||
|
Adjustments for assumed changes in amortization patterns |
|
(469.3 |
) |
(515.2 |
) | ||
|
Adjustments for assumed changes in policyholder liabilities |
|
(1,289.2 |
) |
(1,198.7 |
) | ||
|
Net unrealized gains on derivative instruments |
|
122.8 |
|
90.7 |
| ||
|
Net unrealized gains on equity method subsidiaries and noncontrolling interest adjustments |
|
155.9 |
|
191.3 |
| ||
|
Provision for deferred income taxes |
|
(554.7 |
) |
(597.0 |
) | ||
|
Net unrealized gains on available-for-sale securities and derivative instruments |
|
$ |
1,147.1 |
|
$ |
1,235.7 |
|
(1) Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships.
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Commercial mortgage loans |
|
$ |
10,286.5 |
|
$ |
10,235.1 |
|
|
Residential mortgage loans |
|
1,380.9 |
|
1,382.0 |
| ||
|
Total amortized cost |
|
11,667.4 |
|
11,617.1 |
| ||
|
|
|
|
|
|
| ||
|
Valuation allowance |
|
(89.5 |
) |
(97.4 |
) | ||
|
Total carrying value |
|
$ |
11,577.9 |
|
$ |
11,519.7 |
|
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||
|
|
|
Amortized |
|
Percent |
|
Amortized |
|
Percent |
| ||
|
|
|
cost |
|
of total |
|
cost |
|
of total |
| ||
|
|
|
($in millions) |
| ||||||||
|
Geographic distribution |
|
|
|
|
|
|
|
|
| ||
|
New England |
|
$ |
539.0 |
|
5.2 |
% |
$ |
536.6 |
|
5.2 |
% |
|
Middle Atlantic |
|
2,275.8 |
|
22.2 |
|
2,233.4 |
|
21.8 |
| ||
|
East North Central |
|
588.1 |
|
5.7 |
|
635.6 |
|
6.2 |
| ||
|
West North Central |
|
377.7 |
|
3.7 |
|
377.3 |
|
3.7 |
| ||
|
South Atlantic |
|
2,065.4 |
|
20.1 |
|
2,135.0 |
|
20.9 |
| ||
|
East South Central |
|
199.8 |
|
1.9 |
|
244.8 |
|
2.4 |
| ||
|
West South Central |
|
784.2 |
|
7.6 |
|
767.9 |
|
7.5 |
| ||
|
Mountain |
|
754.8 |
|
7.3 |
|
726.6 |
|
7.1 |
| ||
|
Pacific |
|
2,677.7 |
|
26.1 |
|
2,562.3 |
|
25.0 |
| ||
|
International |
|
24.0 |
|
0.2 |
|
15.6 |
|
0.2 |
| ||
|
Total |
|
$ |
10,286.5 |
|
100.0 |
% |
$ |
10,235.1 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
| ||
|
Property type distribution |
|
|
|
|
|
|
|
|
| ||
|
Office |
|
$ |
3,288.3 |
|
31.9 |
% |
$ |
3,078.8 |
|
30.1 |
% |
|
Retail |
|
2,866.4 |
|
27.9 |
|
2,928.3 |
|
28.6 |
| ||
|
Industrial |
|
1,697.0 |
|
16.5 |
|
1,765.5 |
|
17.2 |
| ||
|
Apartments |
|
1,676.6 |
|
16.3 |
|
1,685.9 |
|
16.5 |
| ||
|
Hotel |
|
440.6 |
|
4.3 |
|
445.8 |
|
4.4 |
| ||
|
Mixed use/other |
|
317.6 |
|
3.1 |
|
330.8 |
|
3.2 |
| ||
|
Total |
|
$ |
10,286.5 |
|
100.0 |
% |
$ |
10,235.1 |
|
100.0 |
% |
|
|
|
March 31, 2013 |
| |||||||
|
|
|
Brick and mortar |
|
CTL |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
A- and above |
|
$ |
7,520.9 |
|
$ |
210.5 |
|
$ |
7,731.4 |
|
|
BBB+ thru BBB- |
|
1,718.8 |
|
277.7 |
|
1,996.5 |
| |||
|
BB+ thru BB- |
|
278.5 |
|
1.3 |
|
279.8 |
| |||
|
B+ and below |
|
276.5 |
|
2.3 |
|
278.8 |
| |||
|
Total |
|
$ |
9,794.7 |
|
$ |
491.8 |
|
$ |
10,286.5 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
Brick and mortar |
|
CTL |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
A- and above |
|
$ |
7,257.7 |
|
$ |
231.3 |
|
$ |
7,489.0 |
|
|
BBB+ thru BBB- |
|
1,804.5 |
|
294.9 |
|
2,099.4 |
| |||
|
BB+ thru BB- |
|
266.8 |
|
1.6 |
|
268.4 |
| |||
|
B+ and below |
|
376.0 |
|
2.3 |
|
378.3 |
| |||
|
Total |
|
$ |
9,705.0 |
|
$ |
530.1 |
|
$ |
10,235.1 |
|
|
|
|
March 31, 2013 |
| |||||||
|
|
|
Home equity |
|
First liens |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
Performing |
|
$ |
447.9 |
|
$ |
889.0 |
|
$ |
1,336.9 |
|
|
Nonperforming |
|
22.3 |
|
21.7 |
|
44.0 |
| |||
|
Total |
|
$ |
470.2 |
|
$ |
910.7 |
|
$ |
1,380.9 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
Home equity |
|
First liens |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
Performing |
|
$ |
472.6 |
|
$ |
865.0 |
|
$ |
1,337.6 |
|
|
Nonperforming |
|
23.1 |
|
21.3 |
|
44.4 |
| |||
|
Total |
|
$ |
495.7 |
|
$ |
886.3 |
|
$ |
1,382.0 |
|
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Commercial: |
|
|
|
|
| ||
|
Brick and mortar |
|
$ |
76.6 |
|
$ |
44.5 |
|
|
Residential: |
|
|
|
|
| ||
|
Home equity |
|
22.3 |
|
23.1 |
| ||
|
First liens |
|
13.3 |
|
13.2 |
| ||
|
Total |
|
$ |
112.2 |
|
$ |
80.8 |
|
|
|
|
March 31, 2013 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
| |||||||
|
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
| |||||||
|
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
| |||||||
|
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
| |||||||
|
|
|
(in millions) |
| |||||||||||||||||||
|
Commercial-brick and mortar |
|
$ |
46.2 |
|
$ |
4.1 |
|
$ |
19.7 |
|
$ |
70.0 |
|
$ |
9,724.7 |
|
$ |
9,794.7 |
|
$ |
— |
|
|
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
491.8 |
|
491.8 |
|
— |
| |||||||
|
Residential-home equity |
|
4.3 |
|
1.7 |
|
4.0 |
|
10.0 |
|
460.2 |
|
470.2 |
|
— |
| |||||||
|
Residential-first liens |
|
29.6 |
|
7.1 |
|
18.6 |
|
55.3 |
|
855.4 |
|
910.7 |
|
8.4 |
| |||||||
|
Total |
|
$ |
80.1 |
|
$ |
12.9 |
|
$ |
42.3 |
|
$ |
135.3 |
|
$ |
11,532.1 |
|
$ |
11,667.4 |
|
$ |
8.4 |
|
|
|
|
December 31, 2012 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
| |||||||
|
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
| |||||||
|
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
| |||||||
|
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
| |||||||
|
|
|
(in millions) |
| |||||||||||||||||||
|
Commercial-brick and mortar |
|
$ |
32.8 |
|
$ |
13.7 |
|
$ |
— |
|
$ |
46.5 |
|
$ |
9,658.5 |
|
$ |
9,705.0 |
|
$ |
— |
|
|
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
530.1 |
|
530.1 |
|
— |
| |||||||
|
Residential-home equity |
|
5.7 |
|
2.8 |
|
3.9 |
|
12.4 |
|
483.3 |
|
495.7 |
|
— |
| |||||||
|
Residential-first liens |
|
22.3 |
|
5.1 |
|
19.8 |
|
47.2 |
|
839.1 |
|
886.3 |
|
8.1 |
| |||||||
|
Total |
|
$ |
60.8 |
|
$ |
21.6 |
|
$ |
23.7 |
|
$ |
106.1 |
|
$ |
11,511.0 |
|
$ |
11,617.1 |
|
$ |
8.1 |
|
|
|
|
Commercial |
|
Residential |
|
Total |
| |||
|
|
|
(in millions) |
| |||||||
|
For the three months ended March 31, 2013 |
|
|
|
|
|
|
| |||
|
Beginning balance |
|
$ |
51.8 |
|
$ |
45.6 |
|
$ |
97.4 |
|
|
Provision |
|
(0.5 |
) |
7.0 |
|
6.5 |
| |||
|
Charge-offs |
|
(9.5 |
) |
(5.9 |
) |
(15.4 |
) | |||
|
Recoveries |
|
— |
|
1.0 |
|
1.0 |
| |||
|
Ending balance |
|
$ |
41.8 |
|
$ |
47.7 |
|
$ |
89.5 |
|
|
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
2.7 |
|
$ |
10.8 |
|
$ |
13.5 |
|
|
Collectively evaluated for impairment |
|
39.1 |
|
36.9 |
|
76.0 |
| |||
|
Allowance ending balance |
|
$ |
41.8 |
|
$ |
47.7 |
|
$ |
89.5 |
|
|
Loan balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
17.5 |
|
$ |
35.4 |
|
$ |
52.9 |
|
|
Collectively evaluated for impairment |
|
10,269.0 |
|
1,345.5 |
|
11,614.5 |
| |||
|
Loan ending balance |
|
$ |
10,286.5 |
|
$ |
1,380.9 |
|
$ |
11,667.4 |
|
|
|
|
|
|
|
|
|
| |||
|
For the three months ended March 31, 2012 |
|
|
|
|
|
|
| |||
|
Beginning balance |
|
$ |
64.8 |
|
$ |
37.3 |
|
$ |
102.1 |
|
|
Provision |
|
7.0 |
|
6.6 |
|
13.6 |
| |||
|
Charge-offs |
|
(19.4 |
) |
(8.3 |
) |
(27.7 |
) | |||
|
Recoveries |
|
— |
|
1.2 |
|
1.2 |
| |||
|
Effect of exchange rates |
|
— |
|
0.1 |
|
0.1 |
| |||
|
Ending balance |
|
$ |
52.4 |
|
$ |
36.9 |
|
$ |
89.3 |
|
|
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
6.2 |
|
$ |
4.6 |
|
$ |
10.8 |
|
|
Collectively evaluated for impairment |
|
46.2 |
|
32.3 |
|
78.5 |
| |||
|
Allowance ending balance |
|
$ |
52.4 |
|
$ |
36.9 |
|
$ |
89.3 |
|
|
Loan balance by basis of impairment method: |
|
|
|
|
|
|
| |||
|
Individually evaluated for impairment |
|
$ |
40.3 |
|
$ |
31.4 |
|
$ |
71.7 |
|
|
Collectively evaluated for impairment |
|
9,976.5 |
|
1,350.0 |
|
11,326.5 |
| |||
|
Loan ending balance |
|
$ |
10,016.8 |
|
$ |
1,381.4 |
|
$ |
11,398.2 |
|
|
|
|
March 31, 2013 |
| |||||||
|
|
|
|
|
Unpaid |
|
|
| |||
|
|
|
Recorded |
|
principal |
|
Related |
| |||
|
|
|
investment |
|
balance |
|
allowance |
| |||
|
|
|
(in millions) |
| |||||||
|
With no related allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
$ |
51.6 |
|
$ |
57.8 |
|
$ |
— |
|
|
Residential-first liens |
|
5.3 |
|
5.3 |
|
— |
| |||
|
With an allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
8.5 |
|
8.5 |
|
2.7 |
| |||
|
Residential-home equity |
|
20.4 |
|
20.4 |
|
9.6 |
| |||
|
Residential-first liens |
|
9.7 |
|
9.6 |
|
1.2 |
| |||
|
Total: |
|
|
|
|
|
|
| |||
|
Commercial |
|
$ |
60.1 |
|
$ |
66.3 |
|
$ |
2.7 |
|
|
Residential |
|
$ |
35.4 |
|
$ |
35.3 |
|
$ |
10.8 |
|
|
|
|
December 31, 2012 |
| |||||||
|
|
|
|
|
Unpaid |
|
|
| |||
|
|
|
Recorded |
|
principal |
|
Related |
| |||
|
|
|
investment |
|
balance |
|
allowance |
| |||
|
|
|
(in millions) |
| |||||||
|
With no related allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
$ |
22.9 |
|
$ |
25.3 |
|
$ |
— |
|
|
Residential-first liens |
|
9.7 |
|
6.6 |
|
— |
| |||
|
With an allowance recorded: |
|
|
|
|
|
|
| |||
|
Commercial-brick and mortar |
|
4.4 |
|
4.4 |
|
2.4 |
| |||
|
Residential-home equity |
|
20.8 |
|
20.7 |
|
9.1 |
| |||
|
Residential-first liens |
|
9.2 |
|
9.1 |
|
1.3 |
| |||
|
Total: |
|
|
|
|
|
|
| |||
|
Commercial |
|
$ |
27.3 |
|
$ |
29.7 |
|
$ |
2.4 |
|
|
Residential |
|
$ |
39.7 |
|
$ |
36.4 |
|
$ |
10.4 |
|
|
|
|
Average |
|
|
| ||
|
|
|
recorded |
|
Interest income |
| ||
|
|
|
investment |
|
recognized |
| ||
|
|
|
(in millions) |
| ||||
|
For the three months ended March 31, 2013 |
|
|
|
|
| ||
|
With no related allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
$ |
37.3 |
|
$ |
0.1 |
|
|
Residential-first liens |
|
7.5 |
|
— |
| ||
|
With an allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
6.4 |
|
— |
| ||
|
Residential-home equity |
|
20.6 |
|
0.2 |
| ||
|
Residential-first liens |
|
9.5 |
|
— |
| ||
|
Total: |
|
|
|
|
| ||
|
Commercial |
|
$ |
43.7 |
|
$ |
0.1 |
|
|
Residential |
|
$ |
37.6 |
|
$ |
0.2 |
|
|
|
|
|
|
|
| ||
|
For the three months ended March 31, 2012 |
|
|
|
|
| ||
|
With no related allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
$ |
47.7 |
|
$ |
0.6 |
|
|
Residential-first liens |
|
5.3 |
|
— |
| ||
|
With an allowance recorded: |
|
|
|
|
| ||
|
Commercial-brick and mortar |
|
77.1 |
|
0.5 |
| ||
|
Residential-home equity |
|
15.4 |
|
0.3 |
| ||
|
Residential-first liens |
|
8.8 |
|
— |
| ||
|
Total: |
|
|
|
|
| ||
|
Commercial |
|
$ |
124.8 |
|
$ |
1.1 |
|
|
Residential |
|
$ |
29.5 |
|
$ |
0.3 |
|
|
|
|
For the three months ended March 31, 2013 |
| ||||||||
|
|
|
TDRs |
|
TDRs in payment default |
| ||||||
|
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
| ||
|
|
|
contracts |
|
investment |
|
contracts |
|
investment |
| ||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||
|
Commercial-brick and mortar |
|
1 |
|
$ |
0.8 |
|
— |
|
$ |
— |
|
|
Residential-home equity |
|
32 |
|
1.9 |
|
12 |
|
— |
| ||
|
Residential-first liens |
|
2 |
|
0.4 |
|
— |
|
— |
| ||
|
Total |
|
35 |
|
$ |
3.1 |
|
12 |
|
$ |
— |
|
|
|
|
For the three months ended March 31, 2012 |
| ||||||||
|
|
|
TDRs |
|
TDRs in payment default |
| ||||||
|
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
| ||
|
|
|
contracts |
|
investment |
|
contracts |
|
investment |
| ||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||
|
Commercial-brick and mortar |
|
4 |
|
$ |
63.2 |
|
— |
|
$ |
— |
|
|
Residential-home equity |
|
49 |
|
2.2 |
|
2 |
|
— |
| ||
|
Total |
|
53 |
|
$ |
65.4 |
|
2 |
|
$ |
— |
|
|
|
|
|
|
Gross amounts not offset in the |
|
|
| ||||||
|
|
|
Gross amount |
|
Statement of Financial Position |
|
|
| ||||||
|
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
| ||||
|
|
|
assets (1) |
|
instruments (2) |
|
received |
|
Net amount |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative assets |
|
$ |
840.5 |
|
$ |
(699.1 |
) |
$ |
(128.0 |
) |
$ |
13.4 |
|
|
Reverse repurchase agreements |
|
57.4 |
|
— |
|
(57.4 |
) |
— |
| ||||
|
Total |
|
$ |
897.9 |
|
$ |
(699.1 |
) |
$ |
(185.4 |
) |
$ |
13.4 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative assets |
|
$ |
1,016.3 |
|
$ |
(779.3 |
) |
$ |
(225.5 |
) |
$ |
11.5 |
|
|
Reverse repurchase agreements |
|
148.2 |
|
— |
|
(148.2 |
) |
— |
| ||||
|
Total |
|
$ |
1,164.5 |
|
$ |
(779.3 |
) |
$ |
(373.7 |
) |
$ |
11.5 |
|
(1) The gross amount of recognized derivative and reverse repurchase agreement assets are reported with other investments on the consolidated statements of financial position. The above excludes $0.4 million of derivatives assets as of both March 31, 2013 and December 31, 2012 that are not subject to master netting agreements or similar agreements. The gross amounts of derivative and reverse repurchase agreement assets are not netted against offsetting liabilities for presentation on the consolidated statements of financial position.
