CNO FINANCIAL GROUP, INC., 10-Q/A filed on 2/1/2013
Amended Quarterly Report
DOCUMENT AND ENTITY INFORMATION
9 Months Ended
Sep. 30, 2012
Oct. 23, 2012
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
CNO Financial Group, Inc. 
 
Entity Central Index Key
0001224608 
 
Document Type
10-Q/A 
 
Document Period End Date
Sep. 30, 2012 
 
Current Fiscal Year End Date
--12-31 
 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q3 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Voluntary Filers
No 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Current Reporting Status
Yes 
 
Amendment Flag
true 
 
Amendment Description
This Quarterly Report on Form 10-Q/A ("Form 10-Q/A") is being filed as Amendment No. 1 (the "Amendment") to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which was filed with the Securities and Exchange Commission on November 1, 2012 (the "Original Form 10-Q"). This Form 10-Q/A is being filed to amend the consolidated balance sheet as of September 30, 2012; the consolidated statement of comprehensive income for the three and nine months ended September 30, 2012; the consolidated statement of shareholders' equity for the nine months ended September 30, 2012; and certain disclosures in the notes to the consolidated financial statements. Management and the Audit and Enterprise Risk Committee of CNO Financial Group, Inc. (the "Company") concluded that an inadvertent error involving a component of the calculation of accumulated other comprehensive income existed in the Original Form 10-Q that requires correction. The correction of this error had no impact on net income, earnings per share or cash flows. In addition, the correction had no impact on results, cash flows or capital measures calculated in accordance with statutory accounting principles. Pursuant to generally accepted accounting principles, we are required to adjust certain balance sheet accounts to reflect the impact resulting from assuming that unrealized gains and losses on available for sale securities are realized and the proceeds are invested in securities earning current market yields. Such adjustments are commonly referred to as “shadow adjustments” and may include adjustments to: (i) deferred acquisition costs; (ii) the present value of future profits; (iii) loss recognition reserves; and (iv) income taxes. The net impact of these shadow adjustments is recognized in accumulated other comprehensive income. Amounts related to the shadow adjustments for certain long-term care products previously reported in our Original Form 10-Q have been corrected and are described in the note to the consolidated financial statements entitled "Correction to Previously Issued Financial Statements" contained herein. Shadow adjustments will vary from period to period and are primarily dependent upon the amount of unrealized gains or losses related to available for sale securities and the estimated gross profits of certain lines of business. As a result of the correction, management has also re-assessed the effectiveness of its disclosure controls and procedures and internal control over financial reporting and concluded that they were not effective as of the end of the period covered by this report on Form 10-Q/A because of a material weakness in internal control over financial reporting. Specifically, controls in place to ensure the accurate calculation of shadow adjustments impacting accumulated other comprehensive income did not operate effectively. Therefore, management has subsequently concluded that the Company's disclosure controls and procedures were not effective as of the end of the period covered by this report. As a result of the identification of the error that led to the amendment of our Original Form 10-Q and the related reassessment of disclosure controls and procedures and internal control over financial reporting, we have emphasized the importance of performing and reviewing calculations consistent with the design of our internal control structure in an effort to ensure controls operate effectively. The Company believes this action has remediated the material weakness. The material weakness in internal control over financial reporting is further discussed in Item 4 contained herein. The following sections have been amended from the Original Form 10-Q as a result of the restatement described above: Part I - Item 1. Financial Statements Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part I - Item 4. Controls and Procedures This Form 10-Q/A also includes as exhibits, certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing. Except as described above, no other sections have been amended from the Original Form 10-Q. This Form 10-Q/A does not reflect information or events occurring after the November 1, 2012 filing date of the Original Form 10-Q, or modify or update disclosures set forth in the Original Form 10-Q, except to reflect the corrections discussed above.  
 
Entity Common Stock, Shares Outstanding
 
227,011,634 
CONSOLIDATED BALANCE SHEET (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Investments:
 
 
Fixed maturities, available for sale, at fair value (amortized cost: September 30, 2012 - $21,825.7; December 31, 2011 - $21,779.1)
$ 24,742.3 
$ 23,516.0 
Equity securities at fair value (cost: September 30, 2012 - $174.0; December 31, 2011 - $177.0)
180.0 
175.1 
Mortgage loans
1,597.2 
1,602.8 
Policy loans
274.1 
279.7 
Trading securities
199.4 
91.6 
Investments held by variable interest entities
829.4 
496.3 
Other invested assets
265.0 
202.8 
Total investments
28,087.4 
26,364.3 
Cash and cash equivalents - unrestricted
415.3 
436.0 
Cash and cash equivalents held by variable interest entities
48.2 
74.4 
Accrued investment income
317.8 
288.7 
Present value of future profits
642.4 
697.7 
Deferred acquisition costs
623.4 
797.1 
Reinsurance receivables
2,967.7 
3,091.1 
Income tax assets, net
699.5 
865.4 
Assets held in separate accounts
15.7 
15.0 
Other assets
338.6 
292.2 
Total assets
34,156.0 
32,921.9 
Liabilities for insurance products:
 
 
Interest-sensitive products
12,930.3 
13,165.5 
Traditional products
11,004.3 
10,482.7 
Claims payable and other policyholder funds
977.6 
1,034.3 
Liabilities related to separate accounts
15.7 
15.0 
Other liabilities
709.0 
556.3 
Investment borrowings
1,650.9 
1,676.5 
Borrowings related to variable interest entities
766.9 
519.9 
Notes payable - direct corporate obligations
1,035.1 
857.9 
Total liabilities
29,089.8 
28,308.1 
Commitments and contingencies
   
   
Shareholders' equity:
 
 
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: September 30, 2012 – 229,506,690; December 31, 2011 – 241,304,503)
2.3 
2.4 
Additional paid-in capital
4,251.2 
4,361.9 
Accumulated other comprehensive income
1,234.4 
781.6 
Accumulated deficit
(421.7)
(532.1)
Total shareholders' equity
5,066.2 
4,613.8 
Total liabilities and shareholders' equity
$ 34,156.0 
$ 32,921.9 
PARENTHETICAL DATA TO THE CONSOLIDATED BALANCE SHEET (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Investments:
 
 
Fixed maturities, available for sale, amortized cost
$ 21,825.7 
$ 21,779.1 
Equity securities cost
$ 174.0 
$ 177.0 
Shareholders' equity:
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
8,000,000,000 
8,000,000,000 
Common stock, shares issued
229,506,690 
241,304,503 
Common stock, shares outstanding
229,506,690 
241,304,503 
CONSOLIDATED STATEMENT OF OPERATIONS (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Revenues:
 
 
 
 
Insurance policy income
$ 690.2 
$ 673.5 
$ 2,071.3 
$ 2,020.3 
Net investment income (loss):
 
 
 
 
General account assets
349.4 
338.2 
1,045.7 
1,016.5 
Policyholder and reinsurer accounts and other special- purpose portfolios
39.1 
(54.9)
87.4 
(14.4)
Realized investment gains (losses):
 
 
 
 
Net realized investment gains, excluding impairment losses
32.2 
33.5 
98.4 
64.9 
Other-than-temporary impairment losses:
 
 
 
 
Total other-than-temporary impairment losses
(23.1)
(2.9)
(34.5)
(26.3)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income
Net impairment losses recognized
23.1 
2.9 
34.5 
26.3 
Total realized gains
9.1 
30.6 
63.9 
38.6 
Fee revenue and other income
5.2 
4.9 
13.6 
12.5 
Total revenues
1,093.0 
992.3 
3,281.9 
3,073.5 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
745.7 
661.0 
2,124.4 
2,028.6 
Interest expense
29.2 
27.9 
86.7 
86.0 
Amortization
60.9 
58.6 
215.8 
224.1 
Loss on extinguishment of debt
198.5 
1.1 
199.2 
3.1 
Other operating costs and expenses
217.5 
182.0 
617.8 
527.8 
Total benefits and expenses
1,251.8 
930.6 
3,243.9 
2,869.6 
Income (loss) before income taxes
(158.8)
61.7 
38.0 
203.9 
Income tax expense (benefit):
 
 
 
 
Income tax expense (benefit) on period income
(10.8)
25.2 
61.2 
75.6 
Decrease in valuation allowance for deferred tax assets
(143.0)
(143.0)
(143.0)
(143.0)
Net income (loss)
$ (5.0)
$ 179.5 
$ 119.8 
$ 271.3 
Basic:
 
 
 
 
Weighted average shares outstanding
231,481,000 
246,965,000 
236,555,000 
249,673,000 
Net income (loss)
$ (0.02)
$ 0.73 
$ 0.51 
$ 1.09 
Diluted:
 
 
 
 
Weighted average shares outstanding
231,481,000 
302,708,000 
292,983,000 
306,085,000 
Net income (loss)
$ (0.02)
$ 0.61 
$ 0.45 
$ 0.92 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ (5.0)
$ 179.5 
$ 119.8 
$ 271.3 
Other comprehensive income, before tax:
 
 
 
 
Unrealized gains for the period
689.4 
973.6 
1,252.8 
1,248.1 
Amortization of present value of future profits and deferred acquisition costs
(38.0)
(125.9)
(114.2)
(163.0)
Amount related to premium deficiencies assuming the net unrealized gains had been realized
(267.6)
(241.0)
(380.7)
(241.0)
Reclassification adjustments:
 
 
 
 
For net realized investment gains included in net income
(4.6)
(55.1)
(57.2)
(69.1)
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains included in net income
1.7 
3.9 
5.9 
3.7 
Unrealized gains on investments
380.9 
555.5 
706.6 
778.7 
Change related to deferred compensation plan
(2.1)
(2.4)
(0.5)
(2.0)
Other comprehensive income before tax
378.8 
553.1 
706.1 
776.7 
Income tax expense related to items of accumulated other comprehensive income
(135.2)
(197.7)
(253.3)
(278.5)
Other comprehensive income, net of tax
243.6 
355.4 
452.8 
498.2 
Comprehensive income
$ 238.6 
$ 534.9 
$ 572.6 
$ 769.5 
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $)
In Millions
Total
Common stock and additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings (accumulated deficit)
Balance at Dec. 31, 2010
$ 3,811.6 
$ 4,426.7 
$ 252.7 
$ (867.8)
Net income (loss)
271.3 
271.3 
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense)
495.0 
495.0 
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense)
3.2 
3.2 
Cost of shares acquired
(55.7)
(55.7)
Stock option and restricted stock plans
10.8 
10.8 
Balance at Sep. 30, 2011
4,536.2 
4,381.8 
750.9 
(596.5)
Balance at Dec. 31, 2011
4,613.8 
4,364.3 
781.6 
(532.1)
Net income (loss)
119.8 
119.8 
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense)
444.9 
444.9 
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense)
7.9 
7.9 
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures
(24.0)
(24.0)
Cost of shares acquired
(99.5)
(99.5)
Dividends on common stock
(9.4)
(9.4)
Stock option and restricted stock plans
12.7 
12.7 
Balance at Sep. 30, 2012
$ 5,066.2 
$ 4,253.5 
$ 1,234.4 
$ (421.7)
PARENTHETICAL DATA TO THE CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Comprehensive income (loss), net of tax:
 