(2) Represents amount of offsetting derivative assets or liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or liabilities for presentation on the consolidated statements of financial position.
|
|
|
|
|
Gross amounts not offset in the |
|
|
| ||||||
|
|
|
Gross amount |
|
Statement of Financial Position |
|
|
| ||||||
|
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
| ||||
|
|
|
liabilities (1) |
|
instruments (2) |
|
pledged |
|
Net amount |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
March 31, 2013 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
1,196.5 |
|
$ |
(699.1 |
) |
$ |
(371.4 |
) |
$ |
126.0 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
1,198.2 |
|
$ |
(779.3 |
) |
$ |
(279.1 |
) |
$ |
139.8 |
|
(1) The gross amount of recognized derivative liabilities are reported with other liabilities and contractholder funds on the consolidated statements of financial position. The above excludes $294.7 million and $329.8 million of derivative liabilities as of March 31, 2013 and December 31, 2012, respectively, which are primarily embedded derivatives that are not subject to master netting agreements or similar agreements. The gross amount of recognized repurchase agreement liabilities are reported with short-term debt on the consolidated statements of financial position. The gross amounts of derivative and repurchase agreement liabilities are not netted against offsetting assets for presentation on the consolidated statements of financial position.
(2) Represents amount of offsetting derivative assets or liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets or liabilities for presentation on the consolidated statements of financial position.
|
|||
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Notional amounts of derivative instruments |
|
|
|
|
| ||
|
Interest rate contracts: |
|
|
|
|
| ||
|
Interest rate swaps |
|
$ |
18,897.8 |
|
$ |
18,381.2 |
|
|
Interest rate options |
|
1,500.0 |
|
500.0 |
| ||
|
Swaptions |
|
325.0 |
|
325.0 |
| ||
|
Futures |
|
187.0 |
|
82.0 |
| ||
|
Foreign exchange contracts: |
|
|
|
|
| ||
|
Foreign currency swaps |
|
3,287.8 |
|
3,454.1 |
| ||
|
Currency forwards |
|
251.3 |
|
557.2 |
| ||
|
Foreign currency options |
|
— |
|
1,400.0 |
| ||
|
Equity contracts: |
|
|
|
|
| ||
|
Options |
|
1,827.2 |
|
1,811.8 |
| ||
|
Futures |
|
363.6 |
|
373.6 |
| ||
|
Credit contracts: |
|
|
|
|
| ||
|
Credit default swaps |
|
1,254.2 |
|
1,378.3 |
| ||
|
Total return swaps |
|
100.0 |
|
100.0 |
| ||
|
Other contracts: |
|
|
|
|
| ||
|
Embedded derivative financial instruments |
|
5,950.5 |
|
5,893.2 |
| ||
|
Total notional amounts at end of period |
|
$ |
33,944.4 |
|
$ |
34,256.4 |
|
|
|
|
|
|
|
| ||
|
Credit exposure of derivative instruments |
|
|
|
|
| ||
|
Interest rate contracts: |
|
|
|
|
| ||
|
Interest rate swaps |
|
$ |
612.1 |
|
$ |
683.9 |
|
|
Interest rate options |
|
46.3 |
|
48.5 |
| ||
|
Swaptions |
|
0.8 |
|
0.7 |
| ||
|
Foreign exchange contracts: |
|
|
|
|
| ||
|
Foreign currency swaps |
|
168.4 |
|
263.8 |
| ||
|
Currency forwards |
|
6.6 |
|
6.8 |
| ||
|
Foreign currency options |
|
— |
|
1.9 |
| ||
|
Equity contracts: |
|
|
|
|
| ||
|
Options |
|
50.8 |
|
74.3 |
| ||
|
Credit contracts: |
|
|
|
|
| ||
|
Credit default swaps |
|
7.7 |
|
6.8 |
| ||
|
Total return swaps |
|
0.3 |
|
— |
| ||
|
Total gross credit exposure |
|
893.0 |
|
1,086.7 |
| ||
|
Less: collateral received |
|
131.4 |
|
248.0 |
| ||
|
Net credit exposure |
|
$ |
761.6 |
|
$ |
838.7 |
|
|
|
|
Derivative assets (1) |
|
Derivative liabilities (2) |
| ||||||||
|
|
|
March 31, 2013 |
|
December 31, 2012 |
|
March 31, 2013 |
|
December 31, 2012 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
| ||||
|
Interest rate contracts |
|
$ |
5.9 |
|
$ |
10.3 |
|
$ |
404.7 |
|
$ |
440.5 |
|
|
Foreign exchange contracts |
|
118.4 |
|
190.0 |
|
170.9 |
|
127.2 |
| ||||
|
Total derivatives designated as hedging instruments |
|
$ |
124.3 |
|
$ |
200.3 |
|
$ |
575.6 |
|
$ |
567.7 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
| ||||
|
Interest rate contracts |
|
$ |
605.2 |
|
$ |
677.1 |
|
$ |
468.6 |
|
$ |
493.9 |
|
|
Foreign exchange contracts |
|
52.6 |
|
58.2 |
|
15.0 |
|
14.3 |
| ||||
|
Equity contracts |
|
50.8 |
|
74.3 |
|
67.8 |
|
27.7 |
| ||||
|
Credit contracts |
|
8.0 |
|
6.8 |
|
71.1 |
|
96.6 |
| ||||
|
Other contracts |
|
— |
|
— |
|
293.1 |
|
327.8 |
| ||||
|
Total derivatives not designated as hedging instruments |
|
716.6 |
|
816.4 |
|
915.6 |
|
960.3 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total derivative instruments |
|
$ |
840.9 |
|
$ |
1,016.7 |
|
$ |
1,491.2 |
|
$ |
1,528.0 |
|
(1) The fair value of derivative assets is reported with other investments on the consolidated statements of financial position.
(2) The fair value of derivative liabilities is reported with other liabilities on the consolidated statement of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative liabilities with a fair value of $117.8 million and $170.5 million as of March 31, 2013 and December 31, 2012, respectively, are reported with contractholder funds on the consolidated statements of financial position.
|
|
|
March 31, 2013 |
| |||||||||
|
|
|
|
|
|
|
|
|
Weighted |
| |||
|
|
|
|
|
|
|
Maximum |
|
average |
| |||
|
|
|
Notional |
|
Fair |
|
future |
|
expected life |
| |||
|
|
|
amount |
|
value |
|
payments |
|
(in years) |
| |||
|
|
|
(in millions) |
| |||||||||
|
Single name credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
$ |
50.0 |
|
$ |
— |
|
$ |
50.0 |
|
4.1 |
|
|
A |
|
497.0 |
|
3.4 |
|
497.0 |
|
3.0 |
| |||
|
BBB |
|
210.0 |
|
(2.1 |
) |
210.0 |
|
4.1 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
9.0 |
|
(9.0 |
) |
9.0 |
|
8.3 |
| |||
|
Total single name credit default swaps |
|
766.0 |
|
(7.7 |
) |
766.0 |
|
3.4 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
110.4 |
|
(46.2 |
) |
110.4 |
|
4.0 |
| |||
|
Government/municipalities |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
30.0 |
|
(5.2 |
) |
30.0 |
|
4.5 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
BBB |
|
25.0 |
|
(3.3 |
) |
25.0 |
|
4.3 |
| |||
|
Total basket and index credit default swaps |
|
165.4 |
|
(54.7 |
) |
165.4 |
|
4.1 |
| |||
|
Total credit default swap protection sold |
|
$ |
931.4 |
|
$ |
(62.4 |
) |
$ |
931.4 |
|
3.5 |
|
|
|
|
December 31, 2012 |
| |||||||||
|
|
|
|
|
|
|
|
|
Weighted |
| |||
|
|
|
|
|
|
|
Maximum |
|
average |
| |||
|
|
|
Notional |
|
Fair |
|
future |
|
expected life |
| |||
|
|
|
amount |
|
value |
|
payments |
|
(in years) |
| |||
|
|
|
(in millions) |
| |||||||||
|
Single name credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
$ |
70.0 |
|
$ |
(0.2 |
) |
$ |
70.0 |
|
2.5 |
|
|
A |
|
572.0 |
|
2.4 |
|
572.0 |
|
2.4 |
| |||
|
BBB |
|
200.0 |
|
(1.6 |
) |
200.0 |
|
3.0 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
11.1 |
|
(11.0 |
) |
11.1 |
|
8.5 |
| |||
|
Total single name credit default swaps |
|
853.1 |
|
(10.4 |
) |
853.1 |
|
2.6 |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
| |||
|
Corporate debt |
|
|
|
|
|
|
|
|
| |||
|
Near default |
|
110.4 |
|
(65.2 |
) |
110.4 |
|
4.2 |
| |||
|
Government/municipalities |
|
|
|
|
|
|
|
|
| |||
|
AA |
|
30.0 |
|
(7.3 |
) |
30.0 |
|
4.7 |
| |||
|
Structured finance |
|
|
|
|
|
|
|
|
| |||
|
BBB |
|
25.0 |
|
(5.6 |
) |
25.0 |
|
4.5 |
| |||
|
Total basket and index credit default swaps |
|
165.4 |
|
(78.1 |
) |
165.4 |
|
4.4 |
| |||
|
Total credit default swap protection sold |
|
$ |
1,018.5 |
|
$ |
(88.5 |
) |
$ |
1,018.5 |
|
2.9 |
|
|
|
|
March 31, 2013 |
| ||||||
|
|
|
|
|
|
|
Weighted |
| ||
|
|
|
|
|
|
|
average |
| ||
|
|
|
Amortized |
|
Carrying |
|
expected life |
| ||
|
|
|
cost |
|
value |
|
(in years) |
| ||
|
|
|
(in millions) |
| ||||||
|
Corporate debt |
|
|
|
|
|
|
| ||
|
BBB |
|
$ |
21.2 |
|
$ |
21.2 |
|
3.8 |
|
|
B |
|
25.0 |
|
25.0 |
|
0.3 |
| ||
|
Total corporate debt |
|
46.2 |
|
46.2 |
|
1.9 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Structured finance |
|
|
|
|
|
|
| ||
|
A |
|
5.6 |
|
5.6 |
|
16.9 |
| ||
|
BB |
|
35.6 |
|
33.6 |
|
2.5 |
| ||
|
B |
|
4.1 |
|
4.1 |
|
4.2 |
| ||
|
CCC |
|
22.7 |
|
22.7 |
|
5.7 |
| ||
|
Total structured finance |
|
68.0 |
|
66.0 |
|
4.9 |
| ||
|
Total fixed maturities with credit derivatives |
|
$ |
114.2 |
|
$ |
112.2 |
|
3.6 |
|
|
|
|
December 31, 2012 |
| ||||||
|
|
|
|
|
|
|
Weighted |
| ||
|
|
|
|
|
|
|
average |
| ||
|
|
|
Amortized |
|
Carrying |
|
expected life |
| ||
|
|
|
cost |
|
value |
|
(in years) |
| ||
|
|
|
(in millions) |
| ||||||
|
Corporate debt |
|
|
|
|
|
|
| ||
|
BBB |
|
$ |
20.5 |
|
$ |
20.5 |
|
4.0 |
|
|
B |
|
25.0 |
|
24.9 |
|
0.5 |
| ||
|
Total corporate debt |
|
45.5 |
|
45.4 |
|
2.1 |
| ||
|
|
|
|
|
|
|
|
| ||
|
Structured finance |
|
|
|
|
|
|
| ||
|
AA |
|
4.6 |
|
4.6 |
|
17.0 |
| ||
|
BB |
|
39.6 |
|
37.5 |
|
2.9 |
| ||
|
B |
|
4.0 |
|
4.0 |
|
4.4 |
| ||
|
CCC |
|
17.7 |
|
17.7 |
|
6.4 |
| ||
|
Total structured finance |
|
65.9 |
|
63.8 |
|
4.9 |
| ||
|
Total fixed maturities with credit derivatives |
|
$ |
111.4 |
|
$ |
109.2 |
|
3.8 |
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) |
| ||||||
|
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
| ||||||||
|
|
|
recognized in net income on |
|
|
|
related hedged item for the |
| ||||||||
|
|
|
derivatives for the three months |
|
|
|
three months ended |
| ||||||||
|
Derivatives in fair value hedging |
|
ended March 31, (1) |
|
Hedged items in fair value |
|
March 31, (1) |
| ||||||||
|
relationships |
|
2013 |
|
2012 |
|
hedging relationships |
|
2013 |
|
2012 |
| ||||
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||||||||
|
Interest rate contracts |
|
$ |
30.4 |
|
$ |
31.7 |
|
Fixed maturities, available-for-sale |
|
$ |
(28.6 |
) |
$ |
(28.2 |
) |
|
Foreign exchange contracts |
|
1.3 |
|
(0.8 |
) |
Fixed maturities, available-for-sale |
|
(1.3 |
) |
1.3 |
| ||||
|
Foreign exchange contracts |
|
(64.1 |
) |
16.2 |
|
Investment-type insurance contracts |
|
63.7 |
|
(14.8 |
) | ||||
|
Total |
|
$ |
(32.4 |
) |
$ |
47.1 |
|
Total |
|
$ |
33.8 |
|
$ |
(41.7 |
) |
(1) The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges.
|
|
|
Amount of gain (loss) for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Hedged item |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale (1) |
|
$ |
(31.5 |
) |
$ |
(35.5 |
) |
|
Investment-type insurance contracts (2) |
|
9.3 |
|
8.8 |
| ||
(1) Reported in net investment income on the consolidated statements of operations.
(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.
|
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
| ||||||||
|
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
| ||||||||
|
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
| ||||||||
|
Derivatives in cash |
|
|
|
for the three months ended |
|
reclassified from AOCI |
|
for the three months ended |
| ||||||||
|
flow hedging |
|
|
|
March 31, |
|
into net income |
|
March 31, |
| ||||||||
|
relationships |
|
Related hedged item |
|
2013 |
|
2012 |
|
(effective portion) |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
(in millions) |
|
|
|
(in millions) |
| ||||||||
|
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
(23.7 |
) |
$ |
(2.1 |
) |
Net investment income |
|
$ |
2.7 |
|
$ |
1.9 |
|
|
Interest rate contracts |
|
Investment-type insurance contracts |
|
1.0 |
|
1.7 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
| ||||
|
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(1.6 |
) |
(1.4 |
) | ||||
|
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
41.0 |
|
(19.5 |
) |
Net realized capital losses |
|
(0.6 |
) |
(10.2 |
) | ||||
|
Foreign exchange contracts |
|
Investment-type insurance contract |
|
(3.6 |
) |
(3.9 |
) |
Benefits, claims and settlement expenses |
|
— |
|
— |
| ||||
|
Total |
|
|
|
$ |
14.7 |
|
$ |
(23.8 |
) |
Total |
|
$ |
0.5 |
|
$ |
(9.7 |
) |
|
|
|
Amount of gain (loss) for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Hedged item |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Fixed maturities, available-for-sale (1) |
|
$ |
2.4 |
|
$ |
2.0 |
|
|
Investment-type insurance contracts (2) |
|
(2.9 |
) |
(3.3 |
) | ||
(1) Reported in net investment income on the consolidated statements of operations.
(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.
|
|
|
Amount of gain (loss) recognized in |
| ||||
|
|
|
net income on derivatives for the three |
| ||||
|
|
|
months ended March 31, |
| ||||
|
Derivatives not designated as hedging instruments |
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Interest rate contracts |
|
$ |
(29.6 |
) |
$ |
(34.8 |
) |
|
Foreign exchange contracts |
|
4.3 |
|
27.6 |
| ||
|
Equity contracts |
|
(54.6 |
) |
(63.9 |
) | ||
|
Credit contracts |
|
15.1 |
|
18.6 |
| ||
|
Other contracts |
|
57.2 |
|
68.2 |
| ||
|
Total |
|
$ |
(7.6 |
) |
$ |
15.7 |
|
|
|||
|
|
|
|
|
Other postretirement |
| ||||||||
|
|
|
Pension benefits |
|
benefits |
| ||||||||
|
|
|
For the three months ended |
|
For the three months ended |
| ||||||||
|
|
|
March 31, |
|
March 31, |
| ||||||||
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Service cost |
|
$ |
14.3 |
|
$ |
11.7 |
|
$ |
0.3 |
|
$ |
0.3 |
|
|
Interest cost |
|
25.9 |
|
27.3 |
|
1.4 |
|
2.1 |
| ||||
|
Expected return on plan assets |
|
(31.9 |
) |
(28.6 |
) |
(7.2 |
) |
(8.4 |
) | ||||
|
Amortization of prior service benefit |
|
(2.1 |
) |
(2.4 |
) |
(6.5 |
) |
(7.1 |
) | ||||
|
Recognized net actuarial loss |
|
29.5 |
|
22.7 |
|
0.3 |
|
0.2 |
| ||||
|
Net periodic benefit cost (income) |
|
$ |
35.7 |
|
$ |
30.7 |
|
$ |
(11.7 |
) |
$ |
(12.9 |
) |
|
|||
|
|
|
Series A |
|
Series B |
|
Common |
|
|
|
|
preferred stock |
|
preferred stock |
|
stock |
|
|
|
|
(in millions) |
| ||||
|
Outstanding shares at January 1, 2012 |
|
3.0 |
|
10.0 |
|
301.1 |
|
|
Shares issued |
|
— |
|
— |
|
2.1 |
|
|
Treasury stock acquired |
|
— |
|
— |
|
(2.3 |
) |
|
Outstanding shares at March 31, 2012 |
|
3.0 |
|
10.0 |
|
300.9 |
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares at January 1, 2013 |
|
3.0 |
|
10.0 |
|
293.8 |
|
|
Shares issued |
|
— |
|
— |
|
2.4 |
|
|
Treasury stock acquired |
|
— |
|
— |
|
(2.9 |
) |
|
Outstanding shares at March 31, 2013 |
|
3.0 |
|
10.0 |
|
293.3 |
|
|
|
|
For the three months ended March 31, 2013 |
| |||||||
|
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
| |||
|
|
|
(in millions) |
| |||||||
|
Net unrealized losses on available-for-sale securities during the period |
|
$ |
(132.3 |
) |
$ |
46.0 |
|
$ |
(86.3 |
) |
|
Reclassification adjustment for losses included in net income (1) |
|
34.1 |
|
(11.7 |
) |
22.4 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
43.7 |
|
(15.3 |
) |
28.4 |
| |||
|
Adjustments for assumed changes in policyholder liabilities |
|
(91.9 |
) |
28.1 |
|
(63.8 |
) | |||
|
Net unrealized losses on available-for-sale securities |
|
(146.4 |
) |
47.1 |
|
(99.3 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
(20.2 |
) |
7.1 |
|
(13.1 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
1.2 |
|
(0.2 |
) |
1.0 |
| |||
|
Adjustments for assumed changes in policyholder liabilities |
|
1.4 |
|
(0.6 |
) |
0.8 |
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
(17.6 |
) |
6.3 |
|
(11.3 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net unrealized gains on derivative instruments during the period |
|
32.6 |
|
(10.8 |
) |
21.8 |
| |||
|
Reclassification adjustment for gains included in net income (3) |
|
(0.5 |
) |
0.1 |
|
(0.4 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
1.0 |
|
(0.4 |
) |
0.6 |
| |||
|
Net unrealized gains on derivative instruments |
|
33.1 |
|
(11.1 |
) |
22.0 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Foreign currency translation adjustment |
|
55.1 |
|
(0.7 |
) |
54.4 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
21.2 |
|
(7.4 |
) |
13.8 |
| |||
|
Net unrecognized postretirement benefit obligation |
|
21.2 |
|
(7.4 |
) |
13.8 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Other comprehensive loss |
|
$ |
(54.6 |
) |
$ |
34.2 |
|
$ |
(20.4 |
) |
|
|
|
For the three months ended March 31, 2012 |
| |||||||
|
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
| |||
|
|
|
(in millions) |
| |||||||
|
Net unrealized gains on available-for-sale securities during the period |
|
$ |
333.1 |
|
$ |
(112.2 |
) |
$ |
220.9 |
|
|
Reclassification adjustment for losses included in net income (1) |
|
10.5 |
|
(3.9 |
) |
6.6 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
(55.5 |
) |
19.4 |
|
(36.1 |
) | |||
|
Adjustments for assumed changes in policyholder liabilities |
|
(52.0 |
) |
21.9 |
|
(30.1 |
) | |||
|
Net unrealized gains on available-for-sale securities |
|
236.1 |
|
(74.8 |
) |
161.3 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
(4.9 |
) |
1.6 |
|
(3.3 |
) | |||
|
Adjustments for assumed changes in amortization patterns |
|
3.8 |
|
(1.4 |
) |
2.4 |
| |||
|
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
(1.1 |
) |
0.2 |
|
(0.9 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Net unrealized losses on derivative instruments during the period |
|
(43.8 |
) |
15.3 |
|
(28.5 |
) | |||
|
Reclassification adjustment for losses included in net income (3) |
|
9.7 |
|
(3.4 |
) |
6.3 |
| |||
|
Adjustments for assumed changes in amortization patterns |
|
28.8 |
|
(10.1 |
) |
18.7 |
| |||
|
Net unrealized losses on derivative instruments |
|
(5.3 |
) |
1.8 |
|
(3.5 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Foreign currency translation adjustment |
|
55.7 |
|
3.9 |
|
59.6 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
13.4 |
|
(4.7 |
) |
8.7 |
| |||
|
Net unrecognized postretirement benefit obligation |
|
13.4 |
|
(4.7 |
) |
8.7 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Other comprehensive income |
|
$ |
298.8 |
|
$ |
(73.6 |
) |
$ |
225.2 |
|
(1) Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations.
(2) Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI.
(3) See Note 5, Derivative Financial Instruments — Cash Flow Hedges, for further details.
(4) Pre-tax amortization of prior service cost and actuarial loss included in net periodic benefit cost, which is comprised of amortization of prior service cost (benefit); recognized net actuarial (gain) loss and amounts recognized due to special events, is reported in operating expenses on the consolidated statements of operations. See Note 7, Employee and Agent Benefits — Components of Net Periodic Benefit Cost, for further details.
|
|
|
|
|
Noncredit |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
Net unrealized |
|
component of |
|
Net unrealized |
|
Foreign |
|
Unrecognized |
|
Accumulated |
| ||||||
|
|
|
gains on |
|
impairment losses |
|
gains (losses) on |
|
currency |
|
postretirement |
|
other |
| ||||||
|
|
|
available-for-sale |
|
on fixed maturities |
|
derivative |
|
translation |
|
benefit |
|
comprehensive |
| ||||||
|
|
|
securities |
|
available-for-sale |
|
instruments |
|
adjustment |
|
obligation |
|
income |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Balances at January 1, 2012 |
|
$ |
860.7 |
|
$ |
(167.2 |
) |
$ |
34.9 |
|
$ |
(95.9 |
) |
$ |
(361.1 |
) |
$ |
271.4 |
|
|
Other comprehensive income during the period, net of adjustments |
|
154.7 |
|
(0.9 |
) |
(9.8 |
) |
58.8 |
|
— |
|
202.8 |
| ||||||
|
Amounts reclassified from AOCI |
|
6.6 |
|
— |
|
6.3 |
|
— |
|
8.7 |
|
21.6 |
| ||||||
|
Other comprehensive income |
|
161.3 |
|
(0.9 |
) |
(3.5 |
) |
58.8 |
|
8.7 |
|
224.4 |
| ||||||
|
Balances at March 31, 2012 |
|
$ |
1,022.0 |
|
$ |
(168.1 |
) |
$ |
31.4 |
|
$ |
(37.1 |
) |
$ |
(352.4 |
) |
$ |
495.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Balances at January 1, 2013 |
|
$ |
1,418.3 |
|
$ |
(173.9 |
) |
$ |
(8.7 |
) |
$ |
(106.9 |
) |
$ |
(488.5 |
) |
$ |
640.3 |
|
|
Other comprehensive income during the period, net of adjustments |
|
(121.7 |
) |
(11.3 |
) |
22.4 |
|
55.5 |
|
— |
|
(55.1 |
) | ||||||
|
Amounts reclassified from AOCI |
|
22.4 |
|
— |
|
(0.4 |
) |
— |
|
13.8 |
|
35.8 |
| ||||||
|
Other comprehensive loss |
|
(99.3 |
) |
(11.3 |
) |
22.0 |
|
55.5 |
|
13.8 |
|
(19.3 |
) | ||||||
|
Balances at March 31, 2013 |
|
$ |
1,319.0 |
|
$ |
(185.2 |
) |
$ |
13.3 |
|
$ |
(51.4 |
) |
$ |
(474.7 |
) |
$ |
621.0 |
|
Following is a reconciliation of the changes in the redeemable noncontrolling interest (in millions):
|
Balance at January 1, 2012 |
|
$ |
22.2 |
|
|
Net income attributable to redeemable noncontrolling interest |
|
0.2 |
| |
|
Foreign currency translation adjustment |
|
0.7 |
| |
|
Balance at March 31, 2012 |
|
$ |
23.1 |
|
|
|
|
|
| |
|
Balance at January 1, 2013 |
|
$ |
60.4 |
|
|
Net income attributable to redeemable noncontrolling interest |
|
0.1 |
| |
|
Distributions to redeemable noncontrolling interest |
|
(0.6 |
) | |
|
Foreign currency translation adjustment |
|
(1.0 |
) | |
|
Balance at March 31, 2013 |
|
$ |
58.9 |
|
|
|||
|
|
|
As of March 31, 2013 |
| ||||||||||
|
|
|
Assets/ |
|
|
|
|
|
|
| ||||
|
|
|
(liabilities) |
|
|
|
|
|
|
| ||||
|
|
|
measured at |
|
Fair value hierarchy level |
| ||||||||
|
|
|
fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
| ||||
|
U.S. government and agencies |
|
$ |
953.3 |
|
$ |
297.5 |
|
$ |
655.8 |
|
$ |
— |
|
|
Non-U.S. governments |
|
1,179.7 |
|
— |
|
1,139.3 |
|
40.4 |
| ||||
|
States and political subdivisions |
|
3,491.8 |
|
— |
|
3,489.9 |
|
1.9 |
| ||||
|
Corporate |
|
34,102.8 |
|
74.2 |
|
33,861.0 |
|
167.6 |
| ||||
|
Residential mortgage-backed securities |
|
3,123.2 |
|
— |
|
3,123.2 |
|
— |
| ||||
|
Commercial mortgage-backed securities |
|
3,990.7 |
|
— |
|
3,990.7 |
|
— |
| ||||
|
Collateralized debt obligations |
|
394.0 |
|
— |
|
318.8 |
|
75.2 |
| ||||
|
Other debt obligations |
|
3,848.6 |
|
— |
|
3,832.7 |
|
15.9 |
| ||||
|
Total fixed maturities, available-for-sale |
|
51,084.1 |
|
371.7 |
|
50,411.4 |
|
301.0 |
| ||||
|
Fixed maturities, trading |
|
628.9 |
|
— |
|
459.4 |
|
169.5 |
| ||||
|
Equity securities, available-for-sale |
|
147.0 |
|
62.1 |
|
68.8 |
|
16.1 |
| ||||
|
Equity securities, trading |
|
732.2 |
|
107.5 |
|
624.7 |
|
— |
| ||||
|
Derivative assets (1) |
|
840.9 |
|
— |
|
773.7 |
|
67.2 |
| ||||
|
Other investments (2) |
|
288.9 |
|
41.8 |
|
136.2 |
|
110.9 |
| ||||
|
Cash equivalents (3) |
|
757.4 |
|
2.4 |
|
755.0 |
|
— |
| ||||
|
Sub-total excluding separate account assets |
|
54,479.4 |
|
585.5 |
|
53,229.2 |
|
664.7 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Separate account assets |
|
120,906.1 |
|
58,020.6 |
|
58,226.3 |
|
4,659.2 |
| ||||
|
Total assets |
|
$ |
175,385.5 |
|
$ |
58,606.1 |
|
$ |
111,455.5 |
|
$ |
5,323.9 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Investments-type insurance contracts (4) |
|
$ |
(117.8 |
) |
$ |
— |
|
$ |
— |
|
$ |
(117.8 |
) |
|
Derivative liabilities (1) |
|
(1,198.1 |
) |
— |
|
(1,122.5 |
) |
(75.6 |
) | ||||
|
Other liabilities (4) |
|
(271.8 |
) |
— |
|
(217.6 |
) |
(54.2 |
) | ||||
|
Total liabilities |
|
$ |
(1,587.7 |
) |
$ |
— |
|
$ |
(1,340.1 |
) |
$ |
(247.6 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net assets (liabilities) |
|
$ |
173,797.8 |
|
$ |
58,606.1 |
|
$ |
110,115.4 |
|
$ |
5,076.3 |
|
|
|
|
As of December 31, 2012 |
| ||||||||||
|
|
|
Assets/ |
|
|
|
|
|
|
| ||||
|
|
|
(liabilities) |
|
|
|
|
|
|
| ||||
|
|
|
measured at |
|
Fair value hierarchy level |
| ||||||||
|
|
|
fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
| ||||
|
U.S. government and agencies |
|
$ |
944.3 |
|
$ |
203.5 |
|
$ |
740.8 |
|
$ |
— |
|
|
Non-U.S. governments |
|
1,208.3 |
|
— |
|
1,164.0 |
|
44.3 |
| ||||
|
States and political subdivisions |
|
3,178.8 |
|
— |
|
3,176.9 |
|
1.9 |
| ||||
|
Corporate |
|
34,325.4 |
|
85.9 |
|
34,065.0 |
|
174.5 |
| ||||
|
Residential mortgage-backed securities |
|
3,226.7 |
|
— |
|
3,226.7 |
|
— |
| ||||
|
Commercial mortgage-backed securities |
|
3,897.4 |
|
— |
|
3,897.4 |
|
— |
| ||||
|
Collateralized debt obligations |
|
379.2 |
|
— |
|
301.6 |
|
77.6 |
| ||||
|
Other debt obligations |
|
3,779.2 |
|
— |
|
3,764.5 |
|
14.7 |
| ||||
|
Total fixed maturities, available-for-sale |
|
50,939.3 |
|
289.4 |
|
50,336.9 |
|
313.0 |
| ||||
|
Fixed maturities, trading |
|
626.7 |
|
9.4 |
|
450.5 |
|
166.8 |
| ||||
|
Equity securities, available-for-sale |
|
136.5 |
|
54.4 |
|
66.8 |
|
15.3 |
| ||||
|
Equity securities, trading |
|
252.8 |
|
99.8 |
|
153.0 |
|
— |
| ||||
|
Derivative assets (1) |
|
1,016.7 |
|
— |
|
941.6 |
|
75.1 |
| ||||
|
Other investments (2) |
|
272.1 |
|
64.1 |
|
94.1 |
|
113.9 |
| ||||
|
Cash equivalents (3) |
|
1,772.6 |
|
561.4 |
|
1,211.2 |
|
— |
| ||||
|
Sub-total excluding separate account assets |
|
55,016.7 |
|
1,078.5 |
|
53,254.1 |
|
684.1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Separate account assets |
|
81,653.8 |
|
54,010.1 |
|
23,027.7 |
|
4,616.0 |
| ||||
|
Total assets |
|
$ |
136,670.5 |
|
$ |
55,088.6 |
|
$ |
76,281.8 |
|
$ |
5,300.1 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Investments-type insurance contracts (4) |
|
$ |
(170.5 |
) |
$ |
— |
|
$ |
— |
|
$ |
(170.5 |
) |
|
Derivative liabilities (1) |
|
(1,205.1 |
) |
— |
|
(1,102.5 |
) |
(102.6 |
) | ||||
|
Other liabilities (4) |
|
(237.4 |
) |
— |
|
(197.8 |
) |
(39.6 |
) | ||||
|
Total liabilities |
|
$ |
(1,613.0 |
) |
$ |
— |
|
$ |
(1,300.3 |
) |
$ |
(312.7 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net assets (liabilities) |
|
$ |
135,057.5 |
|
$ |
55,088.6 |
|
$ |
74,981.5 |
|
$ |
4,987.4 |
|
(1) Within the consolidated statements of financial position, derivative assets are reported with other investments and derivative liabilities are reported with other liabilities. Refer to Note 5, Derivative Financial Instruments, for further information on fair value by class of derivative instruments. Our derivatives are primarily Level 2, with the exception of certain credit default swaps and other swaps that are Level 3.