 
Change in unrealized appreciation (depreciation) of investments, applicable income tax expense
$ 248.9 
$ 276.7 
Change in noncredit component of impairment losses on fixed maturities, available for sale, applicable income tax expense
$ 4.4 
$ 1.8 
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Cash flows from operating activities:
 
 
Insurance policy income
$ 1,802.3 
$ 1,791.8 
Net investment income
1,010.0 
1,065.0 
Fee revenue and other income
13.6 
12.5 
Insurance policy benefits
(1,611.5)
(1,555.7)
Interest expense
(84.3)
(70.5)
Deferrable policy acquisition costs
(141.4)
(164.9)
Other operating costs
(558.6)
(513.6)
Taxes
(5.5)
(2.4)
Net cash provided by operating activities
424.6 
562.2 
Cash flows from investing activities:
 
 
Sales of investments
1,852.5 
4,390.5 
Maturities and redemptions of investments
1,365.4 
853.3 
Purchases of investments
(3,570.2)
(6,363.8)
Net sales of trading securities
47.2 
307.2 
Change in cash and cash equivalents held by variable interest entities
26.2 
7.1 
Other
(24.3)
(23.4)
Net cash used by investing activities
(303.2)
(829.1)
Cash flows from financing activities:
 
 
Issuance of notes payable, net
944.5 
Payments on notes payable
(779.0)
(130.7)
Expenses related to extinguishment of debt
(206.4)
Issuance of common stock
2.0 
0.6 
Payments to repurchase common stock
(99.5)
(55.7)
Common stock dividends paid
(9.4)
Amounts received for deposit products
986.0 
1,285.8 
Withdrawals from deposit products
(1,201.4)
(1,272.0)
Issuance of investment borrowings:
 
 
Federal Home Loan Bank
200.0 
517.0 
Related to variable interest entities
246.7 
122.2 
Payments on investment borrowings:
 
 
Federal Home Loan Bank
(200.0)
(267.0)
Related to variable interest entities and other
(0.8)
(100.4)
Investment borrowings - repurchase agreements, net
(24.8)
57.1 
Net cash provided (used) by financing activities
(142.1)
156.9 
Net decrease in cash and cash equivalents
(20.7)
(110.0)
Cash and cash equivalents, beginning of period
436.0 
571.9 
Cash and cash equivalents, end of period
$ 415.3 
$ 461.9 
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION

The following notes should be read together with the notes to the consolidated financial statements included in our 2011 Annual Report on Form 10-K as retrospectively updated by the Current Report on Form 8-K filed on September 4, 2012 in connection with a change in accounting principle.

CNO Financial Group, Inc., a Delaware corporation (“CNO”), is a holding company for a group of insurance companies operating throughout the United States that develop, market and administer health insurance, annuity, individual life insurance and other insurance products.  CNO became the successor to Conseco, Inc., an Indiana corporation (our “Predecessor”), in connection with our bankruptcy reorganization which became effective on September 10, 2003.  The terms “CNO Financial Group, Inc.”, the “Company”, “we”, “us”, and “our” as used in these financial statements refer to CNO and its subsidiaries or, when the context requires otherwise, our Predecessor and its subsidiaries.  We focus on serving the senior and middle-income markets, which we believe are attractive, underserved, high growth markets.  We sell our products through three distribution channels: career agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing.

Our unaudited consolidated financial statements reflect normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.  As permitted by rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to quarterly reports on Form 10-Q, we have condensed or omitted certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  We have reclassified certain amounts from the prior periods to conform to the 2012 presentation.  These reclassifications have no effect on net income or shareholders’ equity.  Results for interim periods are not necessarily indicative of the results that may be expected for a full year.

As discussed in the note to the consolidated financial statements entitled "Recently Issued Accounting Standards", we have adopted the provisions of Financial Accounting Standards Update No. 2010-26 (“ASU 2010-26”), effective January 1, 2012, which modified the definition of the types of costs incurred by insurance entities that could be capitalized in the acquisition of new and renewal contracts. Pursuant to the guidance, we elected to adopt the provisions on a retrospective basis. Accordingly, all prior periods presented have been retrospectively adjusted.

The balance sheet at December 31, 2011, presented herein, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

When we prepare financial statements in conformity with GAAP, we are required to make estimates and assumptions that significantly affect reported amounts of various assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting periods.  For example, we use significant estimates and assumptions to calculate values for deferred acquisition costs, the present value of future profits, fair value measurements of certain investments (including derivatives), other-than-temporary impairments of investments, assets and liabilities related to income taxes, liabilities for insurance products, liabilities related to litigation and guaranty fund assessment accruals.  If our future experience differs from these estimates and assumptions, our financial statements would be materially affected.

Our consolidated financial statements exclude the results of transactions between us and our consolidated affiliates, or among our consolidated affiliates.
CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS
CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS
CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS

As further described below, the consolidated balance sheet as of September 30, 2012; the consolidated statement of comprehensive income for the three and nine months ended September 30, 2012; the consolidated statement of shareholders' equity for the nine months ended September 30, 2012; and certain disclosures in the notes to the consolidated financial statements have been amended to correct an inadvertent error related to a component of accumulated other comprehensive income. The correction of this error had no impact on net income, earnings per share or cash flows. In addition, the correction had no impact on results, cash flows or capital measures calculated in accordance with statutory accounting principles.

Pursuant to GAAP, we are required to adjust certain balance sheet accounts to reflect the impact resulting from assuming that unrealized gains and losses on available for sale securities are realized and the proceeds are invested in securities earning current market yields. Such adjustments are commonly referred to as “shadow adjustments” and may include adjustments to: (i) deferred acquisition costs; (ii) the present value of future profits; (iii) loss recognition reserves; and (iv) income taxes. The net impact of these shadow adjustments is recognized in accumulated other comprehensive income. Amounts related to the shadow adjustments for certain long-term care products previously reported in our Form 10-Q for the quarterly period ended September 30, 2012, filed with the Securities and Exchange Commission on November 1, 2012, have been corrected. Shadow adjustments will vary from period to period and are primarily dependent upon the amount of unrealized gains or losses related to available for sale securities and the estimated gross profits of certain lines of business. The following summarizes the increase (decrease) to the principal items impacted by the corrections (dollars in millions):

 
As reported in Form 10-Q
 
Corrections to shadow adjustments
 
As reported in Form 10-Q/A
Deferred acquisition costs
$
580.7

 
$
42.7

 
$
623.4

Income tax assets
594.5

 
105.0

 
699.5

  Change in total assets
 
 
$
147.7

 
 
 
 
 
 
 
 
Liabilities for insurance products
$
24,593.5

 
$
334.4

 
$
24,927.9

Accumulated other comprehensive income
1,421.1

 
(186.7
)
 
1,234.4

  Change to total liabilities and shareholders' equity
 
 
$
147.7

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
For the three months ended September 30, 2012
$
425.3

 
$
(186.7
)
 
$
238.6

For the nine months ended September 30, 2012
$
759.3

 
$
(186.7
)
 
$
572.6

INVESTMENTS
INVESTMENTS
INVESTMENTS

We classify our fixed maturity securities into one of three categories: (i) “available for sale” (which we carry at estimated fair value with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders’ equity); (ii) “trading” (which we carry at estimated fair value with changes in such value recognized as net investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios)); or (iii) “held to maturity” (which we carry at amortized cost).  We had no fixed maturity securities classified as held to maturity during the periods presented in these financial statements.

The trading account includes: (i) investments purchased with the intent of selling in the near term to generate income on price changes; and (ii) investments supporting certain insurance liabilities (including investments backing the market strategies of our multibucket annuity products) and certain reinsurance agreements. The change in fair value of these securities is recognized in income from policyholder and reinsurer accounts and other special-purpose portfolios (a component of net investment income). Investment income from trading securities backing certain insurance liabilities and certain reinsurance agreements is substantially offset by the change in insurance policy benefits related to certain products and agreements.  Prior to June 30, 2011, certain of our trading securities were held to offset the income statement volatility caused by the effect of interest rate fluctuations on the value of embedded derivatives related to our fixed index annuity products.  During the second quarter of 2011, we sold this trading portfolio and invested the proceeds in higher yielding investments which were classified as available for sale. See the note entitled “Accounting for Derivatives” for further discussion regarding these embedded derivatives.  The trading account also includes certain fixed maturity securities containing embedded derivatives for which we have elected the fair value option. The change in value of these securities is recognized in realized investment gain (losses). Our trading securities totaled $199.4 million and $91.6 million at September 30, 2012 and December 31, 2011, respectively.

Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments.  These amounts, included in shareholders’ equity as of September 30, 2012 and December 31, 2011, were as follows (dollars in millions):

 
September 30,
2012
 
December 31,
2011
 
(Restated)
 
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
$
9.6

 
$
(4.4
)
Net unrealized gains on all other investments
2,914.8

 
1,733.2

Adjustment to present value of future profits (a)
(200.7
)
 
(214.8
)
Adjustment to deferred acquisition costs
(458.0
)
 
(289.3
)
Adjustment to insurance liabilities
(334.4
)
 

Unrecognized net loss related to deferred compensation plan
(8.8
)
 
(8.3
)
Deferred income tax liabilities
(688.1
)
 
(434.8
)
Accumulated other comprehensive income
$
1,234.4

 
$
781.6

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

At September 30, 2012, adjustments to the present value of future profits, deferred acquisition costs, insurance liabilities and deferred income tax assets included $(166.5) million, $(150.8) million, $(334.4) million and $234.6 million, respectively, for premium deficiencies that would exist on certain long-term health products if unrealized gains on the assets backing such products had been realized and the proceeds from our sales of such assets were invested at then current yields.

At September 30, 2012, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, were as follows (dollars in millions):
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
 
Other-than-
temporary
impairments
included in
accumulated other
comprehensive
income
Corporate securities
$
14,586.6

 
$
2,265.7

 
$
(28.8
)
 
$
16,823.5

 
$

United States Treasury securities and obligations of United States government corporations and agencies
164.2

 
6.9

 

 
171.1

 

States and political subdivisions
1,785.6

 
267.9

 
(5.4
)
 
2,048.1

 

Debt securities issued by foreign governments
.8

 

 

 
.8

 

Asset-backed securities
1,391.3

 
92.0

 
(6.6
)
 
1,476.7

 

Collateralized debt obligations
327.6

 
5.2

 
(.8
)
 
332.0

 

Commercial mortgage-backed securities
1,400.7

 
142.7

 
(.8
)
 
1,542.6

 

Mortgage pass-through securities
18.8

 
1.4

 

 
20.2

 

Collateralized mortgage obligations
2,150.1

 
178.1

 
(.9
)
 
2,327.3

 
(7.3
)
Total fixed maturities, available for sale
$
21,825.7

 
$
2,959.9

 
$
(43.3
)
 
$
24,742.3

 
$
(7.3
)


The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at September 30, 2012, by contractual maturity.  Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.  In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as “structured securities”) frequently include provisions for periodic principal payments and permit periodic unscheduled payments.
 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
178.3

 
$
180.7

Due after one year through five years
1,558.1

 
1,697.5

Due after five years through ten years
4,491.1

 
5,038.7

Due after ten years
10,309.7

 
12,126.6

Subtotal
16,537.2

 
19,043.5

Structured securities
5,288.5

 
5,698.8

Total fixed maturities, available for sale
$
21,825.7

 
$
24,742.3



Net Realized Investment Gains (Losses)

During the first nine months of 2012, we recognized net realized investment gains of $63.9 million, which were comprised of $89.0 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $1.9 billion, the increase in fair value of certain fixed maturity investments with embedded derivatives of $9.4 million, and $34.5 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

During the first nine months of 2011, we recognized net realized investment gains of $38.6 million, which were comprised of $64.9 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $4.4 billion and $26.3 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

At September 30, 2012, fixed maturity securities in default or considered nonperforming had an aggregate amortized cost of $.4 million and a carrying value of $.5 million.