(2) Primarily includes seed money investments, commercial mortgage loans of consolidated VIEs and an equity method investment reported at fair value.
(3) Includes money market instruments and short-term investments with a maturity date of three months or less when purchased.
(4) Includes bifurcated embedded derivatives that are reported at fair value within the same line item in the consolidated statements of financial position in which the host contract is reported. Other liabilities also include obligations of consolidated VIEs reported at fair value.
|
|
|
For the three months ended March 31, 2013 |
|
Changes in |
| ||||||||||||||||||||
|
|
|
Beginning |
|
|
|
|
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
| ||||||||
|
|
|
asset/ |
|
Total realized/unrealized |
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
| ||||||||||
|
|
|
(liability) |
|
gains (losses) |
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
| ||||||||||
|
|
|
balance |
|
|
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
| ||||||||
|
|
|
as of |
|
Included in |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
| ||||||||
|
|
|
December 31, |
|
net income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
March 31, |
|
positions still |
| ||||||||
|
|
|
2012 |
|
(1) |
|
income |
|
(4) |
|
Level 3 |
|
Level 3 |
|
2013 |
|
held (1) |
| ||||||||
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| ||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Non-U.S. governments |
|
$ |
44.3 |
|
$ |
— |
|
$ |
0.3 |
|
$ |
(4.2 |
) |
$ |
— |
|
$ |
— |
|
$ |
40.4 |
|
$ |
— |
|
|
State and political subdivisions |
|
1.9 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1.9 |
|
— |
| ||||||||
|
Corporate |
|
174.5 |
|
(3.1 |
) |
(10.1 |
) |
(17.6 |
) |
47.5 |
|
(23.6 |
) |
167.6 |
|
(3.1 |
) | ||||||||
|
Collateralized debt obligations |
|
77.6 |
|
2.1 |
|
7.1 |
|
(33.0 |
) |
21.4 |
|
— |
|
75.2 |
|
— |
| ||||||||
|
Other debt obligations |
|
14.7 |
|
— |
|
1.7 |
|
(0.5 |
) |
— |
|
— |
|
15.9 |
|
— |
| ||||||||
|
Total fixed maturities, available-for-sale |
|
313.0 |
|
(1.0 |
) |
(1.0 |
) |
(55.3 |
) |
68.9 |
|
(23.6 |
) |
301.0 |
|
(3.1 |
) | ||||||||
|
Fixed maturities, trading |
|
166.8 |
|
2.7 |
|
— |
|
— |
|
— |
|
— |
|
169.5 |
|
2.8 |
| ||||||||
|
Equity securities, available-for-sale |
|
15.3 |
|
— |
|
0.8 |
|
— |
|
— |
|
— |
|
16.1 |
|
— |
| ||||||||
|
Derivative assets |
|
75.1 |
|
(11.5 |
) |
— |
|
3.6 |
|
— |
|
— |
|
67.2 |
|
(11.0 |
) | ||||||||
|
Other investments |
|
113.9 |
|
(0.6 |
) |
— |
|
(2.4 |
) |
— |
|
— |
|
110.9 |
|
(0.6 |
) | ||||||||
|
Separate account assets (2) |
|
4,616.0 |
|
119.0 |
|
(0.2 |
) |
(77.0 |
) |
1.4 |
|
— |
|
4,659.2 |
|
117.2 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Investments-type insurance contracts |
|
(170.5 |
) |
51.7 |
|
— |
|
1.0 |
|
— |
|
— |
|
(117.8 |
) |
50.9 |
| ||||||||
|
Derivative liabilities |
|
(102.6 |
) |
25.8 |
|
0.3 |
|
0.9 |
|
— |
|
— |
|
(75.6 |
) |
25.7 |
| ||||||||
|
Other liabilities (3) |
|
(39.6 |
) |
(14.6 |
) |
— |
|
— |
|
— |
|
— |
|
(54.2 |
) |
(14.6 |
) | ||||||||
|
|
|
For the three months ended March 31, 2012 |
|
Changes in |
| ||||||||||||||||||||
|
|
|
Beginning |
|
|
|
|
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
| ||||||||
|
|
|
asset/ |
|
Total realized/unrealized |
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
| ||||||||||
|
|
|
(liability) |
|
gains (losses) |
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
| ||||||||||
|
|
|
balance |
|
Included in |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
| ||||||||
|
|
|
as of |
|
net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
| ||||||||
|
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
March 31, |
|
positions still |
| ||||||||
|
|
|
2011 |
|
(1) |
|
income |
|
(4) |
|
Level 3 |
|
Level 3 |
|
2012 |
|
held (1) |
| ||||||||
|
|
|
(in millions) |
| ||||||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Non-U.S. governments |
|
$ |
22.9 |
|
$ |
— |
|
$ |
(0.3 |
) |
$ |
(0.3 |
) |
$ |
14.5 |
|
$ |
— |
|
$ |
36.8 |
|
$ |
— |
|
|
Corporate |
|
297.0 |
|
(2.6 |
) |
2.0 |
|
(16.6 |
) |
3.4 |
|
(80.5 |
) |
202.7 |
|
(2.7 |
) | ||||||||
|
Collateralized debt obligations |
|
102.5 |
|
(0.1 |
) |
3.1 |
|
0.5 |
|
— |
|
(27.0 |
) |
79.0 |
|
(0.1 |
) | ||||||||
|
Other debt obligations |
|
27.3 |
|
(0.7 |
) |
(1.3 |
) |
(25.2 |
) |
6.0 |
|
— |
|
6.1 |
|
— |
| ||||||||
|
Total fixed maturities, available-for-sale |
|
449.7 |
|
(3.4 |
) |
3.5 |
|
(41.6 |
) |
23.9 |
|
(107.5 |
) |
324.6 |
|
(2.8 |
) | ||||||||
|
Fixed maturities, trading |
|
220.8 |
|
3.6 |
|
— |
|
(18.2 |
) |
— |
|
— |
|
206.2 |
|
(2.4 |
) | ||||||||
|
Equity securities, available-for-sale |
|
18.0 |
|
— |
|
(0.5 |
) |
— |
|
— |
|
— |
|
17.5 |
|
— |
| ||||||||
|
Derivative assets |
|
60.2 |
|
(14.6 |
) |
— |
|
1.7 |
|
— |
|
— |
|
47.3 |
|
(13.6 |
) | ||||||||
|
Other investments |
|
97.5 |
|
(0.9 |
) |
— |
|
(6.8 |
) |
— |
|
— |
|
89.8 |
|
(0.8 |
) | ||||||||
|
Separate account assets (2) |
|
4,198.2 |
|
86.1 |
|
0.1 |
|
(2.7 |
) |
0.3 |
|
(1.7 |
) |
4,280.3 |
|
76.9 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Investment-type insurance contracts |
|
(195.8 |
) |
68.8 |
|
— |
|
(2.0 |
) |
— |
|
— |
|
(129.0 |
) |
68.1 |
| ||||||||
|
Derivative liabilities |
|
(177.1 |
) |
25.4 |
|
1.3 |
|
8.1 |
|
— |
|
— |
|
(142.3 |
) |
26.4 |
| ||||||||
|
Other liabilities (3) |
|
(24.2 |
) |
(16.5 |
) |
— |
|
— |
|
— |
|
— |
|
(40.7 |
) |
(16.5 |
) | ||||||||
(1) Both realized gains (losses) and mark-to-market unrealized gains (losses) are generally reported in net realized capital gains (losses) within the consolidated statements of operations. Realized and unrealized gains (losses) on certain fixed maturities, trading and certain derivatives used in relation to certain trading portfolios are reported in net investment income within the consolidated statements of operation.
(2) Gains and losses for separate account assets do not impact net income as the change in value of separate account assets is offset by a change in value of separate account liabilities. Foreign currency translation adjustments related to the Principal International segment separate account assets are recorded in AOCI and are offset by foreign currency translation adjustments of the corresponding separate account liabilities.
(3) Certain embedded derivatives reported in other liabilities are part of a cash flow hedge, with the effective portion of the unrealized gains (losses) recorded in AOCI.
(4) Gross purchases, sales, issuances and settlements were:
|
|
|
For the three months ended March 31, 2013 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Net purchases, |
| |||||
|
|
|
|
|
|
|
|
|
|
|
sales, issuances |
| |||||
|
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Non-U.S. governments |
|
$ |
— |
|
$ |
(3.9 |
) |
$ |
— |
|
$ |
(0.3 |
) |
$ |
(4.2 |
) |
|
Corporate |
|
4.2 |
|
(9.4 |
) |
— |
|
(12.4 |
) |
(17.6 |
) | |||||
|
Collateralized debt obligations |
|
— |
|
(32.4 |
) |
— |
|
(0.6 |
) |
(33.0 |
) | |||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.5 |
) |
(0.5 |
) | |||||
|
Total fixed maturities, available-for-sale |
|
4.2 |
|
(45.7 |
) |
— |
|
(13.8 |
) |
(55.3 |
) | |||||
|
Derivative assets |
|
6.7 |
|
(3.1 |
) |
— |
|
— |
|
3.6 |
| |||||
|
Other investments |
|
0.2 |
|
— |
|
— |
|
(2.6 |
) |
(2.4 |
) | |||||
|
Separate account assets (5) |
|
66.5 |
|
(136.8 |
) |
(4.5 |
) |
(2.2 |
) |
(77.0 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Investment-type insurance contracts |
|
— |
|
— |
|
(0.3 |
) |
1.3 |
|
1.0 |
| |||||
|
Derivative liabilities |
|
(1.6 |
) |
2.5 |
|
— |
|
— |
|
0.9 |
| |||||
|
|
|
For the three months ended March 31, 2012 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Net purchases, |
| |||||
|
|
|
|
|
|
|
|
|
|
|
sales, issuances |
| |||||
|
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Non-U.S. governments |
|
$ |
3.9 |
|
$ |
(3.9 |
) |
$ |
— |
|
$ |
(0.3 |
) |
$ |
(0.3 |
) |
|
Corporate |
|
12.3 |
|
(26.6 |
) |
— |
|
(2.3 |
) |
(16.6 |
) | |||||
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
0.5 |
|
0.5 |
| |||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
(25.2 |
) |
(25.2 |
) | |||||
|
Total fixed maturities, available-for-sale |
|
16.2 |
|
(30.5 |
) |
— |
|
(27.3 |
) |
(41.6 |
) | |||||
|
Fixed maturities, trading |
|
— |
|
(0.9 |
) |
— |
|
(17.3 |
) |
(18.2 |
) | |||||
|
Derivative assets |
|
2.5 |
|
(0.8 |
) |
— |
|
— |
|
1.7 |
| |||||
|
Other investments |
|
— |
|
— |
|
— |
|
(6.8 |
) |
(6.8 |
) | |||||
|
Separate account assets (5) |
|
127.5 |
|
(90.3 |
) |
(134.9 |
) |
95.0 |
|
(2.7 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Investment-type insurance contracts |
|
— |
|
— |
|
(3.3 |
) |
1.3 |
|
(2.0 |
) | |||||
|
Derivative liabilities |
|
(0.7 |
) |
8.8 |
|
— |
|
— |
|
8.1 |
| |||||
(5) Issuances and settlements include amounts related to mortgage encumbrances associated with real estate in our separate accounts.
|
|
|
For the three months ended March 31, 2013 |
| ||||||||||||||||
|
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
| ||||||
|
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
| ||||||
|
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
47.5 |
|
$ |
— |
|
$ |
23.6 |
|
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
21.4 |
|
— |
|
— |
| ||||||
|
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
68.9 |
|
— |
|
23.6 |
| ||||||
|
Separate account assets |
|
243.4 |
|
— |
|
4.6 |
|
1.4 |
|
— |
|
— |
| ||||||
|
|
|
For the three months ended March 31, 2012 |
| ||||||||||||||||
|
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
| ||||||
|
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
| ||||||
|
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
| ||||||
|
|
|
(in millions) |
| ||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
14.5 |
|
$ |
— |
|
$ |
— |
|
|
Corporate |
|
— |
|
— |
|
— |
|
3.4 |
|
— |
|
80.5 |
| ||||||
|
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
27.0 |
| ||||||
|
Other debt obligations |
|
— |
|
— |
|
— |
|
6.0 |
|
— |
|
— |
| ||||||
|
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
23.9 |
|
— |
|
107.5 |
| ||||||
|
Separate account assets |
|
— |
|
0.3 |
|
— |
|
— |
|
— |
|
1.7 |
| ||||||
|
|
|
As of March 31, 2013 |
| |||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
| |
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
| |
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
| |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
| |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| |
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |
|
Non-U.S. governments |
|
$ |
13.0 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.8% |
|
1.8% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
| |
|
Corporate |
|
31.4 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.7%-22.0% |
|
11.4% |
| |
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization multiple |
|
0x-4.8x |
|
3.1x |
| |
|
|
|
|
|
|
|
Probability of default |
|
0%-100% |
|
65.1% |
| |
|
|
|
|
|
|
|
Potential loss severity |
|
0%-30% |
|
14.4% |
| |
|
Collateralized debt obligations |
|
35.6 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-2.7% |
|
2.1% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-400bps |
|
150bps |
| |
|
Other debt obligations |
|
15.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
6.5%-15.0% |
|
10.4% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
27bps |
| |
|
Fixed maturities, trading |
|
37.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.3%-62.1% |
|
4.0% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-1,400bps |
|
390bps |
| |
|
|
|
110.4 |
|
See note (2) |
|
|
|
|
|
|
| |
|
|
|
As of March 31, 2013 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Other investments |
|
77.2 |
|
Discounted cash flow - commercial mortgage loans of consolidated VIEs |
|
Discount rate (1) |
|
3.7% |
|
3.7% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
272bps |
|
272bps |
|
|
|
|
33.7 |
|
Discounted cash flow - equity method real estate investment |
|
Discount rate (1) |
|
9.0% |
|
9.0% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
5.5% |
|
5.5% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.6% |
|
3.6% |
|
|
|
|
|
|
Discounted cash flow - equity method real estate investment debt |
|
Loan to value |
|
48.4% |
|
48.4% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
3.3% |
|
3.3% |
|
|
Separate account assets |
|
4,510.9 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
0.8%-9.4% |
|
3.3% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
20bps |
|
|
|
|
|
|
|
|
Credit spread rate |
|
47bps-880bps |
|
240bps |
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
6.5%-16.0% |
|
7.9% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.8%-9.0% |
|
6.8% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
1.9%-5.6% |
|
3.5% |
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
16.1%-85.8% |
|
54.2% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.4%-5.1% |
|
3.3% |
|
|
|
|
As of March 31, 2013 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Investment-type insurance contracts |
|
(117.8 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
2.8%-3.0% (3) |
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
16.1%-37.8% |
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.2%-1.5% |
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.6% |
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (5) |
|
|
|
|
Derivative liabilities |
|
(46.2 |
) |
See note (2) |
|
|
|
|
|
|
|
|
Other liabilities |
|
(54.2 |
) |
See note (2) |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012 |
| |||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
| |
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
| |
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
| |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
| |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
| |
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
| |
|
Non-U.S. governments |
|
$ |
12.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.6% |
|
1.6% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
| |
|
Corporate |
|
66.6 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.7%-29.0% |
|
8.4% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-100bps |
|
39bps |
| |
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization multiple |
|
0x-3.5x |
|
0.2x |
| |
|
|
|
|
|
|
|
Probability of default |
|
0%-100% |
|
6.4% |
| |
|
|
|
|
|
|
|
Potential loss severity |
|
0%-30% |
|
1.9% |
| |
|
Collateralized debt obligations |
|
38.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.0%-19.8% |
|
13.3% |
| |
|
|
|
|
|
|
|
Illiquidity premium |
|
400bps-1,000bps |
|
791bps |
| |
|
|
|
As of December 31, 2012 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
14.7 |
|
Discounted cash flow |
|
Discount rate (1) |
|
6.5%-20.0% |
|
11.8% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
30bps |
|
|
Fixed maturities, trading |
|
35.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-60.5% |
|
4.1% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-1,400bps |
|
390bps |
|
|
|
|
110.4 |
|
See note (2) |
|
|
|
|
|
|
|
|
Other investments |
|
80.3 |
|
Discounted cash flow - commercial mortgage loans of consolidated VIEs |
|
Discount rate (1) |
|
3.5 |
% |
3.5% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
287bps |
|
287bps |
|
|
|
|
33.6 |
|
Discounted cash flow - equity method real estate investment |
|
Discount rate (1) |
|
9.3 |
% |
9.3% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
5.5 |
% |
5.5% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.6 |
% |
3.6% |
|
|
|
|
|
|
Discounted cash flow - equity method real estate investment debt |
|
Loan to value |
|
49.4 |
% |
49.4% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
3.3 |
% |
3.3% |
|
|
|
|
As of December 31, 2012 |
| ||||||||
|
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Separate account assets |
|
4,449.0 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
0.8%-10.4% |
|
3.3% |
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-50bps |
|
20bps |
|
|
|
|
|
|
|
|
Credit spread rate |
|
44bps-975bps |
|
286bps |
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
6.5%-16.0% |
|
8.3% |
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.8%-9.0% |
|
7.2% |
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
2.3%-5.5% |
|
3.3% |
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
17.0%-86.0% |
|
54.8% |
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.6%-5.3% |
|
3.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Investment-type insurance contracts |
|
(170.5 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
2.6%-2.8% (3) |
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
16.1%-38.3% |
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.3%-1.6% |
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.6% |
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (5) |
|
|
|
|
Derivative liabilities |
|
(65.1 |
) |
See note (2) |
|
|
|
|
|
|
|
|
Other liabilities |
|
(39.6 |
) |
See note (2) |
|
|
|
|
|
|
|
(1) Represents market comparable interest rate or an index adjusted rate used as the base rate in the discounted cash flow analysis prior to any credit spread, illiquidity or other adjustments, where applicable.
(2) Relates to a consolidated collateralized private investment vehicle that is a VIE. Fixed maturities, trading represents the underlying collateral of the investment structure and consists of high-grade fixed maturity investments, which are over-collateralized based on outstanding notes priced at par. The derivative liability represents credit default swaps that are valued using a correlation model to the credit default swap (“CDS”) Index (“CDX”) and inputs to the valuation are based on observable market data such as the end of period swap curve, CDS constituents of the index and spread levels of the index, as well as CDX tranche spreads. The other liabilities represent obligations to third party note holders due at maturity or termination of the trust. The value of the obligations reflect the third parties’ interest in the investment structure.
(3) Represents the range of rate curves used in the valuation analysis that we have determined market participants would use when pricing the instrument. Derived from interpolation between observable 20 and 30-year swap rates.
(4) This input factor is the number of contractholders taking withdrawals as well as the amount and timing of the withdrawals and a range does not provide a meaningful presentation.
(5) This input is based on an appropriate industry mortality table and a range does not provide a meaningful presentation.
|
|
|
March 31, 2013 |
| |||||||||||||
|
|
|
|
|
|
|
Fair value hierarchy level |
| |||||||||
|
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Mortgage loans |
|
$ |
11,577.9 |
|
$ |
12,350.1 |
|
$ |
— |
|
$ |
— |
|
$ |
12,350.1 |
|
|
Policy loans |
|
866.5 |
|
1,051.9 |
|
— |
|
— |
|
1,051.9 |
| |||||
|
Other investments |
|
231.7 |
|
233.2 |
|
— |
|
146.0 |
|
87.2 |
| |||||
|
Cash and cash equivalents |
|
903.8 |
|
903.8 |
|
903.8 |
|
— |
|
— |
| |||||
|
Investments-type insurance contracts |
|
(30,791.6 |
) |
(31,405.9 |
) |
— |
|
(6,822.7 |
) |
(24,583.2 |
) | |||||
|
Short-term debt |
|
(46.5 |
) |
(46.5 |
) |
— |
|
(46.5 |
) |
— |
| |||||
|
Long-term debt |
|
(2,790.5 |
) |
(3,090.4 |
) |
— |
|
(3,057.3 |
) |
(33.1 |
) | |||||
|
Separate account liabilities |
|
(111,716.3 |
) |
(110,268.8 |
) |
— |
|
— |
|
(110,268.8 |
) | |||||
|
Bank deposits |
|
(2,181.6 |
) |
(2,225.5 |
) |
(1,433.4 |
) |
(792.1 |
) |
— |
| |||||
|
Cash collateral payable |
|
(75.0 |
) |
(75.0 |
) |
(75.0 |
) |
— |
|
— |
| |||||
|
|
|
December 31, 2012 |
| |||||||||||||
|
|
|
|
|
|
|
Fair value hierarchy level |
| |||||||||
|
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Mortgage loans |
|
$ |
11,519.7 |
|
$ |
12,163.7 |
|
$ |
— |
|
$ |
— |
|
$ |
12,163.7 |
|
|
Policy loans |
|
864.9 |
|
1,056.8 |
|
— |
|
— |
|
1,056.8 |
| |||||
|
Other investments |
|
280.1 |
|
280.5 |
|
— |
|
195.3 |
|
85.2 |
| |||||
|
Cash and cash equivalents |
|
2,404.6 |
|
2,404.6 |
|
2,364.6 |
|
40.0 |
|
— |
| |||||
|
Investments-type insurance contracts |
|
(31,953.1 |
) |
(32,531.6 |
) |
— |
|
(7,367.4 |
) |
(25,164.2 |
) | |||||
|
Short-term debt |
|
(40.8 |
) |
(40.8 |
) |
— |
|
(40.8 |
) |
— |
| |||||
|
Long-term debt |
|
(2,671.3 |
) |
(2,951.4 |
) |
— |
|
(2,921.7 |
) |
(29.7 |
) | |||||
|
Separate account liabilities |
|
(73,096.0 |
) |
(72,173.8 |
) |
— |
|
— |
|
(72,173.8 |
) | |||||
|
Bank deposits |
|
(2,174.7 |
) |
(2,177.7 |
) |
(1,404.4 |
) |
(773.3 |
) |
— |
| |||||
|
Cash collateral payable |
|
(205.6 |
) |
(205.6 |
) |
(205.6 |
) |
— |
|
— |
| |||||
|
|||
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||
|
|
|
(in millions) |
| ||||
|
|
|
|
|
|
| ||
|
Assets: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
120,416.2 |
|
$ |
117,399.5 |
|
|
Principal Global Investors |
|
1,207.2 |
|
1,282.2 |
| ||
|
Principal International |
|
56,122.5 |
|
19,170.9 |
| ||
|
U.S. Insurance Solutions |
|
19,518.6 |
|
19,017.2 |
| ||
|
Corporate |
|
3,498.4 |
|
4,960.4 |
| ||
|
Total consolidated assets |
|
$ |
200,762.9 |
|
$ |
161,830.2 |
|
|
|
For the three months ended March 31, |
| |||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Operating revenues by segment: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
1,102.3 |
|
$ |
1,055.1 |
|
|
Principal Global Investors |
|
153.7 |
|
138.1 |
| ||
|
Principal International |
|
247.5 |
|
262.5 |
| ||
|
U.S. Insurance Solutions |
|
778.0 |
|
697.0 |
| ||
|
Corporate |
|
(43.2 |
) |
(45.3 |
) | ||
|
Total segment operating revenues |
|
2,238.3 |
|
2,107.4 |
| ||
|
Net realized capital losses, net of related revenue adjustments |
|
(75.2 |
) |
(30.4 |
) | ||
|
Exited group medical insurance business |
|
3.6 |
|
18.9 |
| ||
|
Total revenues per consolidated statements of operations |
|
$ |
2,166.7 |
|
$ |
2,095.9 |
|
|
Operating earnings (loss) by segment, net of related income taxes: |
|
|
|
|
| ||
|
Retirement and Investor Services |
|
$ |
170.0 |
|
$ |
143.6 |
|
|
Principal Global Investors |
|
20.3 |
|
16.2 |
| ||
|
Principal International |
|
44.6 |
|
44.1 |
| ||
|
U.S. Insurance Solutions |
|
35.7 |
|
50.2 |
| ||
|
Corporate |
|
(37.3 |
) |
(38.8 |
) | ||
|
Total segment operating earnings, net of related income taxes |
|
233.3 |
|
215.3 |
| ||
|
Net realized capital losses, as adjusted (1) |
|
(56.4 |
) |
(9.9 |
) | ||
|
Other after-tax adjustments (2) |
|
1.4 |
|
(1.5 |
) | ||
|
Net income available to common stockholders per consolidated statements of operations |
|
$ |
178.3 |
|
$ |
203.9 |
|
(1) Net realized capital gains (losses), as adjusted, is derived as follows:
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Net realized capital losses: |
|
|
|
|
| ||
|
Net realized capital losses |
|
$ |
(50.9 |
) |
$ |
(6.7 |
) |
|
Certain derivative and hedging-related adjustments |
|
(24.1 |
) |
(23.3 |
) | ||
|
Recognition of front-end fee revenue |
|
(0.2 |
) |
(0.4 |
) | ||
|
Net realized capital losses, net of related revenue adjustments |
|
(75.2 |
) |
(30.4 |
) | ||
|
Amortization of deferred acquisition costs and other actuarial balances |
|
3.1 |
|
32.8 |
| ||
|
Capital gains distributed |
|
(6.1 |
) |
(7.5 |
) | ||
|
Certain market value adjustments of embedded derivatives |
|
0.1 |
|
(1.9 |
) | ||
|
Net realized capital losses associated with exited group medical insurance business |
|
— |
|
0.1 |
| ||
|
Noncontrolling interest capital gains |
|
— |
|
(8.1 |
) | ||
|
Income tax effect |
|
21.7 |
|
5.1 |
| ||
|
Net realized capital losses, as adjusted |
|
$ |
(56.4 |
) |
$ |
(9.9 |
) |
(2) For the three months ended March 31, 2013, other after-tax adjustments included the positive effect of gains associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP.