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

During the nine months ended September 30, 2012, we sold $393.8 million of fixed maturity investments which resulted in gross investment losses (before income taxes) of $15.3 million.  We sell securities at a loss for a number of reasons including, but not limited to:  (i) changes in the investment environment; (ii) expectation that the market value could deteriorate further; (iii) desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; or (v) changes in expected cash flows.

There were no investments sold at a loss during the first nine months of 2012 that had been continuously in an unrealized loss position exceeding 20 percent of the amortized cost basis for more than 12 months prior to the sale of the investment.

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

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

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

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

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

The remaining noncredit impairment, which is recorded in accumulated other comprehensive income, is the difference between the security’s estimated fair value and our best estimate of future cash flows discounted at the effective interest rate prior to impairment.  The remaining noncredit impairment typically represents changes in the market interest rates, current market liquidity and risk premiums.  As of September 30, 2012, other-than-temporary impairments included in accumulated other comprehensive income of $7.3 million (before taxes and related amortization) related to structured securities.

The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and nine months ended September 30, 2012 and 2011 (dollars in millions):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Credit losses on fixed maturity securities, available for sale, beginning of period
$
(1.7
)
 
$
(1.6
)
 
$
(2.0
)
 
$
(6.1
)
Add:  credit losses on other-than-temporary impairments not previously recognized

 

 

 

Less:  credit losses on securities sold

 
.7

 
.3

 
5.2

Less:  credit losses on securities impaired due to intent to sell (a)

 

 

 

Add:  credit losses on previously impaired securities

 

 

 

Less:  increases in cash flows expected on previously impaired securities

 

 

 

Credit losses on fixed maturity securities, available for sale, end of period
$
(1.7
)
 
$
(.9
)
 
$
(1.7
)
 
$
(.9
)
__________
(a)
Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.

Gross Unrealized Investment Losses

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

The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 2012 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
States and political subdivisions
 
$
40.2

 
$
(2.0
)
 
$
68.7

 
$
(3.4
)
 
$
108.9

 
$
(5.4
)
Corporate securities
 
300.5

 
(9.2
)
 
278.1

 
(19.6
)
 
578.6

 
(28.8
)
Asset-backed securities
 
42.1

 
(.3
)
 
137.8

 
(6.3
)
 
179.9

 
(6.6
)
Collateralized debt obligations
 
12.7

 
(.1
)
 
47.2

 
(.7
)
 
59.9

 
(.8
)
Commercial mortgage-backed securities
 
16.0

 
(.1
)
 
14.3

 
(.7
)
 
30.3

 
(.8
)
Mortgage pass-through securities
 

 

 
2.0

 

 
2.0

 

Collateralized mortgage obligations
 
58.5

 
(.5
)
 
36.0

 
(.4
)
 
94.5

 
(.9
)
Total fixed maturities, available for sale
 
$
470.0

 
$
(12.2
)
 
$
584.1

 
$
(31.1
)
 
$
1,054.1

 
$
(43.3
)
Equity securities
 
$
2.1

 
$
(.1
)
 
$

 
$

 
$
2.1

 
$
(.1
)


The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2011 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
9.1

 
$

 
$
.2

 
$

 
$
9.3

 
$

States and political subdivisions
 
6.9

 
(.2
)
 
155.4

 
(13.4
)
 
162.3

 
(13.6
)
Debt securities issued by foreign governments
 
.5

 

 

 

 
.5

 

Corporate securities
 
1,394.7

 
(57.0
)
 
466.2

 
(79.9
)
 
1,860.9

 
(136.9
)
Asset-backed securities
 
437.6

 
(14.5
)
 
147.5

 
(22.2
)
 
585.1

 
(36.7
)
Collateralized debt obligations
 
268.8

 
(6.3
)
 
1.7

 

 
270.5

 
(6.3
)
Commercial mortgage-backed securities
 
168.8

 
(5.2
)
 
33.0

 
(2.7
)
 
201.8

 
(7.9
)
Mortgage pass-through securities
 
1.2

 

 
2.2

 
(.1
)
 
3.4

 
(.1
)
Collateralized mortgage obligations
 
645.0

 
(20.8
)
 
29.7

 
(.6
)
 
674.7

 
(21.4
)
Total fixed maturities, available for sale
 
$
2,932.6

 
$
(104.0
)
 
$
835.9

 
$
(118.9
)
 
$
3,768.5

 
$
(222.9
)
Equity securities
 
$
41.6

 
$
(3.0
)
 
$
.4

 
$

 
$
42.0

 
$
(3.0
)


Based on management’s current assessment of investments with unrealized losses at September 30, 2012, the Company believes the issuers of the securities will continue to meet their obligations (or with respect to equity-type securities, the investment value will recover to its cost basis).  While we do not have the intent to sell securities with unrealized losses and it is not more likely than not that we will be required to sell securities with unrealized losses prior to their anticipated recovery, our intent on an individual security may change, based upon market or other unforeseen developments.  In such instances, if a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we had the intent to sell the security before its anticipated recovery.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE

A reconciliation of net income and shares used to calculate basic and diluted earnings per share is as follows (dollars in millions and shares in thousands):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net income (loss) for basic earnings per share
$
(5.0
)
 
$
179.5

 
$
119.8

 
$
271.3

Add:  interest expense on 7.0% Convertible Senior Debentures due 2016 (the “7.0% Debentures”), net of income taxes

 
3.7

 
11.1

 
11.1

Net income for diluted earnings per share
$
(5.0
)
 
$
183.2

 
$
130.9

 
$
282.4

Shares:
 

 
 

 
 

 
 

Weighted average shares outstanding for basic earnings per share
231,481

 
246,965

 
236,555

 
249,673

Effect of dilutive securities on weighted average shares:
 

 
 

 
 

 
 

7% Debentures

 
53,367

 
53,037

 
53,367

Stock option and restricted stock plans

 
2,353

 
2,639

 
2,712

Warrants

 
23

 
752

 
333

Dilutive potential common shares

 
55,743

 
56,428

 
56,412

Weighted average shares outstanding for diluted earnings per share
231,481

 
302,708

 
292,983

 
306,085



In the third quarter of 2012, interest expense of $3.7 million (net of income taxes) on the 7% Debentures was not added back to net income; and 56,651,000 equivalent common shares (comprised of 52,366,000 shares related to the 7% Debentures; 2,968,000 shares related to stock option and restricted stock plans; and 1,317,000 shares related to warrants) were not included in the diluted weighted average shares outstanding, because their inclusion would have been antidilutive in such period due to the net loss recognized by the Company.

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period.  Restricted shares (including our performance shares) are not included in basic earnings per share until vested.  Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options and warrants were exercised and restricted stock was vested.  The dilution from options, warrants and restricted shares is calculated using the treasury stock method.  Under this method, we assume the proceeds from the exercise of the options and warrants (or the unrecognized compensation expense with respect to restricted stock) will be used to purchase shares of our common stock at the average market price during the period, reducing the dilutive effect of the exercise of the options and warrants (or the vesting of the restricted stock). The dilution from our 7.0% Debentures is calculated using the "if converted" method. Initially, the 7.0% Debentures will be convertible into 182.1494 shares of our common stock for each $1,000 principal amount of 7.0% Debentures, which is equivalent to an initial conversion price of approximately $5.49 per share. The conversion rate is subject to adjustment following the occurrence of certain events in accordance with the terms of the 7.0% Debentures.

BUSINESS SEGMENTS
BUSINESS SEGMENTS
BUSINESS SEGMENTS

The Company manages its business through the following operating segments: Bankers Life, Washington National and Colonial Penn, which are defined on the basis of product distribution; Other CNO Business, comprised primarily of products we no longer sell actively; and corporate operations, comprised of holding company activities and certain noninsurance company businesses.  

We measure segment performance by excluding realized investment gains (losses) and fair value changes in embedded derivative liabilities because we believe that this performance measure is a better indicator of the ongoing business and trends in our business.  Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of realized investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.

Realized investment gains (losses) and fair value changes in embedded derivative liabilities depend on market conditions and do not necessarily relate to the underlying business of our segments.  Realized investment gains (losses) and fair value changes in embedded derivative liabilities may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business.

Operating information by segment was as follows (dollars in millions):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy income:
 
 
 
 
 
 
 
Annuities
$
6.8

 
$
9.6

 
$
21.9

 
$
26.7

Health
335.1

 
334.0

 
1,010.6

 
1,017.1

Life
74.2

 
61.0

 
209.1

 
170.4

Net investment income (a)
221.6

 
158.0

 
642.1

 
564.5

Fee revenue and other income (a)
4.0

 
3.6

 
10.2

 
9.2

Total Bankers Life revenues
641.7

 
566.2

 
1,893.9

 
1,787.9

Washington National:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Health
143.4

 
141.2

 
429.0

 
423.1

Life
3.6

 
3.9

 
11.6

 
11.8

Other
.8

 
.8

 
2.2

 
3.0

Net investment income (a)
50.9

 
47.3

 
151.9

 
140.3

Fee revenue and other income (a)
.3

 
.4

 
.8

 
.9

Total Washington National revenues
199.0

 
193.6

 
595.5

 
579.1

Colonial Penn:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Health
1.3

 
1.4

 
4.0

 
4.5

Life
53.2

 
49.4

 
158.5

 
147.5

Net investment income (a)
9.9

 
10.1

 
30.1

 
30.9

Fee revenue and other income (a)
.2

 
.2

 
.6

 
.6

Total Colonial Penn revenues
64.6

 
61.1

 
193.2

 
183.5

Other CNO Business:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Annuities
2.5

 
3.4

 
8.3

 
8.6

Health
6.2

 
6.9

 
19.3

 
21.3

Life
62.9

 
61.7

 
196.2

 
184.9

Other
.2

 
.2

 
.6

 
1.4

Net investment income (a)
86.7

 
74.6

 
259.2

 
256.0

Total Other CNO Business revenues
158.5

 
146.8

 
483.6

 
472.2

Corporate operations:
 

 
 

 
 

 
 

Net investment income
19.4

 
(6.7
)
 
49.8

 
10.4

Fee and other income
.7

 
.7

 
2.0

 
1.8

Total corporate revenues
20.1

 
(6.0
)
 
51.8

 
12.2

Total revenues
1,083.9

 
961.7

 
3,218.0

 
3,034.9


(continued on next page)
(continued from previous page)
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Expenses:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy benefits
$
434.6