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Retirement and Investor Services: |
|
|
|
|
| ||
|
Full service accumulation |
|
$ |
351.7 |
|
$ |
332.7 |
|
|
Principal Funds |
|
180.6 |
|
147.1 |
| ||
|
Individual annuities |
|
268.2 |
|
272.3 |
| ||
|
Bank and trust services |
|
24.9 |
|
24.5 |
| ||
|
Eliminations |
|
(34.4 |
) |
(29.2 |
) | ||
|
Total Accumulation |
|
791.0 |
|
747.4 |
| ||
|
Investment only |
|
92.4 |
|
115.3 |
| ||
|
Full service payout |
|
218.9 |
|
192.4 |
| ||
|
Total Guaranteed |
|
311.3 |
|
307.7 |
| ||
|
Total Retirement and Investor Services |
|
1,102.3 |
|
1,055.1 |
| ||
|
Principal Global Investors (1) |
|
153.7 |
|
138.1 |
| ||
|
Principal International |
|
247.5 |
|
262.5 |
| ||
|
U.S. Insurance Solutions: |
|
|
|
|
| ||
|
Individual life insurance |
|
379.5 |
|
313.5 |
| ||
|
Specialty benefits insurance |
|
398.5 |
|
383.5 |
| ||
|
Total U.S. Insurance Solutions |
|
778.0 |
|
697.0 |
| ||
|
Corporate |
|
(43.2 |
) |
(45.3 |
) | ||
|
Total operating revenues |
|
$ |
2,238.3 |
|
$ |
2,107.4 |
|
|
Total operating revenues |
|
$ |
2,238.3 |
|
$ |
2,107.4 |
|
|
Net realized capital losses (except periodic settlements and accruals on non-hedge derivatives), including recognition of front-end fee revenues and certain market value adjustments to fee revenues |
|
(75.2 |
) |
(30.4 |
) | ||
|
Exited group medical insurance business |
|
3.6 |
|
18.9 |
| ||
|
Total revenues per consolidated statements of operations |
|
$ |
2,166.7 |
|
$ |
2,095.9 |
|
(1) Reflects inter-segment revenues of $58.6 million and $52.6 million for the three months ended March 31, 2013 and 2012, respectively. These revenues are eliminated within the Corporate segment.
|
|||
|
|
|
For the three months ended March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
|
|
(in millions) |
| ||||
|
Compensation cost |
|
$ |
15.6 |
|
$ |
15.2 |
|
|
Related income tax benefit |
|
4.7 |
|
4.6 |
| ||
|
Capitalized as part of an asset |
|
0.6 |
|
0.7 |
| ||
|
|||
Condensed Consolidating Statements of Financial Position
March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
44,789.5 |
|
$ |
6,661.0 |
|
$ |
(366.4 |
) |
$ |
51,084.1 |
|
|
Fixed maturities, trading |
|
— |
|
279.2 |
|
349.7 |
|
— |
|
628.9 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
130.0 |
|
17.0 |
|
— |
|
147.0 |
| |||||
|
Equity securities, trading |
|
— |
|
0.3 |
|
731.9 |
|
— |
|
732.2 |
| |||||
|
Mortgage loans |
|
— |
|
10,107.7 |
|
1,801.3 |
|
(331.1 |
) |
11,577.9 |
| |||||
|
Real estate |
|
— |
|
8.3 |
|
1,193.7 |
|
— |
|
1,202.0 |
| |||||
|
Policy loans |
|
— |
|
833.5 |
|
33.0 |
|
— |
|
866.5 |
| |||||
|
Investment in unconsolidated entities |
|
12,036.1 |
|
3,321.2 |
|
4,666.1 |
|
(19,142.0 |
) |
881.4 |
| |||||
|
Other investments |
|
9.0 |
|
2,504.8 |
|
1,358.1 |
|
(1,566.1 |
) |
2,305.8 |
| |||||
|
Cash and cash equivalents |
|
112.7 |
|
711.1 |
|
751.9 |
|
85.5 |
|
1,661.2 |
| |||||
|
Accrued investment income |
|
— |
|
518.2 |
|
68.0 |
|
(1.7 |
) |
584.5 |
| |||||
|
Premiums due and other receivables |
|
— |
|
1,020.6 |
|
1,460.9 |
|
(1,306.3 |
) |
1,175.2 |
| |||||
|
Deferred acquisition costs |
|
— |
|
2,504.7 |
|
210.8 |
|
— |
|
2,715.5 |
| |||||
|
Property and equipment |
|
— |
|
395.2 |
|
77.4 |
|
— |
|
472.6 |
| |||||
|
Goodwill |
|
— |
|
54.3 |
|
1,143.1 |
|
— |
|
1,197.4 |
| |||||
|
Other intangibles |
|
— |
|
27.6 |
|
1,562.7 |
|
— |
|
1,590.3 |
| |||||
|
Separate account assets |
|
— |
|
73,423.6 |
|
47,482.5 |
|
— |
|
120,906.1 |
| |||||
|
Other assets |
|
66.2 |
|
983.3 |
|
1,660.8 |
|
(1,676.0 |
) |
1,034.3 |
| |||||
|
Total assets |
|
$ |
12,224.0 |
|
$ |
141,613.1 |
|
$ |
71,229.9 |
|
$ |
(24,304.1 |
) |
$ |
200,762.9 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
35,868.5 |
|
$ |
1,113.9 |
|
$ |
(280.8 |
) |
$ |
36,701.6 |
|
|
Future policy benefits and claims |
|
— |
|
18,048.2 |
|
4,854.2 |
|
(212.9 |
) |
22,689.5 |
| |||||
|
Other policyholder funds |
|
— |
|
767.4 |
|
44.1 |
|
(0.3 |
) |
811.2 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
46.5 |
|
— |
|
46.5 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
99.4 |
|
573.6 |
|
(331.1 |
) |
2,790.5 |
| |||||
|
Income taxes currently payable |
|
— |
|
— |
|
82.2 |
|
(72.4 |
) |
9.8 |
| |||||
|
Deferred income taxes |
|
— |
|
230.6 |
|
686.8 |
|
(126.0 |
) |
791.4 |
| |||||
|
Separate account liabilities |
|
— |
|
73,423.6 |
|
47,482.5 |
|
— |
|
120,906.1 |
| |||||
|
Other liabilities |
|
51.8 |
|
5,531.5 |
|
4,143.6 |
|
(3,596.1 |
) |
6,130.8 |
| |||||
|
Total liabilities |
|
2,500.4 |
|
133,969.2 |
|
59,027.4 |
|
(4,619.6 |
) |
190,877.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
58.9 |
|
— |
|
58.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.6 |
|
2.5 |
|
— |
|
(2.5 |
) |
4.6 |
| |||||
|
Additional paid-in capital |
|
9,771.5 |
|
5,745.0 |
|
9,394.8 |
|
(15,139.8 |
) |
9,771.5 |
| |||||
|
Retained earnings |
|
4,971.7 |
|
1,318.0 |
|
1,986.1 |
|
(3,304.1 |
) |
4,971.7 |
| |||||
|
Accumulated other comprehensive income |
|
621.0 |
|
578.4 |
|
655.2 |
|
(1,233.6 |
) |
621.0 |
| |||||
|
Treasury stock, at cost |
|
(5,645.3 |
) |
— |
|
— |
|
— |
|
(5,645.3 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,723.6 |
|
7,643.9 |
|
12,036.1 |
|
(19,680.0 |
) |
9,723.6 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
107.5 |
|
(4.5 |
) |
103.0 |
| |||||
|
Total stockholders’ equity |
|
9,723.6 |
|
7,643.9 |
|
12,143.6 |
|
(19,684.5 |
) |
9,826.6 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,224.0 |
|
$ |
141,613.1 |
|
$ |
71,229.9 |
|
$ |
(24,304.1 |
) |
$ |
200,762.9 |
|
Condensed Consolidating Statements of Financial Position
December 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
44,614.6 |
|
$ |
6,681.7 |
|
$ |
(357.0 |
) |
$ |
50,939.3 |
|
|
Fixed maturities, trading |
|
10.5 |
|
284.4 |
|
331.8 |
|
— |
|
626.7 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
131.3 |
|
5.2 |
|
— |
|
136.5 |
| |||||
|
Equity securities, trading |
|
— |
|
0.3 |
|
252.5 |
|
— |
|
252.8 |
| |||||
|
Mortgage loans |
|
— |
|
10,054.2 |
|
1,775.5 |
|
(310.0 |
) |
11,519.7 |
| |||||
|
Real estate |
|
— |
|
8.4 |
|
1,171.9 |
|
— |
|
1,180.3 |
| |||||
|
Policy loans |
|
— |
|
834.0 |
|
30.9 |
|
— |
|
864.9 |
| |||||
|
Investment in unconsolidated entities |
|
11,853.3 |
|
3,309.2 |
|
4,808.3 |
|
(19,101.8 |
) |
869.0 |
| |||||
|
Other investments |
|
11.1 |
|
2,834.0 |
|
1,208.4 |
|
(1,631.4 |
) |
2,422.1 |
| |||||
|
Cash and cash equivalents |
|
207.1 |
|
1,698.4 |
|
2,286.9 |
|
(15.2 |
) |
4,177.2 |
| |||||
|
Accrued investment income |
|
— |
|
521.6 |
|
64.5 |
|
(1.7 |
) |
584.4 |
| |||||
|
Premiums due and other receivables |
|
0.1 |
|
916.7 |
|
1,327.1 |
|
(1,159.5 |
) |
1,084.4 |
| |||||
|
Deferred acquisition costs |
|
— |
|
2,394.8 |
|
195.2 |
|
— |
|
2,590.0 |
| |||||
|
Property and equipment |
|
— |
|
402.2 |
|
62.0 |
|
— |
|
464.2 |
| |||||
|
Goodwill |
|
— |
|
54.3 |
|
489.1 |
|
— |
|
543.4 |
| |||||
|
Other intangibles |
|
— |
|
27.9 |
|
886.8 |
|
— |
|
914.7 |
| |||||
|
Separate account assets |
|
— |
|
69,217.8 |
|
12,436.0 |
|
— |
|
81,653.8 |
| |||||
|
Other assets |
|
78.0 |
|
947.8 |
|
1,567.7 |
|
(1,586.7 |
) |
1,006.8 |
| |||||
|
Total assets |
|
$ |
12,160.1 |
|
$ |
138,251.9 |
|
$ |
35,581.5 |
|
$ |
(24,163.3 |
) |
$ |
161,830.2 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
37,053.3 |
|
$ |
1,011.9 |
|
$ |
(278.7 |
) |
$ |
37,786.5 |
|
|
Future policy benefits and claims |
|
— |
|
17,944.9 |
|
4,679.6 |
|
(188.3 |
) |
22,436.2 |
| |||||
|
Other policyholder funds |
|
— |
|
676.5 |
|
40.3 |
|
(0.4 |
) |
716.4 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
40.8 |
|
— |
|
40.8 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
99.4 |
|
433.3 |
|
(310.0 |
) |
2,671.3 |
| |||||
|
Income taxes currently payable |
|
— |
|
— |
|
84.7 |
|
(69.4 |
) |
15.3 |
| |||||
|
Deferred income taxes |
|
— |
|
324.5 |
|
378.4 |
|
(102.9 |
) |
600.0 |
| |||||
|
Separate account liabilities |
|
— |
|
69,217.8 |
|
12,436.0 |
|
— |
|
81,653.8 |
| |||||
|
Other liabilities |
|
28.1 |
|
5,375.1 |
|
4,538.4 |
|
(3,795.5 |
) |
6,146.1 |
| |||||
|
Total liabilities |
|
2,476.7 |
|
130,691.5 |
|
23,643.4 |
|
(4,745.2 |
) |
152,066.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
60.4 |
|
— |
|
60.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.5 |
|
2.5 |
|
— |
|
(2.5 |
) |
4.5 |
| |||||
|
Additional paid-in capital |
|
9,730.9 |
|
5,747.6 |
|
9,393.8 |
|
(15,141.4 |
) |
9,730.9 |
| |||||
|
Retained earnings |
|
4,862.0 |
|
1,167.7 |
|
1,783.4 |
|
(2,951.1 |
) |
4,862.0 |
| |||||
|
Accumulated other comprehensive income |
|
640.3 |
|
642.6 |
|
676.1 |
|
(1,318.7 |
) |
640.3 |
| |||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
— |
|
— |
|
— |
|
(5,554.4 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,683.4 |
|
7,560.4 |
|
11,853.3 |
|
(19,413.7 |
) |
9,683.4 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
24.4 |
|
(4.4 |
) |
20.0 |
| |||||
|
Total stockholders’ equity |
|
9,683.4 |
|
7,560.4 |
|
11,877.7 |
|
(19,418.1 |
) |
9,703.4 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,160.1 |
|
$ |
138,251.9 |
|
$ |
35,581.5 |
|
$ |
(24,163.3 |
) |
$ |
161,830.2 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
605.1 |
|
$ |
89.6 |
|
$ |
— |
|
$ |
694.7 |
|
|
Fees and other revenues |
|
— |
|
413.2 |
|
404.3 |
|
(83.9 |
) |
733.6 |
| |||||
|
Net investment income |
|
— |
|
602.0 |
|
179.9 |
|
7.4 |
|
789.3 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
6.3 |
|
(304.9 |
) |
272.1 |
|
0.1 |
|
(26.4 |
) | |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(44.2 |
) |
(0.5 |
) |
— |
|
(44.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
20.1 |
|
0.1 |
|
— |
|
20.2 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
(24.1 |
) |
(0.4 |
) |
— |
|
(24.5 |
) | |||||
|
Net realized capital gains (losses) |
|
6.3 |
|
(329.0 |
) |
271.7 |
|
0.1 |
|
(50.9 |
) | |||||
|
Total revenues |
|
6.3 |
|
1,291.3 |
|
945.5 |
|
(76.4 |
) |
2,166.7 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
950.3 |
|
147.3 |
|
(3.1 |
) |
1,094.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
48.3 |
|
— |
|
— |
|
48.3 |
| |||||
|
Operating expenses |
|
35.0 |
|
470.7 |
|
362.5 |
|
(72.5 |
) |
795.7 |
| |||||
|
Total expenses |
|
35.0 |
|
1,469.3 |
|
509.8 |
|
(75.6 |
) |
1,938.5 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.7 |
) |
(178.0 |
) |
435.7 |
|
(0.8 |
) |
228.2 |
| |||||
|
Income taxes (benefits) |
|
(11.5 |
) |
(88.4 |
) |
138.2 |
|
(0.1 |
) |
38.2 |
| |||||
|
Equity in the net income (loss) of subsidiaries |
|
203.7 |
|
240.6 |
|
(90.3 |
) |
(354.0 |
) |
— |
| |||||
|
Net income |
|
186.5 |
|
151.0 |
|
207.2 |
|
(354.7 |
) |
190.0 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Net income attributable to PFG |
|
186.5 |
|
151.0 |
|
203.7 |
|
(354.7 |
) |
186.5 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
178.3 |
|
$ |
151.0 |
|
$ |
203.7 |
|
$ |
(354.7 |
) |
$ |
178.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
186.5 |
|
$ |
151.0 |
|
$ |
207.2 |
|
$ |
(354.7 |
) |
$ |
190.0 |
|
|
Other comprehensive income (loss) |
|
(81.3 |
) |
(65.9 |
) |
59.7 |
|
67.1 |
|
(20.4 |
) | |||||
|
Comprehensive income |
|
$ |
105.2 |
|
$ |
85.1 |
|
$ |
266.9 |
|
$ |
(287.6 |
) |
$ |
169.6 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
583.4 |
|
$ |
96.4 |
|
$ |
— |
|
$ |
679.8 |
|
|
Fees and other revenues |
|
0.1 |
|
343.8 |
|
329.7 |
|
(75.6 |
) |
598.0 |
| |||||
|
Net investment income |
|
1.0 |
|
626.8 |
|
195.4 |
|
1.6 |
|
824.8 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
(350.5 |
) |
389.3 |
|
(16.7 |
) |
22.1 |
| |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(33.0 |
) |
(0.7 |
) |
— |
|
(33.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
4.5 |
|
0.4 |
|
— |
|
4.9 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
(28.5 |
) |
(0.3 |
) |
— |
|
(28.8 |
) | |||||
|
Net realized capital gains (losses) |
|
— |
|
(379.0 |
) |
389.0 |
|
(16.7 |
) |
(6.7 |
) | |||||
|
Total revenues |
|
1.1 |
|
1,175.0 |
|
1,010.5 |
|
(90.7 |
) |
2,095.9 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
1,034.5 |
|
181.2 |
|
(3.2 |
) |
1,212.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
50.3 |
|
— |
|
— |
|
50.3 |
| |||||
|
Operating expenses |
|
29.9 |
|
282.0 |
|
309.1 |
|
(65.9 |
) |
555.1 |
| |||||
|
Total expenses |
|
29.9 |
|
1,366.8 |
|
490.3 |
|
(69.1 |
) |
1,817.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.8 |
) |
(191.8 |
) |
520.2 |
|
(21.6 |
) |
278.0 |
| |||||
|
Income taxes (benefits) |
|
(11.3 |
) |
(84.9 |
) |
153.1 |
|
(0.2 |
) |
56.7 |
| |||||
|
Equity in the net income (loss) of subsidiaries |
|
229.6 |
|
275.1 |
|
(128.3 |
) |
(376.4 |
) |
— |
| |||||
|
Net income |
|
212.1 |
|
168.2 |
|
238.8 |
|
(397.8 |
) |
221.3 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
9.2 |
|
— |
|
9.2 |
| |||||
|
Net income attributable to PFG |
|
212.1 |
|
168.2 |
|
229.6 |
|
(397.8 |
) |
212.1 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
203.9 |
|
$ |
168.2 |
|
$ |
229.6 |
|
$ |
(397.8 |
) |
$ |
203.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
212.1 |
|
$ |
168.2 |
|
$ |
238.8 |
|
$ |
(397.8 |
) |
$ |
221.3 |
|
|
Other comprehensive income |
|
180.6 |
|
141.5 |
|
91.2 |
|
(188.1 |
) |
225.2 |
| |||||
|
Comprehensive income |
|
$ |
392.7 |
|
$ |
309.7 |
|
$ |
330.0 |
|
$ |
(585.9 |
) |
$ |
446.5 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2013
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
28.0 |
|
$ |
812.7 |
|
$ |
(385.0 |
) |
$ |
140.2 |
|
$ |
595.9 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
(2,242.7 |
) |
(206.4 |
) |
2.0 |
|
(2,447.1 |
) | |||||
|
Sales |
|
— |
|
392.7 |
|
128.7 |
|
(18.3 |
) |
503.1 |
| |||||
|
Maturities |
|
— |
|
1,596.0 |
|
194.9 |
|
— |
|
1,790.9 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
(573.2 |
) |
(59.8 |
) |
22.1 |
|
(610.9 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
519.3 |
|
79.2 |
|
(42.7 |
) |
555.8 |
| |||||
|
Real estate acquired |
|
— |
|
0.1 |
|
(23.5 |
) |
— |
|
(23.4 |
) | |||||
|
Net (purchases) sales of property and equipment |
|
— |
|
(2.0 |
) |
8.7 |
|
— |
|
6.7 |
| |||||
|
Purchases of interests in subsidiaries, net of cash acquired |
|
— |
|
— |
|
(1,268.3 |
) |
— |
|
(1,268.3 |
) | |||||
|
Dividends and returns of capital received from (contributions to) unconsolidated entities |
|
18.8 |
|
25.4 |
|
15.8 |
|
(60.0 |
) |
— |
| |||||
|
Net change in other investments |
|
(3.0 |
) |
56.3 |
|
(104.0 |
) |
18.5 |
|
(32.2 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
15.8 |
|
(228.1 |
) |
(1,234.7 |
) |
(78.4 |
) |
(1,525.4 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
20.3 |
|
— |
|
— |
|
— |
|
20.3 |
| |||||
|
Acquisition of treasury stock |
|
(90.9 |
) |
— |
|
— |
|
— |
|
(90.9 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
14.3 |
|
— |
|
— |
|
14.3 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
(12.7 |
) |
— |
|
— |
|
(12.7 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
1.3 |
|
2.5 |
|
— |
|
3.8 |
| |||||
|
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(30.6 |
) |
— |
|
(30.6 |
) | |||||
|
Dividends to common stockholders |
|
(67.6 |
) |
— |
|
— |
|
— |
|
(67.6 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
20.7 |
|
(21.1 |
) |
(0.4 |
) | |||||
|
Capital received from (dividends and capital paid to) parent |
|
— |
|
(15.8 |
) |
(44.2 |
) |
60.0 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
1,292.1 |
|
127.6 |
|
— |
|
1,419.7 |
| |||||
|
Investment contract withdrawals |
|
— |
|
(2,850.3 |
) |
(1.7 |
) |
— |
|
(2,852.0 |
) | |||||
|
Net increase in banking operation deposits |
|
— |
|
— |
|
6.9 |
|
— |
|
6.9 |
| |||||
|
Other |
|
— |
|
(0.8 |
) |
— |
|
— |
|
(0.8 |
) | |||||
|
Net cash provided by (used in) financing activities |
|
(138.2 |
) |
(1,571.9 |
) |
84.7 |
|
38.9 |
|
(1,586.5 |
) | |||||
|
Net decrease in cash and cash equivalents |
|
(94.4 |
) |
(987.3 |
) |
(1,535.0 |
) |
100.7 |
|
(2,516.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
207.1 |
|
1,698.4 |
|
2,286.9 |
|
(15.2 |
) |
4,177.2 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
112.7 |
|
$ |
711.1 |
|
$ |
751.9 |
|
$ |
85.5 |
|
$ |
1,661.2 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2012
|
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
79.9 |
|
$ |
930.6 |
|
$ |
(217.8 |
) |
$ |
109.0 |
|
$ |
901.7 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
(1,749.5 |
) |
(329.5 |
) |
18.5 |
|
(2,060.5 |
) | |||||
|
Sales |
|
— |
|
412.3 |
|
23.6 |
|
(7.4 |
) |
428.5 |
| |||||
|
Maturities |
|
— |
|
1,352.1 |
|
260.0 |
|
— |
|
1,612.1 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
(887.1 |
) |
(32.5 |
) |
— |
|
(919.6 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
389.7 |
|
81.5 |
|
(109.8 |
) |
361.4 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(21.3 |
) |
— |
|
(21.3 |
) | |||||
|
Net purchases of property and equipment |
|
— |
|
(11.8 |
) |
(5.5 |
) |
— |
|
(17.3 |
) | |||||
|
Dividends and returns of capital received from unconsolidated entities |
|
189.3 |
|
140.0 |
|
189.2 |
|
(518.5 |
) |
— |
| |||||
|
Net change in other investments |
|
— |
|
(29.6 |
) |
(25.9 |
) |
(18.3 |
) |
(73.8 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
189.3 |
|
(383.9 |
) |
139.6 |
|
(635.5 |
) |
(690.5 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
9.1 |
|
— |
|
— |
|
— |
|
9.1 |
| |||||
|
Acquisition of treasury stock |
|
(64.2 |
) |
— |
|
— |
|
— |
|
(64.2 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
20.4 |
|
— |
|
— |
|
20.4 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
(16.2 |
) |
— |
|
— |
|
(16.2 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
4.8 |
|
5.1 |
|
— |
|
9.9 |
| |||||
|
Dividends to common stockholders |
|
(54.3 |
) |
— |
|
— |
|
— |
|
(54.3 |
) | |||||
|
Dividends to preferred stockholders |
|
(8.2 |
) |
— |
|
— |
|
— |
|
(8.2 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
1.0 |
|
— |
|
1.0 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(9.0 |
) |
8.2 |
|
(0.8 |
) | |||||
|
Net repayments of short-term borrowings |
|
— |
|
— |
|
(7.5 |
) |
— |
|
(7.5 |
) | |||||
|
Dividends and capital paid to parent |
|
— |
|
(189.2 |
) |
(329.3 |
) |
518.5 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
1,522.7 |
|
95.9 |
|
— |
|
1,618.6 |
| |||||
|
Investment contract withdrawals |
|
— |
|
(2,885.4 |
) |
(0.5 |
) |
— |
|
(2,885.9 |
) | |||||
|
Net decrease in banking operation deposits |
|
— |
|
— |
|
(13.4 |
) |
— |
|
(13.4 |
) | |||||
|
Other |
|
— |
|
(1.7 |
) |
— |
|
— |
|
(1.7 |
) | |||||
|
Net cash used in financing activities |
|
(117.6 |
) |
(1,544.6 |
) |
(257.7 |
) |
526.7 |
|
(1,393.2 |
) | |||||
|
Net increase (decrease) in cash and cash equivalents |
|
151.6 |
|
(997.9 |
) |
(335.9 |
) |
0.2 |
|
(1,182.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
226.7 |
|
1,344.5 |
|
1,277.6 |
|
(14.9 |
) |
2,833.9 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
378.3 |
|
$ |
346.6 |
|
$ |
941.7 |
|
$ |
(14.7 |
) |
$ |
1,651.9 |
|
Condensed Consolidating Statements of Financial Position
March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
51,084.1 |
|
$ |
— |
|
$ |
51,084.1 |
|
|
Fixed maturities, trading |
|
— |
|
— |
|
628.9 |
|
— |
|
628.9 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
— |
|
147.0 |
|
— |
|
147.0 |
| |||||
|
Equity securities, trading |
|
— |
|
— |
|
732.2 |
|
— |
|
732.2 |
| |||||
|
Mortgage loans |
|
— |
|
— |
|
11,577.9 |
|
— |
|
11,577.9 |
| |||||
|
Real estate |
|
— |
|
— |
|
1,202.0 |
|
— |
|
1,202.0 |
| |||||
|
Policy loans |
|
— |
|
— |
|
866.5 |
|
— |
|
866.5 |
| |||||
|
Investment in unconsolidated entities |
|
12,036.1 |
|
10,819.4 |
|
872.7 |
|
(22,846.8 |
) |
881.4 |
| |||||
|
Other investments |
|
9.0 |
|
52.1 |
|
2,244.7 |
|
— |
|
2,305.8 |
| |||||
|
Cash and cash equivalents |
|
112.7 |
|
584.8 |
|
1,755.9 |
|
(792.2 |
) |
1,661.2 |
| |||||
|
Accrued investment income |
|
— |
|
— |
|
584.5 |
|
— |
|
584.5 |
| |||||
|
Premiums due and other receivables |
|
— |
|
990.8 |
|
2,176.4 |
|
(1,992.0 |
) |
1,175.2 |
| |||||
|
Deferred acquisition costs |
|
— |
|
— |
|
2,715.5 |
|
— |
|
2,715.5 |
| |||||
|
Property and equipment |
|
— |
|
— |
|
472.6 |
|
— |
|
472.6 |
| |||||
|
Goodwill |
|
— |
|
— |
|
1,197.4 |
|
— |
|
1,197.4 |
| |||||
|
Other intangibles |
|
— |
|
— |
|
1,590.3 |
|
— |
|
1,590.3 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
120,906.1 |
|
— |
|
120,906.1 |
| |||||
|
Other assets |
|
66.2 |
|
82.8 |
|
1,071.0 |
|
(185.7 |
) |
1,034.3 |
| |||||
|
Total assets |
|
$ |
12,224.0 |
|
$ |
12,529.9 |
|
$ |
201,825.7 |
|
$ |
(25,816.7 |
) |
$ |
200,762.9 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
36,701.6 |
|
$ |
— |
|
$ |
36,701.6 |
|
|
Future policy benefits and claims |
|
— |
|
— |
|
22,689.5 |
|
— |
|
22,689.5 |
| |||||
|
Other policyholder funds |
|
— |
|
— |
|
811.2 |
|
— |
|
811.2 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
2,353.4 |
|
(2,306.9 |
) |
46.5 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
— |
|
341.9 |
|
— |
|
2,790.5 |
| |||||
|
Income taxes currently payable |
|
— |
|
18.3 |
|
49.1 |
|
(57.6 |
) |
9.8 |
| |||||
|
Deferred income taxes |
|
— |
|
— |
|
899.8 |
|
(108.4 |
) |
791.4 |
| |||||
|
Separate account liabilities |
|
— |
|
— |
|
120,906.1 |
|
— |
|
120,906.1 |
| |||||
|
Other liabilities |
|
51.8 |
|
475.5 |
|
6,091.8 |
|
(488.3 |
) |
6,130.8 |
| |||||
|
Total liabilities |
|
2,500.4 |
|
493.8 |
|
190,844.4 |
|
(2,961.2 |
) |
190,877.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
58.9 |
|
— |
|
58.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.6 |
|
— |
|
17.8 |
|
(17.8 |
) |
4.6 |
| |||||
|
Additional paid-in capital |
|
9,771.5 |
|
9,394.8 |
|
8,306.5 |
|
(17,701.3 |
) |
9,771.5 |
| |||||
|
Retained earnings |
|
4,971.7 |
|
1,986.1 |
|
1,854.8 |
|
(3,840.9 |
) |
4,971.7 |
| |||||
|
Accumulated other comprehensive income |
|
621.0 |
|
655.2 |
|
642.3 |
|
(1,297.5 |
) |
621.0 |
| |||||
|
Treasury stock, at cost |
|
(5,645.3 |
) |
— |
|
(2.0 |
) |
2.0 |
|
(5,645.3 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,723.6 |
|
12,036.1 |
|
10,819.4 |
|
(22,855.5 |
) |
9,723.6 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
103.0 |
|
— |
|
103.0 |
| |||||
|
Total stockholders’ equity |
|
9,723.6 |
|
12,036.1 |
|
10,922.4 |
|
(22,855.5 |
) |
9,826.6 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,224.0 |
|
$ |
12,529.9 |
|
$ |
201,825.7 |
|
$ |
(25,816.7 |
) |
$ |
200,762.9 |
|
Condensed Consolidating Statements of Financial Position
December 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
50,939.3 |
|
$ |
— |
|
$ |
50,939.3 |
|
|
Fixed maturities, trading |
|
10.5 |
|
— |
|
616.2 |
|
— |
|
626.7 |
| |||||
|
Equity securities, available-for-sale |
|
— |
|
— |
|
136.5 |
|
— |
|
136.5 |
| |||||
|
Equity securities, trading |
|
— |
|
— |
|
252.8 |
|
— |
|
252.8 |
| |||||
|
Mortgage loans |
|
— |
|
— |
|
11,519.7 |
|
— |
|
11,519.7 |
| |||||
|
Real estate |
|
— |
|
— |
|
1,180.3 |
|
— |
|
1,180.3 |
| |||||
|
Policy loans |
|
— |
|
— |
|
864.9 |
|
— |
|
864.9 |
| |||||
|
Investment in unconsolidated entities |
|
11,853.3 |
|
10,632.1 |
|
860.2 |
|
(22,476.6 |
) |
869.0 |
| |||||
|
Other investments |
|
11.1 |
|
39.6 |
|
2,371.4 |
|
— |
|
2,422.1 |
| |||||
|
Cash and cash equivalents |
|
207.1 |
|
612.5 |
|
4,241.3 |
|
(883.7 |
) |
4,177.2 |
| |||||
|
Accrued investment income |
|
— |
|
— |
|
584.4 |
|
— |
|
584.4 |
| |||||
|
Premiums due and other receivables |
|
0.1 |
|
1,122.1 |
|
2,206.7 |
|
(2,244.5 |
) |
1,084.4 |
| |||||
|
Deferred acquisition costs |
|
— |
|
— |
|
2,590.0 |
|
— |
|
2,590.0 |
| |||||
|
Property and equipment |
|
— |
|
— |
|
464.2 |
|
— |
|
464.2 |
| |||||
|
Goodwill |
|
— |
|
— |
|
543.4 |
|
— |
|
543.4 |
| |||||
|
Other intangibles |
|
— |
|
— |
|
914.7 |
|
— |
|
914.7 |
| |||||
|
Separate account assets |
|
— |
|
— |
|
81,653.8 |
|
— |
|
81,653.8 |
| |||||
|
Other assets |
|
78.0 |
|
51.0 |
|
1,003.5 |
|
(125.7 |
) |
1,006.8 |
| |||||
|
Total assets |
|
$ |
12,160.1 |
|
$ |
12,457.3 |
|
$ |
162,943.3 |
|
$ |
(25,730.5 |
) |
$ |
161,830.2 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
37,786.5 |
|
$ |
— |
|
$ |
37,786.5 |
|
|
Future policy benefits and claims |
|
— |
|
— |
|
22,436.2 |
|
— |
|
22,436.2 |
| |||||
|
Other policyholder funds |
|
— |
|
— |
|
716.4 |
|
— |
|
716.4 |
| |||||
|
Short-term debt |
|
— |
|
— |
|
2,564.1 |
|
(2,523.3 |
) |
40.8 |
| |||||
|
Long-term debt |