 
$
360.6

 
$
1,252.2

 
$
1,174.3

Amortization
35.6

 
44.1

 
143.0

 
159.5

Interest expense on investment borrowings
1.3

 
1.2

 
4.1

 
3.5

Other operating costs and expenses
89.6

 
80.9

 
267.4

 
236.9

Total Bankers Life expenses
561.1

 
486.8

 
1,666.7

 
1,574.2

Washington National:
 

 
 

 
 

 
 

Insurance policy benefits
111.1

 
119.0

 
340.5

 
349.5

Amortization
11.2

 
10.8

 
34.7

 
35.6

Interest expense on investment borrowings
.7

 
.2

 
2.2

 
.2

Other operating costs and expenses
42.1

 
42.4

 
125.6

 
126.5

Total Washington National expenses
165.1

 
172.4

 
503.0

 
511.8

Colonial Penn:
 

 
 

 
 

 
 

Insurance policy benefits
38.3

 
36.0

 
120.0

 
112.7

Amortization
3.5

 
3.5

 
11.1

 
11.0

Other operating costs and expenses
25.4

 
22.9

 
73.9

 
66.3

Total Colonial Penn expenses
67.2

 
62.4

 
205.0

 
190.0

Other CNO Business:
 

 
 

 
 

 
 

Insurance policy benefits
157.1

 
111.5

 
401.0

 
358.2

Amortization
10.5

 
10.4

 
25.1

 
28.4

Interest expense on investment borrowings
5.0

 
5.3

 
15.1

 
15.2

Other operating costs and expenses
39.5

 
16.8

 
96.4

 
55.1

Total Other CNO Business expenses
212.1

 
144.0

 
537.6

 
456.9

Corporate operations:
 

 
 

 
 

 
 

Interest expense on corporate debt
16.3

 
18.7

 
50.4

 
58.6

Interest expense on borrowings of variable interest entities
5.8

 
2.4

 
14.5

 
8.4

Interest expense on investment borrowings
.1

 
.1

 
.4

 
.1

Loss on extinguishment of debt
198.5

 
1.1

 
199.2

 
3.1

Other operating costs and expenses
20.9

 
19.0

 
54.5

 
43.0

Total corporate expenses
241.6

 
41.3

 
319.0

 
113.2

Total expenses
1,247.1

 
906.9

 
3,231.3

 
2,846.1

Income (loss) before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes:
 

 
 
 
 

 
 

Bankers Life
80.6

 
79.4

 
227.2

 
213.7

Washington National
33.9

 
21.2

 
92.5

 
67.3

Colonial Penn
(2.6
)
 
(1.3
)
 
(11.8
)
 
(6.5
)
Other CNO Business
(53.6
)
 
2.8

 
(54.0
)
 
15.3

Corporate operations
(221.5
)
 
(47.3
)
 
(267.2
)
 
(101.0
)
Income (loss) before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
$
(163.2
)
 
$
54.8

 
$
(13.3
)
 
$
188.8

___________________
(a)
It is not practicable to provide additional components of revenue by product or services.

A reconciliation of segment revenues and expenses to consolidated revenues and expenses is as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Total segment revenues
$
1,083.9

 
$
961.7

 
$
3,218.0

 
$
3,034.9

Net realized investment gains
9.1

 
30.6

 
63.9

 
38.6

Consolidated revenues
$
1,093.0

 
$
992.3

 
$
3,281.9

 
$
3,073.5

 
 
 
 
 
 
 
 
Total segment expenses
$
1,247.1

 
$
906.9

 
$
3,231.3

 
$
2,846.1

Insurance policy benefits - fair value changes in embedded derivative liabilities
4.6

 
33.9

 
10.7

 
33.9

Amortization related to fair value changes in embedded derivative liabilities
(1.6
)
 
(14.1
)
 
(4.0
)
 
(14.1
)
Amortization related to net realized investment gains
1.7

 
3.9

 
5.9

 
3.7

Consolidated expenses
$
1,251.8

 
$
930.6

 
$
3,243.9

 
$
2,869.6

ACCOUNTING FOR DERIVATIVES
ACCOUNTING FOR DERIVATIVES
ACCOUNTING FOR DERIVATIVES

Our fixed index annuity products provide a guaranteed minimum rate of return and a higher potential return that is based on a percentage (the “participation rate”) of the amount of increase in the value of a particular index, such as the Standard & Poor’s 500 Index, over a specified period.  Typically, on each policy anniversary date, a new index period begins.  We are generally able to change the participation rate at the beginning of each index period during a policy year, subject to contractual minimums.  We typically buy call options (including call spreads) referenced to the applicable indices in an effort to offset or hedge potential increases to policyholder benefits resulting from increases in the particular index to which the policy’s return is linked.  We reflect changes in the estimated fair value of these options in net investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios).  Net investment gains (losses) related to fixed index products were $37.5 million and $(25.7) million in the nine months ended September 30, 2012 and 2011, respectively. These amounts were substantially offset by a corresponding change to insurance policy benefits.  The estimated fair value of these options was $81.9 million and $37.9 million at September 30, 2012 and December 31, 2011, respectively.  We classify these instruments as other invested assets.

The Company accounts for the options attributed to the policyholder for the estimated life of the annuity contract as embedded derivatives.  The expected future cost of options on fixed index annuity products is used to determine the value of embedded derivatives.  The Company purchases options to hedge liabilities for the next policy year on each policy anniversary date and must estimate the fair value of the forward embedded options related to the policies.  These accounting requirements often create volatility in the earnings from these products.  We record the changes in the fair values of the embedded derivatives in current earnings as a component of insurance policy benefits.  The fair value of these derivatives, which are classified as “liabilities for interest-sensitive products”, was $737.9 million at September 30, 2012 and $666.3 million at December 31, 2011. Prior to June 30, 2011, we maintained a specific block of investments in our trading securities account (which we carried at estimated fair value with changes in such value recognized as investment income from policyholder and reinsurer accounts and other special-purpose portfolios) to offset the income statement volatility caused by the effect of interest rate fluctuations on the value of embedded derivatives related to our fixed index annuity products.  During the second quarter of 2011, we sold this trading portfolio, which resulted in $6.7 million and $19.8 million of decreased earnings in the first nine months of 2012 and 2011, respectively, since the volatility caused by the accounting requirements to record embedded options at fair value were no longer being offset.

If the counterparties for the call options we hold fail to meet their obligations, we may have to recognize a loss.  We limit our exposure to such a loss by diversifying among several counterparties believed to be strong and creditworthy.  At September 30, 2012, substantially all of our counterparties were rated “BBB+” or higher by Standard & Poor’s Corporation (“S&P”).

Certain of our reinsurance payable balances contain embedded derivatives.  Such derivatives had an estimated fair value of $6.0 million and $3.5 million at September 30, 2012 and December 31, 2011, respectively.  We record the change in the fair value of these derivatives as a component of investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios).  We maintain the investments related to these agreements in our trading securities account, which we carry at estimated fair value with changes in such value recognized as investment income (also classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios).  The change in value of these trading securities offsets the change in value of the embedded derivatives.

We purchase certain fixed maturity securities that contain embedded derivatives that are required to be bifurcated from the instrument and held at fair value on the consolidated balance sheet. For certain of these securities, we have elected the fair value option to carry the entire security at fair value with changes in fair value reported in net income for operational ease.

REINSURANCE
REINSURANCE
REINSURANCE

The cost of reinsurance ceded totaled $48.0 million and $58.3 million in the third quarters of 2012 and 2011, respectively, and $164.5 million and $176.3 million in the first nine months of 2012 and 2011, respectively. We deduct this cost from insurance policy income.  Reinsurance recoveries netted against insurance policy benefits totaled $56.4 million and $45.4 million in the third quarters of 2012 and 2011, respectively, and $172.2 million and $160.2 million in the first nine months of 2012 and 2011, respectively.

From time-to-time, we assume insurance from other companies.  Any costs associated with the assumption of insurance are amortized consistent with the method used to amortize deferred acquisition costs.  Reinsurance premiums assumed totaled $15.9 million and $18.1 million in the third quarters of 2012 and 2011, respectively, and $54.7 million and $64.6 million in the first nine months of 2012 and 2011, respectively.  Reinsurance premiums included amounts assumed pursuant to marketing and quota-share agreements with Coventry Health Care (“Coventry”) of $11.4 million and $12.8 million in the third quarters of 2012 and 2011, respectively, and $39.9 million and $47.6 million in the first nine months of 2012 and 2011, respectively.

See the note entitled “Accounting for Derivatives” for a discussion of the derivative embedded in the payable related to certain modified coinsurance agreements.

INCOME TAXES
INCOME TAXES
INCOME TAXES

The Company's interim tax expense is based upon the estimated annual effective tax rate for the respective period. Under authoritative guidance, certain items are required to be excluded from the estimated annual effective tax rate calculation. Such items include changes in judgment about the realizability of deferred tax assets resulting from changes in projections of income expected to be available in future years, and items deemed to be unusual, infrequent, or that can not be reliably estimated. In these cases, the actual tax expense or benefit applicable to that item is treated discretely and is reported in the same period as the related item. The reductions to the valuation allowance applicable to future years income were treated as discrete items in the three month periods ended September 30, 2012 and 2011. In addition, the loss on extinguishment of debt of $198.5 million was treated as a discrete item in the three month period ended September 30, 2012. The components of income tax expense were as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Current tax expense
$
2.4

 
$
2.3

 
$
9.1

 
$
7.2

Deferred tax expense (benefit)
11.1

 
22.9

 
76.4

 
68.4

Valuation allowance applicable to current year income
(31.8
)
 

 
(31.8
)
 

Income tax expense (benefit) calculated based on estimated annual effective tax rate
(18.3
)
 
25.2

 
53.7

 
75.6

Income tax expense (benefit) on discrete items:
 
 
 
 
 
 
 
Valuation allowance reduction applicable to income in future years
(111.2
)
 
(143.0
)
 
(111.2
)
 
(143.0
)
Deferred tax benefit related to loss on extinguishment of debt and other items
(24.3
)
 

 
(24.3
)
 

Total income tax benefit
$
(153.8
)
 
$
(117.8
)
 
$
(81.8
)
 
$
(67.4
)


A reconciliation of the U.S. statutory corporate tax rate to the estimated annual tax rate, before discrete items, reflected in the consolidated statement of operations is as follows:
 

Nine months ended
 
September 30,
 
2012
 
2011
U.S. statutory corporate rate
35.0
 %
 
35.0
 %
Valuation allowance reduction applicable to current year income
(13.8
)
 

Nondeductible amounts
.5

 
1.8

State taxes
1.0

 
1.0

Provision for tax issues, tax credits and other

 
(.8
)
Estimated annual effective tax rate
22.7
 %
 
37.0
 %


The components of the Company’s income tax assets and liabilities were as follows (dollars in millions):
 
September 30,
2012
 
December 31,
2011
 
(Restated)
 
 
Deferred tax assets:
 
 
 
Net federal operating loss carryforwards
$
1,366.2

 
$
1,445.2

Net state operating loss carryforwards
16.3

 
16.8

Tax credits
37.7

 
32.6

Capital loss carryforwards
305.4

 
342.3

Deductible temporary differences:


 
 

Insurance liabilities
754.8

 
744.4

Other
81.7

 
64.8

Gross deferred tax assets
2,562.1

 
2,646.1

Deferred tax liabilities:
 

 
 

Investments
(21.9
)
 
(24.2
)
Present value of future profits and deferred acquisition costs
(333.7
)
 
(363.7
)
Accumulated other comprehensive income
(688.1
)
 
(434.8
)
Gross deferred tax liabilities
(1,043.7
)
 
(822.7
)
Net deferred tax assets before valuation allowance
1,518.4

 
1,823.4

Valuation allowance
(795.4
)
 
(938.4
)
Net deferred tax assets
723.0

 
885.0

Current income taxes accrued
(23.5
)
 
(19.6
)
Income tax assets, net
$
699.5

 
$
865.4



Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities, capital loss carryforwards and net operating loss carryforwards (“NOLs”). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or paid.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in earnings in the period when the changes are enacted.