|
2,448.6 |
|
— |
|
222.7 |
|
— |
|
2,671.3 |
| |||||
|
Income taxes currently payable |
|
— |
|
0.1 |
|
47.2 |
|
(32.0 |
) |
15.3 |
| |||||
|
Deferred income taxes |
|
— |
|
— |
|
686.1 |
|
(86.1 |
) |
600.0 |
| |||||
|
Separate account liabilities |
|
— |
|
— |
|
81,653.8 |
|
— |
|
81,653.8 |
| |||||
|
Other liabilities |
|
28.1 |
|
603.9 |
|
6,117.8 |
|
(603.7 |
) |
6,146.1 |
| |||||
|
Total liabilities |
|
2,476.7 |
|
604.0 |
|
152,230.8 |
|
(3,245.1 |
) |
152,066.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Redeemable noncontrolling interest |
|
— |
|
— |
|
60.4 |
|
— |
|
60.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A preferred stock |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Series B preferred stock |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
| |||||
|
Common stock |
|
4.5 |
|
— |
|
17.8 |
|
(17.8 |
) |
4.5 |
| |||||
|
Additional paid-in capital |
|
9,730.9 |
|
9,393.8 |
|
8,287.7 |
|
(17,681.5 |
) |
9,730.9 |
| |||||
|
Retained earnings |
|
4,862.0 |
|
1,783.4 |
|
1,666.7 |
|
(3,450.1 |
) |
4,862.0 |
| |||||
|
Accumulated other comprehensive income |
|
640.3 |
|
676.1 |
|
661.9 |
|
(1,338.0 |
) |
640.3 |
| |||||
|
Treasury stock, at cost |
|
(5,554.4 |
) |
— |
|
(2.0 |
) |
2.0 |
|
(5,554.4 |
) | |||||
|
Total stockholders’ equity attributable to PFG |
|
9,683.4 |
|
11,853.3 |
|
10,632.1 |
|
(22,485.4 |
) |
9,683.4 |
| |||||
|
Noncontrolling interest |
|
— |
|
— |
|
20.0 |
|
— |
|
20.0 |
| |||||
|
Total stockholders’ equity |
|
9,683.4 |
|
11,853.3 |
|
10,652.1 |
|
(22,485.4 |
) |
9,703.4 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
12,160.1 |
|
$ |
12,457.3 |
|
$ |
162,943.3 |
|
$ |
(25,730.5 |
) |
$ |
161,830.2 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
694.7 |
|
$ |
— |
|
$ |
694.7 |
|
|
Fees and other revenues |
|
— |
|
— |
|
733.7 |
|
(0.1 |
) |
733.6 |
| |||||
|
Net investment income |
|
— |
|
0.7 |
|
788.5 |
|
0.1 |
|
789.3 |
| |||||
|
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
6.3 |
|
2.1 |
|
(34.8 |
) |
— |
|
(26.4 |
) | |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(44.7 |
) |
— |
|
(44.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
20.2 |
|
— |
|
20.2 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(24.5 |
) |
— |
|
(24.5 |
) | |||||
|
Net realized capital gains (losses) |
|
6.3 |
|
2.1 |
|
(59.3 |
) |
— |
|
(50.9 |
) | |||||
|
Total revenues |
|
6.3 |
|
2.8 |
|
2,157.6 |
|
— |
|
2,166.7 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
1,094.5 |
|
— |
|
1,094.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
— |
|
48.3 |
|
— |
|
48.3 |
| |||||
|
Operating expenses |
|
35.0 |
|
8.2 |
|
752.5 |
|
— |
|
795.7 |
| |||||
|
Total expenses |
|
35.0 |
|
8.2 |
|
1,895.3 |
|
— |
|
1,938.5 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.7 |
) |
(5.4 |
) |
262.3 |
|
— |
|
228.2 |
| |||||
|
Income taxes (benefits) |
|
(11.5 |
) |
(1.0 |
) |
50.7 |
|
— |
|
38.2 |
| |||||
|
Equity in the net income of subsidiaries |
|
203.7 |
|
208.1 |
|
— |
|
(411.8 |
) |
— |
| |||||
|
Net income |
|
186.5 |
|
203.7 |
|
211.6 |
|
(411.8 |
) |
190.0 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Net income attributable to PFG |
|
186.5 |
|
203.7 |
|
208.1 |
|
(411.8 |
) |
186.5 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
178.3 |
|
$ |
203.7 |
|
$ |
208.1 |
|
$ |
(411.8 |
) |
$ |
178.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
186.5 |
|
$ |
203.7 |
|
$ |
211.6 |
|
$ |
(411.8 |
) |
$ |
190.0 |
|
|
Other comprehensive loss |
|
(81.3 |
) |
(21.9 |
) |
(21.0 |
) |
103.8 |
|
(20.4 |
) | |||||
|
Comprehensive income |
|
$ |
105.2 |
|
$ |
181.8 |
|
$ |
190.6 |
|
$ |
(308.0 |
) |
$ |
169.6 |
|
Condensed Consolidating Statements of Operations
For the three months March 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
679.8 |
|
$ |
— |
|
$ |
679.8 |
|
|
Fees and other revenues |
|
0.1 |
|
— |
|
598.2 |
|
(0.3 |
) |
598.0 |
| |||||
|
Net investment income |
|
1.0 |
|
— |
|
823.5 |
|
0.3 |
|
824.8 |
| |||||
|
Net realized capital gains, excluding impairment losses on available-for-sale securities |
|
— |
|
— |
|
22.1 |
|
— |
|
22.1 |
| |||||
|
Total other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(33.7 |
) |
— |
|
(33.7 |
) | |||||
|
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
4.9 |
|
— |
|
4.9 |
| |||||
|
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(28.8 |
) |
— |
|
(28.8 |
) | |||||
|
Net realized capital losses |
|
— |
|
— |
|
(6.7 |
) |
— |
|
(6.7 |
) | |||||
|
Total revenues |
|
1.1 |
|
— |
|
2,094.8 |
|
— |
|
2,095.9 |
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
1,212.5 |
|
— |
|
1,212.5 |
| |||||
|
Dividends to policyholders |
|
— |
|
— |
|
50.3 |
|
— |
|
50.3 |
| |||||
|
Operating expenses |
|
29.9 |
|
0.4 |
|
524.8 |
|
— |
|
555.1 |
| |||||
|
Total expenses |
|
29.9 |
|
0.4 |
|
1,787.6 |
|
— |
|
1,817.9 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income (loss) before income taxes |
|
(28.8 |
) |
(0.4 |
) |
307.2 |
|
— |
|
278.0 |
| |||||
|
Income taxes (benefits) |
|
(11.3 |
) |
(1.7 |
) |
69.7 |
|
— |
|
56.7 |
| |||||
|
Equity in the net income of subsidiaries |
|
229.6 |
|
228.3 |
|
— |
|
(457.9 |
) |
— |
| |||||
|
Net income |
|
212.1 |
|
229.6 |
|
237.5 |
|
(457.9 |
) |
221.3 |
| |||||
|
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
9.2 |
|
— |
|
9.2 |
| |||||
|
Net income attributable to PFG |
|
212.1 |
|
229.6 |
|
228.3 |
|
(457.9 |
) |
212.1 |
| |||||
|
Preferred stock dividends |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 |
| |||||
|
Net income available to common stockholders |
|
$ |
203.9 |
|
$ |
229.6 |
|
$ |
228.3 |
|
$ |
(457.9 |
) |
$ |
203.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
$ |
212.1 |
|
$ |
229.6 |
|
$ |
237.5 |
|
$ |
(457.9 |
) |
$ |
221.3 |
|
|
Other comprehensive income |
|
180.6 |
|
224.3 |
|
224.9 |
|
(404.6 |
) |
225.2 |
| |||||
|
Comprehensive income |
|
$ |
392.7 |
|
$ |
453.9 |
|
$ |
462.4 |
|
$ |
(862.5 |
) |
$ |
446.5 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2013
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
28.0 |
|
$ |
(19.8 |
) |
$ |
712.4 |
|
$ |
(124.7 |
) |
$ |
595.9 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
— |
|
(2,447.1 |
) |
— |
|
(2,447.1 |
) | |||||
|
Sales |
|
— |
|
— |
|
503.1 |
|
— |
|
503.1 |
| |||||
|
Maturities |
|
— |
|
— |
|
1,790.9 |
|
— |
|
1,790.9 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
— |
|
(610.9 |
) |
— |
|
(610.9 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
— |
|
555.8 |
|
— |
|
555.8 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(23.4 |
) |
— |
|
(23.4 |
) | |||||
|
Net sales of property and equipment |
|
— |
|
— |
|
6.7 |
|
— |
|
6.7 |
| |||||
|
Purchases of interests in subsidiaries, net of cash acquired |
|
— |
|
— |
|
(1,268.3 |
) |
— |
|
(1,268.3 |
) | |||||
|
Dividends and returns of capital received from (contributions to) unconsolidated entities |
|
18.8 |
|
21.4 |
|
— |
|
(40.2 |
) |
— |
| |||||
|
Net change in other investments |
|
(3.0 |
) |
(10.5 |
) |
(18.7 |
) |
— |
|
(32.2 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
15.8 |
|
10.9 |
|
(1,511.9 |
) |
(40.2 |
) |
(1,525.4 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
20.3 |
|
— |
|
— |
|
— |
|
20.3 |
| |||||
|
Acquisition of treasury stock |
|
(90.9 |
) |
— |
|
— |
|
— |
|
(90.9 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
— |
|
14.3 |
|
— |
|
14.3 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
— |
|
(12.7 |
) |
— |
|
(12.7 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
— |
|
3.8 |
|
— |
|
3.8 |
| |||||
|
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(30.6 |
) |
— |
|
(30.6 |
) | |||||
|
Dividends to common stockholders |
|
(67.6 |
) |
— |
|
— |
|
— |
|
(67.6 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
3.5 |
|
— |
|
3.5 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(0.4 |
) |
— |
|
(0.4 |
) | |||||
|
Net repayments of short-term borrowings |
|
— |
|
— |
|
(216.2 |
) |
216.2 |
|
— |
| |||||
|
Capital received from (dividends and capital paid to) parent |
|
— |
|
(18.8 |
) |
(21.4 |
) |
40.2 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
— |
|
1,419.7 |
|
— |
|
1,419.7 |
| |||||
|
Investment contract withdrawals |
|
— |
|
— |
|
(2,852.0 |
) |
— |
|
(2,852.0 |
) | |||||
|
Net increase in banking operation deposits |
|
— |
|
— |
|
6.9 |
|
— |
|
6.9 |
| |||||
|
Other |
|
— |
|
— |
|
(0.8 |
) |
— |
|
(0.8 |
) | |||||
|
Net cash used in financing activities |
|
(138.2 |
) |
(18.8 |
) |
(1,685.9 |
) |
256.4 |
|
(1,586.5 |
) | |||||
|
Net decrease in cash and cash equivalents |
|
(94.4 |
) |
(27.7 |
) |
(2,485.4 |
) |
91.5 |
|
(2,516.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
207.1 |
|
612.5 |
|
4,241.3 |
|
(883.7 |
) |
4,177.2 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
112.7 |
|
$ |
584.8 |
|
$ |
1,755.9 |
|
$ |
(792.2 |
) |
$ |
1,661.2 |
|
Condensed Consolidating Statements of Cash Flows
For the three months March 31, 2012
|
|
|
|
|
|
|
Principal Life |
|
|
|
|
| |||||
|
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
| |||||
|
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
| |||||
|
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
| |||||
|
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net cash provided by (used in) operating activities |
|
$ |
79.9 |
|
$ |
(56.7 |
) |
$ |
824.3 |
|
$ |
54.2 |
|
$ |
901.7 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Purchases |
|
— |
|
— |
|
(2,060.5 |
) |
— |
|
(2,060.5 |
) | |||||
|
Sales |
|
— |
|
— |
|
428.5 |
|
— |
|
428.5 |
| |||||
|
Maturities |
|
— |
|
— |
|
1,612.1 |
|
— |
|
1,612.1 |
| |||||
|
Mortgage loans acquired or originated |
|
— |
|
— |
|
(919.6 |
) |
— |
|
(919.6 |
) | |||||
|
Mortgage loans sold or repaid |
|
— |
|
— |
|
361.4 |
|
— |
|
361.4 |
| |||||
|
Real estate acquired |
|
— |
|
— |
|
(21.3 |
) |
— |
|
(21.3 |
) | |||||
|
Net purchases of property and equipment |
|
— |
|
— |
|
(17.3 |
) |
— |
|
(17.3 |
) | |||||
|
Dividends and returns of capital received from unconsolidated entities |
|
189.3 |
|
165.5 |
|
— |
|
(354.8 |
) |
— |
| |||||
|
Net change in other investments |
|
— |
|
— |
|
(73.8 |
) |
— |
|
(73.8 |
) | |||||
|
Net cash provided by (used in) investing activities |
|
189.3 |
|
165.5 |
|
(690.5 |
) |
(354.8 |
) |
(690.5 |
) | |||||
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Issuance of common stock |
|
9.1 |
|
— |
|
— |
|
— |
|
9.1 |
| |||||
|
Acquisition of treasury stock |
|
(64.2 |
) |
— |
|
— |
|
— |
|
(64.2 |
) | |||||
|
Proceeds from financing element derivatives |
|
— |
|
— |
|
20.4 |
|
— |
|
20.4 |
| |||||
|
Payments for financing element derivatives |
|
— |
|
— |
|
(16.2 |
) |
— |
|
(16.2 |
) | |||||
|
Excess tax benefits from share-based payment arrangements |
|
— |
|
— |
|
9.9 |
|
— |
|
9.9 |
| |||||
|
Dividends to common stockholders |
|
(54.3 |
) |
— |
|
— |
|
— |
|
(54.3 |
) | |||||
|
Dividends to preferred stockholders |
|
(8.2 |
) |
— |
|
— |
|
— |
|
(8.2 |
) | |||||
|
Issuance of long-term debt |
|
— |
|
— |
|
1.0 |
|
— |
|
1.0 |
| |||||
|
Principal repayments of long-term debt |
|
— |
|
— |
|
(0.8 |
) |
— |
|
(0.8 |
) | |||||
|
Net proceeds from (repayments of) short-term borrowings |
|
— |
|
— |
|
98.9 |
|
(106.4 |
) |
(7.5 |
) | |||||
|
Dividends and capital paid to parent |
|
— |
|
(189.3 |
) |
(165.5 |
) |
354.8 |
|
— |
| |||||
|
Investment contract deposits |
|
— |
|
— |
|
1,618.6 |
|
— |
|
1,618.6 |
| |||||
|
Investment contract withdrawals |
|
— |
|
— |
|
(2,885.9 |
) |
— |
|
(2,885.9 |
) | |||||
|
Net decrease in banking operation deposits |
|
— |
|
— |
|
(13.4 |
) |
— |
|
(13.4 |
) | |||||
|
Other |
|
— |
|
— |
|
(1.7 |
) |
— |
|
(1.7 |
) | |||||
|
Net cash used in financing activities |
|
(117.6 |
) |
(189.3 |
) |
(1,334.7 |
) |
248.4 |
|
(1,393.2 |
) | |||||
|
Net increase (decrease) in cash and cash equivalents |
|
151.6 |
|
(80.5 |
) |
(1,200.9 |
) |
(52.2 |
) |
(1,182.0 |
) | |||||
|
Cash and cash equivalents at beginning of period |
|
226.7 |
|
702.4 |
|
2,787.9 |
|
(883.1 |
) |
2,833.9 |
| |||||
|
Cash and cash equivalents at end of period |
|
$ |
378.3 |
|
$ |
621.9 |
|
$ |
1,587.0 |
|
$ |
(935.3 |
) |
$ |
1,651.9 |
|
|
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