A reduction of the net carrying amount of deferred tax assets by establishing a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. In assessing the need for a valuation allowance, all available evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, our experience with operating loss and tax credit carryforwards expiring unused, and tax planning strategies. We evaluate the need to establish a valuation allowance for our deferred income tax assets on an ongoing basis. The realization of our deferred income tax assets depends upon generating sufficient future taxable income during the periods in which our temporary differences become deductible and before our capital loss carryforwards and NOLs expire.

Based on our assessment, it appears more likely than not that $893 million of our NOLs and capital loss carryforwards will be realized through future taxable earnings. Accordingly, we have identified reductions to our deferred tax valuation allowance of $155.0 million, of which $143.0 million was recognized in the three months ended September 30, 2012 and $12.0 million will be recognized in the three months ended December 31, 2012, as we reflect the impact of a lower estimated annual effective tax rate on estimated income for the entire year. We will continue to assess the need for a valuation allowance in the future. If future results are less than projected, a valuation allowance may be required to reduce the deferred tax asset, which could have a material impact on our results of operations in the period in which it is recorded.

There are two principal components of the reduction to our valuation allowance for deferred tax assets in 2012. First, our 2012 taxable income (including taxable investment gains), is expected to exceed the amount previously reflected in our deferred tax valuation model, resulting in a reduction to the valuation allowance of $43.8 million. This reduction is reflected in the estimate of our annual effective tax rate and, therefore, will be recognized as follows: $31.8 million in the three months ended September 30, 2012 and $12.0 million in the three months ended December 31, 2012. In addition, our recent higher levels of operating income resulted in the projection of higher levels of future years taxable income based on evidence we consider to be objective and verifiable. This change is further described in the following paragraph and resulted in a reduction to the valuation allowance for deferred tax assets of $111.2 million, all of which was recognized in the three months ended September 30, 2012.

Our analysis at September 30, 2012, is consistent with the deferred tax valuation model used in the prior year. Our deferred tax valuation model reflects projections of future taxable income based on a normalized average annual taxable income for the last three years, plus 5 percent growth for the next five years and no growth thereafter. In our new projections, our three year average increased to $293 million, compared to $260 million in our prior projection. The projections used to support the recovery of our NOLs do not anticipate the use of tax planning strategies that we could consider in the future to avoid a tax benefit from expiring. We have evaluated each component of the deferred tax asset and assessed the effect of limitations and/or interpretations on the value of each component to be fully recognized in the future.

Recovery of our deferred tax assets is dependent on achieving the future taxable income used in our deferred tax valuation model and failure to do so would result in an increase in the valuation allowance in a future period.  Any future increase in the valuation allowance may result in additional income tax expense and reduce shareholders’ equity, and such an increase could have a significant impact upon our earnings in the future.  In addition, the use of the Company’s NOLs is dependent, in part, on whether the Internal Revenue Service (the “IRS”) ultimately agrees with the tax positions we have taken in our tax returns with respect to the allocation of cancellation of indebtedness income ("CODI") resulting from the bankruptcy of our Predecessor and the classification of the loss we recognized as a result of the transfer of the stock of Senior Health Insurance Company of Pennsylvania (“Senior Health”) to Senior Health Care Oversight Trust, an independent trust (the “Independent Trust”).

The Internal Revenue Code (the “Code”) limits the extent to which losses realized by a non-life entity (or entities) may offset income from a life insurance company (or companies) to the lesser of:  (i) 35 percent of the income of the life insurance company; or (ii) 35 percent of the total loss of the non-life entities (including NOLs of the non-life entities).  There is no similar limitation on the extent to which losses realized by a life insurance entity (or entities) may offset income from a non-life entity (or entities).

Section 382 of the Code imposes limitations on a corporation’s ability to use its NOLs when the company undergoes an ownership change.  Future transactions and the timing of such transactions could cause an ownership change for Section 382 income tax purposes.  Such transactions may include, but are not limited to, additional repurchases under our share repurchase program, issuances of common stock (including upon conversion of our outstanding 7.0% Debentures), and acquisitions or sales of shares of CNO stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future five percent or more of our outstanding common stock for their own account.  Many of these transactions are beyond our control.  If an additional ownership change were to occur for purposes of Section 382, we would be required to calculate an annual restriction on the use of our NOLs to offset future taxable income.  The annual restriction would be calculated based upon the value of CNO’s equity at the time of such ownership change, multiplied by a federal long-term tax exempt rate (3.02 percent at September 30, 2012), and the annual restriction could effectively eliminate our ability to use a substantial portion of our NOLs to offset future taxable income.  We regularly monitor ownership change (as calculated for purposes of Section 382) and, as of September 30, 2012, we were below the 50 percent ownership change level that would trigger further impairment of our ability to utilize our NOLs.

As of September 30, 2012, we had $3.9 billion of federal NOLs and $.9 billion of capital loss carryforwards. The following table summarizes the expiration dates of our loss carryforwards assuming the IRS does not ultimately agree with the positions we have taken with respect to the allocation of CODI and the loss on our investment in Senior Health, both as further described below (dollars in millions):

Year of expiration
 
Net operating loss carryforwards (a)
 
Capital loss
 
Total loss
 
 
Life
 
Non-life
 
carryforwards
 
carryforwards
2013
 
$

 
 
 
$

 
 
 
$
836.7

 
(b)
 
$
836.7

2014
 

 
 
 

 
 
 
28.6

 
 
 
28.6

2015
 

 
 
 

 
 
 
7.2

 
 
 
7.2

2018
 
550.9

 
(a)
 

 
 
 

 
 
 
550.9

2021
 
29.5

 
 
 

 
 
 

 
 
 
29.5

2022
 
204.1

 
 
 

 
 
 

 
 
 
204.1

2023
 

 
(b)
 
2,602.8

 
(a)
 

 
 
 
2,602.8

2024
 

 
 
 
3.2

 
 
 

 
 
 
3.2

2025
 

 
 
 
118.8

 
 
 

 
 
 
118.8

2027
 

 
 
 
216.8

 
 
 

 
 
 
216.8

2028
 

 
 
 
.5

 
 
 

 
 
 
.5

2029
 

 
 
 
148.9

 
 
 

 
 
 
148.9

2031
 

 
 
 
28.0

 
 
 

 
 
 
28.0

Total
 
$
784.5

 
 
 
$
3,119.0

 
 
 
$
872.5

 
 
 
$
4,776.0

 _________________________
(a)
The life/non-life allocation summarized above assumes the IRS does not ultimately agree with the tax position we have taken in our tax returns with respect to the allocation of CODI.  If the IRS ultimately agrees with our tax position, approximately $631 million of the non-life NOLs expiring in 2023 would be characterized as life NOLs expiring in 2018.
(b)
The allocation of the capital loss carryforwards summarized above assumes the IRS does not ultimately agree with the tax position we have taken with respect to our investment in Senior Health, which was worthless when it was transferred to the Independent Trust in 2008. If the IRS ultimately agrees with our tax position of classifying this loss as ordinary, capital loss carryforwards expiring in 2013 would decrease and life NOLs expiring in 2023 would increase by $742 million.

We had deferred tax assets related to NOLs for state income taxes of $16.3 million and $16.8 million at September 30, 2012 and December 31, 2011, respectively.  The related state NOLs are available to offset future state taxable income in certain states through 2019.

In July 2006, the Joint Committee of Taxation accepted the audit and the settlement which characterized $2.1 billion of the tax losses on our Predecessor's investment in Conseco Finance Corp. as life company losses and the remaining $3.8 billion as non-life losses prior to the application of the CODI attribute reductions described below.

The Code provides that any income realized as a result of the CODI in bankruptcy must reduce NOLs. We realized $2.5 billion of CODI when we emerged from bankruptcy. Pursuant to the Company's interpretation of the tax law, the CODI reductions were all used to reduce non-life NOLs and this position has been taken in our tax returns. However, the IRS has issued a proposed adjustment which is not in agreement with our position. We have requested an appeal of the IRS proposed adjustment through their early appeals process. Due to uncertainties with respect to the position the IRS may take and limitations on our ability to utilize NOLs based on projected life and non-life income, we have consistently considered the $631 million of CODI to be a reduction to life NOLs when determining our valuation allowance, pending resolution. If the IRS ultimately agrees with our position that the $631 million of CODI is a reduction to non-life NOLs, our valuation allowance would be reduced by approximately $140 million based on the income projections used in determining our valuation allowance. The outcome of this uncertainty cannot be predicted.

We recognized a $742 million loss on our investment in Senior Health which was worthless when it was transferred to the Independent Trust in 2008. We have treated the loss as a capital loss when determining the deferred tax benefit we may receive. We also established a full valuation allowance as we believe we will not generate capital gains to utilize the benefit. However, due to uncertainties in the Code, we have reflected this loss as an ordinary loss in our tax return, contrary to certain IRS rulings. If classifying this loss as ordinary is ultimately determined to be correct, our valuation allowance would be reduced by approximately $140 million based on the income projections used in determining our valuation allowance.

Tax years 2008 through 2010 are under examination by the IRS. This examination is expected to accelerate the resolution of the uncertainty related to the loss on our investment in Senior Health.  The Company’s various state income tax returns are generally open for tax years 2009 through 2011 based on the individual state statutes of limitation. Generally, for tax years which generate NOLs, capital losses or tax credit carryforwards, the statute of limitations does not close until the expiration of the statute of limitations for the tax year in which such carryforwards are utilized.
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS

The following notes payable were direct corporate obligations of the Company as of September 30, 2012 and December 31, 2011 (dollars in millions):

 
September 30,
2012
 
December 31,
2011
New Senior Secured Credit Agreement (as defined below)
$
675.0

 
$

7.0% Debentures
93.0

 
293.0

Previous Senior Secured Credit Agreement (as defined below)

 
255.2

6.375% Senior Secured Notes due October 2020 (the "6.375% Notes")
275.0

 

9.0% Senior Secured Notes due January 2018 (the “9.0% Notes”)
1.2

 
275.0

Senior Health Note due November 12, 2013 (the “Senior Health Note”)

 
50.0

Unamortized discount on New Senior Secured Credit Agreement
(5.5
)
 

Unamortized discount on 7.0% Debentures
(3.6
)
 
(12.9
)
Unamortized discount on Previous Senior Secured Credit Agreement

 
(2.4
)
Direct corporate obligations
$
1,035.1

 
$
857.9



6.375% Notes

On September 28, 2012, we issued $275.0 million in aggregate principal amount of 6.375% Notes pursuant to an Indenture, dated as of September 28, 2012 (the “6.375% Indenture”), among the Company, the subsidiary guarantors party thereto (the “Subsidiary Guarantors”) and Wilmington Trust, National Association, as trustee (the “Trustee") and as collateral agent (the “Collateral Agent”). The net proceeds from the issuance of the 6.375% Notes, together with the net proceeds from the New Senior Secured Credit Agreement (as defined below), were used to repay other outstanding indebtedness, as further described below, and for general corporate purposes.

The 6.375% Notes will mature on October 1, 2020. Interest on the 6.375% Notes accrues at a rate of 6.375% per annum and is payable semiannually in arrears on April 1 and October 1 of each year, commencing on April 1, 2013. The 6.375% Notes and the guarantees thereof (the “Guarantees”) are senior secured obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future senior obligations, and senior to all of the Company's and the Subsidiary Guarantors' future subordinated indebtedness. The 6.375% Notes are secured by a first-priority lien on substantially all of the assets of the Company and the Subsidiary Guarantors, subject to certain exceptions. The 6.375% Notes and the Guarantees are pari passu with respect to security and in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future secured indebtedness under the New Senior Secured Credit Agreement (as defined below). The 6.375% Notes are structurally subordinated to all of the liabilities and preferred stock of each of the Company's insurance subsidiaries, which are not guarantors of the 6.375% Notes.

The Company may redeem all or part of the 6.375% Notes beginning on October 1, 2015, at the redemption prices set forth in the 6.375% Indenture. The Company may also redeem all or part of the 6.375% Notes at any time and from time to time prior to October 1, 2015, at a price equal to 100% of the aggregate principal amount of the 6.375% Notes to be redeemed, plus a “make-whole” premium and accrued and unpaid interest to, but not including, the redemption date. In addition, prior to October 1, 2015, the Company may redeem up to 35% of the aggregate principal amount of the 6.375% Notes with the net cash proceeds of certain equity offerings at a price equal to 106.375% of the aggregate principal amount of the 6.375% Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

Upon the occurrence of a Change of Control (as defined in the 6.375% Indenture), each holder of the 6.375% Notes may require the Company to repurchase all or a portion of the 6.375% Notes in cash at a price equal to 101% of the aggregate principal amount of the 6.375% Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The 6.375% Indenture contains covenants that, among other things, limit (subject to certain exceptions) the Company's ability and the ability of the Company's Restricted Subsidiaries (as defined in the 6.375% Indenture) to:

incur or guarantee additional indebtedness or issue preferred stock;

pay dividends or make other distributions to shareholders;

purchase or redeem capital stock or subordinated indebtedness;

make investments;

create liens;

incur restrictions on the Company's ability and the ability of its Restricted Subsidiaries to pay dividends or make other payments to the Company;

sell assets, including capital stock of the Company's subsidiaries;

consolidate or merge with or into other companies or transfer all or substantially all of the Company's assets; and

engage in transactions with affiliates.

The 6.375% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the 6.375% Indenture, failure to pay at maturity or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding 6.375% Notes may declare the principal of and accrued but unpaid interest, including any additional interest, on all of the 6.375% Notes to be due and payable.

Under the 6.375% Indenture, the Company can make Restricted Payments (as such term is defined in the 6.375% Indenture) up to a calculated limit, provided that the Company's pro forma risk-based capital ratio exceeds 225% after giving effect to the Restricted Payment and certain other conditions are met. Restricted Payments include, among other items, repurchases of common stock and cash dividends on common stock (to the extent such dividends exceed $30 million in the aggregate in any calendar year). The limit of Restricted Payments permitted under the 6.375% Indenture is the sum of (x) 50% of the Company's “Net Excess Cash Flow” (as defined in the 6.375% Indenture) for the period (taken as one accounting period) from July 1, 2012 to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment, (y) $175.0 million and (z) certain other amounts specified in the 6.375% Indenture. Based on the provisions set forth in the 6.375% Indenture and the Company's Net Excess Cash Flow for the period from July 1, 2012 through September 30, 2012, the Company could have made additional Restricted Payments under this 6.375% Indenture covenant of approximately $244 million as of September 30, 2012. This limitation on Restricted Payments does not apply if the Debt to Total Capitalization Ratio (as defined in the 6.375% Indenture) as of the last day of the Company's most recently ended fiscal quarter for which financial statements are available that immediately precedes the date of any Restricted Payment, calculated immediately after giving effect to such Restricted Payment and any related transactions on a pro forma basis, is equal to or less than 17.5%.

In connection with the issuance of the 6.375% Notes and execution of the 6.375% Indenture, the Company and the Subsidiary Guarantors entered into a security agreement, dated as of September 28, 2012 (the “Security Agreement”), by and among the Company, the Subsidiary Guarantors and the Collateral Agent, pursuant to which the Company and the Subsidiary Guarantors pledged substantially all of their assets to secure their obligations under the 6.375% Notes and the 6.375% Indenture, subject to certain exceptions as set forth in the Security Agreement.

New Senior Secured Credit Agreement

On September 28, 2012, the Company entered into a new senior secured credit agreement, providing for: (i) a $425.0 million six-year term loan facility; (ii) a $250.0 million four-year term loan facility; and (iii) a $50.0 million three-year revolving credit facility, with JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”), and the lenders from time to time party thereto (the “New Senior Secured Credit Agreement”). The New Senior Secured Credit Agreement is guaranteed by the Subsidiary Guarantors and secured by a first-priority lien (which ranks pari passu with the liens securing the 6.375% Notes) on substantially all of the Company's and the Subsidiary Guarantors' assets. As of September 30, 2012, the Company had borrowed in full the amounts available under each of the term loan facilities and no amounts have been borrowed under the revolving credit facility. The net proceeds from the New Senior Secured Credit Agreement, together with the net proceeds from the 6.375% Notes, were used to repay other outstanding indebtedness, as further described below, and for general corporate purposes.

The revolving credit facility includes an uncommitted subfacility for swingline loans of up to $5.0 million, and up to $5.0 million of the revolving credit facility is available for the issuance of letters of credit. The six-year term loan facility will amortize in quarterly installments in amounts resulting in an annual amortization of 1% and the four-year term loan facility will amortize in quarterly installments resulting in an annual amortization of 20% during the first and second years and 30% during the third and fourth years. Subject to certain conditions, the Company may incur additional incremental loans under the New Senior Secured Credit Agreement in an amount of up to $250.0 million.

Mandatory prepayments of the New Senior Secured Credit Agreement will be required, subject to certain exceptions, in an amount equal to: (i) 100% of the net cash proceeds from certain asset sales or casualty events; (ii) 100% of the net cash proceeds received by the Company or any of its restricted subsidiaries from certain debt issuances; and (iii) 100% of the amount of certain restricted payments made (including any common stock dividends and share repurchases) as defined in the New Senior Secured Credit Agreement provided that if, as of the end of the fiscal quarter immediately preceding such restricted payment, the debt to total capitalization ratio is: (x) equal to or less than 22.5%, but greater than 17.5%, the prepayment requirement shall be reduced to 33.33%; or (y) equal to or less than 17.5%, the prepayment requirement shall not apply.

Notwithstanding the foregoing, no mandatory prepayments pursuant to item (i) in the preceding paragraph shall be required if: (x) the debt to total capitalization ratio is equal or less than 20% and (y) either (A) the financial strength rating of certain of the Company's insurance subsidiaries is equal or better than A- (stable) from A.M. Best Company ("A.M. Best") or (B) the New Senior Secured Credit Agreement is rated equal or better than BBB- (stable) from S&P and Baa3 (stable) by Moody's Investor Services, Inc. ("Moody's").

The interest rates with respect to loans under: (i) the six-year term loan facility will be, at the Company's option, equal to a eurodollar rate, plus 3.75% per annum, or a base rate, plus 2.75% per annum, subject to a eurodollar rate “floor” of 1.25% and a base rate “floor” of 2.25% (such rate was 5.0 percent at September 30, 2012); (ii) the four-year term loan facility will be, at the Company's option, equal to a eurodollar rate, plus 3.25% per annum, or a base rate, plus 2.25% per annum, subject to a eurodollar rate “floor” of 1.00% and a base rate “floor” of 2.00% (such rate was 4.25 percent at September 30, 2012); and (iii) the revolving credit facility will be, at the Company's option, equal to a eurodollar rate, plus 3.50% per annum, or a base rate, plus 2.50% per annum, in each case, with respect to revolving credit facility borrowings only, subject to certain step-downs based on the debt to total capitalization ratio of the Company.

The New Senior Secured Credit Agreement contains covenants that limit the Company's ability to take certain actions and perform certain activities, including (each subject to exceptions as set forth in the New Senior Secured Credit Agreement):

limitations on debt (including, without limitation, guarantees and other contingent obligations);
 
limitations on issuances of disqualified capital stock;

limitations on liens and further negative pledges;

limitations on sales, transfers and other dispositions of assets;

limitations on transactions with affiliates;

limitations on changes in the nature of the Company's business;

limitations on mergers, consolidations and acquisitions;

limitations on dividends and other distributions, stock repurchases and redemptions and other restricted payments;

limitations on investments and acquisitions;

limitations on prepayment of certain debt;

limitations on modifications or waivers of certain debt documents and charter documents;

investment portfolio requirements for insurance subsidiaries;

limitations on restrictions affecting subsidiaries;

limitations on holding company activities; and

limitations on changes in accounting policies.

In addition, the New Senior Secured Credit Agreement requires the Company to maintain (each as calculated in accordance with the New Senior Secured Credit Agreement): (i) a debt to total capitalization ratio of not more than 27.5 percent (such ratio was 21.5 percent at September 30, 2012); (ii) an interest coverage ratio of not less than 2.50 to 1.00 for each rolling four quarters (or, if less, the number of full fiscal quarters commencing after the effective date of the New Senior Secured Credit Agreement) (such ratio was not applicable for the period ended September 30, 2012); (iii) an aggregate ratio of total adjusted capital to company action level risk-based capital for the Company's insurance subsidiaries of not less than 250 percent (such ratio was 361 percent at September 30, 2012); and (iv) a combined statutory capital and surplus for the Company's insurance subsidiaries of at least $1,300.0 million (combined statutory capital and surplus at September 30, 2012, was $1,766.8 million).

The New Senior Secured Credit Agreement provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, incorrectness of any representation or warranty in any material respect, breach of covenants in the New Senior Secured Credit Agreement or other loan documents, cross default to certain other indebtedness, certain events of bankruptcy and insolvency, certain ERISA events, a failure to pay certain judgments, certain material regulatory events, the occurrence of a change of control, and the invalidity of any material provision of any loan document or material lien or guarantee granted under the loan documents. If an event of default under the New Senior Secured Credit Agreement occurs and is continuing, the Agent may accelerate the amounts and terminate all commitments outstanding under the New Senior Secured Credit Agreement and may exercise remedies in respect of the collateral.

In connection with the execution of the New Senior Secured Credit Agreement, the Company and the Subsidiary Guarantors entered into a guarantee and security agreement, dated as of September 28, 2012 (the “Guarantee and Security Agreement”), by and among the Company, the Subsidiary Guarantors and the Agent, pursuant to which the Subsidiary Guarantors guaranteed all of the obligations of the Company under the New Senior Secured Credit Agreement and the Company and the Subsidiary Guarantors pledged substantially all of their assets to secure the New Senior Secured Credit Agreement, subject to certain exceptions as set forth in the Guarantee and Security Agreement.
Pari Passu Intercreditor Agreement

In connection with the issuance of the 6.375% Notes and entry into the New Senior Secured Credit Agreement, the Agent and the Collateral Agent, as authorized representative with respect to the 6.375% Notes, entered into a Pari Passu Intercreditor Agreement, dated as of September 28, 2012 (the “Intercreditor Agreement”), which sets forth agreements with respect to the first-priority liens granted by the Company and the Subsidiary Guarantors pursuant to the 6.375% Indenture and the New Senior Secured Credit Agreement.

Under the Intercreditor Agreement, any actions that may be taken with respect to the collateral that secures the 6.375% Notes and the New Senior Secured Credit Agreement, including the ability to cause the commencement of enforcement proceedings against such collateral, to control such proceedings and to approve amendments to releases of such collateral from the lien of, and waive past defaults under, such documents relating to such collateral, will be at the direction of the authorized representative of the lenders under the New Senior Secured Credit Agreement until the earliest of: (i) the Company's obligations under the New Senior Secured Credit Agreement (or refinancings thereof) are discharged; (ii) the earlier of (x) date on which the outstanding principal amount of loans and commitments under the New Senior Secured Credit Agreement is less than $25.0 million and (y) the date on which the outstanding principal amount of another tranche of first-priority indebtedness exceeds the principal amount of loans and commitments under the New Senior Secured Credit Agreement; and (iii) 180 days after the occurrence of both an event of default under the 6.375% Indenture and the authorized representative of the holders of the New Notes making certain representations as described in the Intercreditor Agreement, unless the authorized representative of the lenders under the New Senior Secured Credit Agreement has commenced and is diligently pursuing enforcement action with respect to the collateral or the grantor of the security interest in that collateral (whether the Company or the applicable Subsidiary Guarantor) is then a debtor under or with respect to (or otherwise subject to) any insolvency or liquidation proceeding.

9.0% Notes

On September 28, 2012, the Company completed the cash tender offer for $273.8 million aggregate principal amount of the 9.0% Notes and received consents from such holders to proposed amendments to the indenture governing the 9.0% Notes (the "9.0% Indenture"). In addition, on September 28, 2012 (the “Initial Payment Date”), the Company, the Subsidiary Guarantors and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as trustee, executed a first supplemental indenture to the 9.0% Indenture (the “Supplemental Indenture”) that eliminates substantially all of the restrictive covenants contained in the 9.0% Indenture and certain events of default and related provisions. The Supplemental Indenture became effective upon execution, and the amendments to the 9.0% Indenture became operative on the Initial Payment Date upon acceptance of and payment for the tendered 9.0% Notes by the Company.

On the Initial Payment Date, the Company paid an aggregate of $326.3 million in order to purchase the 9.0% Notes tendered prior to the Initial Payment Date (representing, in the aggregate, tender offer consideration of approximately $313.1 million, consent payments of approximately $8.2 million and accrued and unpaid interest to, but not including, the Initial Payment Date of approximately $5.0 million).

On September 28, 2012, the Company: (i) issued a notice of redemption to holders of the remaining $1.2 million aggregate principal amount of 9.0% Notes that were not tendered and remained outstanding following the Company's initial acceptance of and payments for the 9.0% Notes tendered in the tender offer prior to the Initial Payment Date; and (ii) deposited with the trustee of the 9.0% Notes sufficient funds to satisfy and discharge the 9.0% Indenture and to fund the make-whole redemption of the remaining outstanding 9.0% Notes and to pay accrued and unpaid interest on the redeemed notes to, but not including, the October 29, 2012 redemption date. Upon the satisfaction and discharge of the 9.0% Indenture, all of the collateral securing the 9.0% Notes was released and any remaining restrictive covenants and certain additional events of default contained in the 9.0% Indenture (as amended by the Supplemental Indenture) ceased to have effect. The remaining $1.2 million of 9.0% Notes were redeemed on October 29, 2012.

7.0% Debentures

In September 2012, the Company entered into a Debenture Repurchase Agreement (the “Debenture Repurchase Agreement”) with Paulson Credit Opportunities Master Ltd. and Paulson Recovery Master Fund Ltd. (collectively, the “Paulson Holders”), funds managed by Paulson & Co. Inc., that held $200.0 million in aggregate principal amount of the Company's 7.0% Debentures. Pursuant to the Debenture Repurchase Agreement, the Company purchased from each of the Paulson Holders the 7.0% Debentures held by such Paulson Holder, for a cash purchase price of $355.1 million that provided for a 2.8% discount to the estimated fair market value of the 7.0% Debentures as defined in the Debenture Repurchase Agreement.

Previous Senior Secured Credit Agreement

In September 2012, the Company used a portion of the net proceeds from its offering of the 6.375% Notes, together with borrowings under the New Senior Secured Credit Agreement to repay the remaining $223.8 million principal amount outstanding under its credit agreement, dated as of December 21, 2010, by and among the Company, Morgan Stanley Senior Funding, Inc., as administrative agent, and the lenders from time to time party thereto (as amended, the "Previous Senior Secured Credit Agreement").

Also, in the first nine months of 2012, as required under the terms of the Previous Senior Secured Credit Agreement, we made mandatory prepayments of $31.4 million due to repurchases of our common stock and payment of a common stock dividend.

Senior Health Note

In March 2012, we paid in full the remaining $50.0 million principal balance on the Senior Health Note, which had been scheduled to mature in November 2013. The repayment in full of the Senior Health Note removed the previous restriction on our ability to pay cash dividends on our common stock.

Loss on Extinguishment of Debt

In the first nine months of 2012, we recognized a loss on extinguishment of debt totaling $199.2 million consisting of:

(i)
$136.3 million (all of which was recognized in the third quarter of 2012) due to our repurchase of $200.0 million principal amount of 7.0% Debentures pursuant to the Debenture Repurchase Agreement described above and the write-off of unamortized discount and issuance costs associated with the 7.0% Debentures. Additional paid-in capital was also reduced by $24.0 million to extinguish the beneficial conversion feature associated with a portion of the 7.0% Debentures that were repurchased. As the Code limits the deduction to taxable income for losses on the redemption of convertible debt, a minimal tax benefit was recognized related to the repurchase of the 7.0% Debentures;

(ii)
$57.8 million (all of which was recognized in the third quarter of 2012) related to the tender offer and consent solicitation for the 9.0% Notes; the write-off of unamortized issuance costs related to the 9.0% Notes; and other transaction costs; and

(iii)
$5.1 million ($4.4 million of which was recognized in the third quarter of 2012) representing the write-off of unamortized discount and issuance costs associated with repayments of our Previous Senior Secured Credit Agreement.

Scheduled Repayment of our Direct Corporate Obligations

The scheduled repayment of our direct corporate obligations was as follows at September 30, 2012 (dollars in millions):

Year ending September 30,
 
2013
$
55.4

2014
54.3

2015
79.3

2016
79.3

2017
97.2

Thereafter
678.7

 
$
1,044.2

INVESTMENT BORROWINGS
INVESTMENT BORROWINGS
INVESTMENT BORROWINGS

Three of the Company’s insurance subsidiaries (Conseco Life Insurance Company (“Conseco Life”), Washington National Insurance Company and Bankers Life and Casualty Company ("Bankers Life")) are members of the Federal Home Loan Bank (“FHLB”).  As members of the FHLB, Conseco Life, Washington National Insurance Company and Bankers Life have the ability to borrow on a collateralized basis from the FHLB.  Conseco Life, Washington National Insurance Company and Bankers Life are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings.  At September 30, 2012, the carrying value of the FHLB common stock was $82.5 million.  As of September 30, 2012, collateralized borrowings from the FHLB totaled $1.7 billion and the proceeds were used to purchase fixed maturity securities.  The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet.  The borrowings are collateralized by investments with an estimated fair value of $2.0 billion at September 30, 2012, which are maintained in a custodial account for the benefit of the FHLB.  Such investments are classified as fixed maturities, available for sale, in our consolidated balance sheet.  Interest expense of $21.3 million and $18.9 million in the first nine months of 2012 and 2011, respectively, was recognized related to the borrowings.

The following summarizes the terms of the borrowings (dollars in millions):

Amount
 
Maturity
 
Interest rate at
borrowed
 
date
 
September 30, 2012
$
100.0

 
November 2013
 
Variable rate – 0.515%
67.0

 
February 2014
 
Fixed rate – 1.830%
50.0

 
August 2014
 
Variable rate – 0.565%
100.0

 
August 2014
 
Variable rate – 0.476%
50.0

 
September 2015
 
Variable rate – 0.747%
150.0

 
October 2015
 
Variable rate – 0.571%
146.0

 
November 2015
 
Fixed rate – 5.300%
100.0

 
December 2015
 
Fixed rate – 4.710%
100.0

 
June 2016
 
Variable rate – 0.657%
75.0

 
June 2016
 
Variable rate – 0.621%
100.0

 
October 2016
 
Variable rate – 0.641%
50.0

 
November 2016
 
Variable rate – 0.684%
50.0

 
November 2016
 
Variable rate – 0.687%
100.0

 
June 2017
 
Variable rate – 0.751%
100.0

 
July 2017
 
Fixed rate – 3.900%
50.0

 
August 2017
 
Variable rate – 0.635%
75.0

 
August 2017
 
Variable rate – 0.577%
100.0

 
October 2017
 
Variable rate – 0.885%
37.0

 
November 2017
 
Fixed rate – 3.750%
50.0

 
July 2018
 
Variable rate – 0.917%
$
1,650.0

 
 
 
 



The variable rate borrowings are pre-payable on each interest reset date without penalty.  The fixed rate borrowings are pre-payable subject to payment of a yield maintenance fee based on current market interest rates.  At September 30, 2012, the aggregate fee to prepay all fixed rate borrowings was $51.6 million.

As part of our investment strategy, we may enter into repurchase agreements to increase our investment return. We account for these transactions as collateralized borrowings, where the amount borrowed is equal to the sales price of the underlying securities. Repurchase agreements involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed-upon price. We had no such borrowings outstanding at September 30, 2012. The primary risks associated with short-term collateralized borrowings are: (i) a substantial decline in the market value of the margined security; and (ii) that a counterparty may be unable to perform under the terms of the contract or be unwilling to extend such financing in future periods especially if the liquidity or value of the margined security has declined. Exposure is limited to any depreciation in value of the related securities.

At September 30, 2012, investment borrowings consisted of:  (i) collateralized borrowings from the FHLB of $1.7 billion; and (ii) other borrowings of $.9 million.

At December 31, 2011, investment borrowings consisted of:  (i) collateralized borrowings from the FHLB of $1.7 billion; (ii) repurchase agreements of $24.8 million; and (iii) other borrowings of $1.7 million.
CHANGES IN COMMON STOCK
CHANGES IN COMMON STOCK
CHANGES IN COMMON STOCK

Changes in the number of shares of common stock outstanding were as follows (shares in thousands):

Balance, December 31, 2011
241,305

 
 
Treasury stock purchased and retired
(12,894
)
 
 
Stock options exercised
692

 
 
Restricted stock vested
404

 
(a)
Balance, September 30, 2012
229,507

 
 
________
(a)
Such amount was reduced by 143 thousand shares which were tendered to the Company for the payment of federal and state taxes owed on the vesting of restricted stock.

In May 2011, the Company announced a common share repurchase program of up to $100.0 million of the Company's outstanding common stock. In February 2012 and June 2012, the Company's board of directors approved, in aggregate, an additional $200.0 million to repurchase the Company's outstanding common stock. In the first nine months of 2012, we repurchased 12.9 million shares of common stock for $99.5 million pursuant to the program. The Company had remaining repurchase authority of $130.7 million as of September 30, 2012.

In May 2012, we initiated a common stock dividend program. In both the second and third quarters of 2012, dividends declared and paid on common stock were $0.02 per common share totaling $9.4 million.
SALES INDUCEMENTS
SALES INDUCEMENTS
SALES INDUCEMENTS

Certain of our annuity products offer sales inducements to contract holders in the form of enhanced crediting rates or bonus payments in the initial period of the contract.  Certain of our life insurance products offer persistency bonuses credited to the contract holders balance after the policy has been outstanding for a specified period of time.  These enhanced rates and persistency bonuses are considered sales inducements in accordance with GAAP.  Such amounts are deferred and amortized in the same manner as deferred acquisition costs.  Sales inducements deferred totaled $3.1 million and $9.7 million during the nine months ended September 30, 2012 and 2011, respectively.  Amounts amortized totaled $20.5 million and $21.2 million during the nine months ended September 30, 2012 and 2011, respectively.  The unamortized balance of deferred sales inducements at September 30, 2012 and December 31, 2011 was $131.8 million and $149.2 million, respectively.  The balance of insurance liabilities for persistency bonus benefits was $36.6 million and $50.0 million at September 30, 2012 and December 31, 2011, respectively.
RECENTLY ISSUED ACCOUNTING STANDARDS
RECENTLY ISSUED ACCOUNTING STANDARDS
RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Standard Adopted on a Retrospective Basis

In October 2010, the Financial Accounting Standards Board ("FASB") issued authoritative guidance that modified the definition of the types of costs incurred by insurance entities that could be capitalized in the acquisition of new and renewal contracts.  The guidance impacts the timing of GAAP reported financial results, but has no impact on cash flows, statutory financial results or the ultimate profitability of the business.

The guidance specifies that an insurance entity shall only capitalize incremental direct costs related to the successful acquisition of new or renewal insurance contracts.  The guidance also states that advertising costs should be included in deferred acquisition costs only if the capitalization criteria in the direct-response advertising guidance is met.  The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. As permitted by the guidance, we elected to apply the provisions on a retrospective basis. The guidance reduced the balance of deferred acquisition costs, its amortization and the amount of costs capitalized. We are able to defer most commission payments, plus other costs directly related to the production of new business. The change did not impact the balance of the present value of future profits. Therefore, in contrast to the reduction in amortization of deferred acquisition costs, there was no change in the amortization of the present value of future profits.



The adoption of ASU 2010-26 affected prior period information as follows (dollars in millions, except per share amounts):

 
Three months ended
 
Nine months ended
 
September 30, 2011
 
September 30, 2011
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
Amortization
$
87.2

 
$
(28.6
)
 
$
58.6

 
$
325.4

 
$
(101.3
)
 
$
224.1

Other operating costs and expenses
127.6

 
54.4

 
182.0

 
367.1

 
160.7

 
527.8

Total benefits and expenses
904.8

 
25.8

 
930.6

 
2,810.2

 
59.4

 
2,869.6

Income before income taxes
87.5

 
(25.8
)
 
61.7

 
263.3

 
(59.4
)
 
203.9

Tax expense on period income
34.5

 
(9.3
)
 
25.2

 
96.9

 
(21.3
)
 
75.6

Net income
196.0

 
(16.5
)
 
179.5

 
309.4

 
(38.1
)
 
271.3

 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
  Basic:
 
 
 
 
 
 
 
 
 
 
 
    Net income
$
.79

 
$
(.06
)
 
$
.73

 
$
1.24

 
$
(.15
)
 
$
1.09

  Diluted:
 
 
 
 
 
 
 
 
 
 
 
    Net income
.66

 
(.05
)
 
.61

 
1.05

 
(.13
)
 
.92



 
Nine months ended
 
September 30, 2011
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
Cash flows from operating activities:
 
 
 
 
 
  Deferrable policy acquisition costs
$
(328.6
)
 
$
163.7

 
$
(164.9
)
  Other operating costs
(349.9
)
 
(163.7
)
 
(513.6
)
Net cash used by operating activities
562.2

 

 
562.2



Deferred acquisition costs represent incremental direct costs related to the successful acquisition of new or renewal insurance contracts. For universal life or investment products, we amortize these costs in relation to the estimated gross profits using the interest rate credited to the underlying policies. For other products, we amortize these costs in relation to future anticipated premium revenue using the projected investment earnings rate.

When we realize a gain or loss on investments backing our universal life or investment-type products, we adjust the amortization to reflect the change in estimated gross profits from the products due to the gain or loss realized and the effect on future investment yields. We also adjust deferred acquisition costs for the change in amortization that would have been recorded if our fixed maturity securities, available for sale, had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. We limit the total adjustment related to the impact of unrealized losses to the total of costs capitalized plus interest related to insurance policies issued in a particular year. We include the impact of this adjustment in accumulated other comprehensive income (loss) within shareholders' equity.

We regularly evaluate the recoverability of the unamortized balance of the deferred acquisition costs. We consider estimated future gross profits or future premiums, expected mortality or morbidity, interest earned and credited rates, persistency and expenses in determining whether the balance is recoverable. If we determine a portion of the unamortized balance is not recoverable, it is charged to amortization expense. In certain cases, the unamortized balance of the deferred acquisition costs may not be deficient in the aggregate, but our estimates of future earnings indicate that profits would be recognized in early periods and losses in later periods. In this case, we increase the amortization of the deferred acquisition costs over the period of profits, by an amount necessary to offset losses that are expected to be recognized in the later years.

Changes in deferred acquisition costs were as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(Restated)
 
 
 
(Restated)
 
 
Balance, beginning of period
$
653.5

 
$
975.5

 
$
797.1

 
$
999.6

Additions
46.7

 
58.3

 
141.4

 
164.9

Amortization
(44.5
)
 
(35.5
)
 
(146.4
)
 
(134.7
)
Amounts related to fair value adjustment of fixed maturities, available for sale
(32.3
)
 
(163.8
)
 
(168.7
)
 
(195.3
)
Balance, end of period
$
623.4

 
$
834.5

 
$
623.4

 
$
834.5




Adopted Accounting Standards

In June 2011, the FASB issued authoritative guidance to increase the prominence of items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement of changes in shareholders' equity. Such guidance requires that all non-owner changes in shareholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income and the total of comprehensive income. The guidance was applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance resulted in a change in the presentation of our financial statements but did not have any impact on our financial condition, operating results or cash flows. In December 2011, the FASB issued authoritative guidance to defer the requirement to present reclassification adjustments out of accumulated other comprehensive income to net income on the face of the financial statements. All other aspects of the original guidance are still effective.

In May 2011, the FASB issued authoritative guidance which clarifies or updates requirements for measuring fair value and for disclosing information about fair value measurements. The guidance clarifies: (i) the application of the highest and best use and valuation premise concepts; (ii) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity; and (iii) disclosure of quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The guidance changes certain requirements for measuring fair value or disclosing information about fair value measurements including: (i) measuring the fair value of financial instruments that are managed within a portfolio; (ii) application of premiums and discounts in a fair value measurement; and (iii) additional disclosures about fair value measurements. Such additional disclosures include a description of the valuation process used for measuring Level 3 instruments and the sensitivity of the Level 3 fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. The guidance was effective prospectively for interim and annual periods beginning after December 15, 2011. Refer to the note to our consolidated financial statements entitled "Fair Value Measurements" for additional disclosures required by this guidance. The adoption of this guidance expanded our disclosures, but did not have a material impact on our financial condition, operating results or cash flows.
CONSOLIDATED STATEMENT CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS

The following disclosures supplement our consolidated statement of cash flows.

The following reconciles net income to net cash provided by operating activities (dollars in millions):

 
Nine months ended
 
September 30,
 
2012
 
2011
Cash flows from operating activities:
 
 
 
Net income
$
119.8

 
$
271.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Amortization and depreciation
235.2

 
243.6

Income taxes
(87.3
)
 
(69.8
)
Insurance liabilities
242.8

 
244.4

Accrual and amortization of investment income
(123.1
)
 
62.9

Deferral of policy acquisition costs
(141.4
)
 
(164.9
)
Net realized investment gains
(63.9
)
 
(38.6
)
Loss on extinguishment of debt
199.2

 
3.1

Other
43.3

 
10.2

Net cash provided by operating activities
$
424.6

 
$
562.2



Non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):

 
Nine months ended
 
September 30,
 
2012
 
2011
Stock option and restricted stock plans
$
10.7

 
$
10.2

INVESTMENTS IN VARIABLE INTEREST ENTITIES
INVESTMENTS IN VARIABLE INTEREST ENTITIES
INVESTMENTS IN VARIABLE INTEREST ENTITIES

Based on our assessment, we have concluded that we are the primary beneficiary with respect to certain variable interest entities (“VIEs”), which are consolidated in our financial statements.  The following is a description of our significant investments in VIEs:

All of the VIEs are collateralized loan trusts that were established to issue securities and use the proceeds to principally invest in corporate loans and other permitted investments (including a new VIE which was consolidated in the first quarter of 2012).  The assets held by the trusts are legally isolated and not available to the Company.  The liabilities of the VIEs are expected to be satisfied from the cash flows generated by the underlying loans held by the trusts, not from the assets of the Company.  Repayment of the remaining principal balance of the borrowings of the VIEs is based on available cash flows from the assets.  The Company has no further commitments to the VIEs.

Certain of our insurance subsidiaries are noteholders of the VIEs.  Another subsidiary of the Company is the investment manager for the VIEs.  As such, it has the power to direct the most significant activities of the VIEs which materially impacts the economic performance of the VIEs.

The following table provides supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):

 
September 30, 2012
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
829.4

 
$

 
$
829.4

Notes receivable of VIEs held by insurance subsidiaries

 
(78.5
)
 
(78.5
)
Cash and cash equivalents held by variable interest entities
48.2

 

 
48.2

Accrued investment income
3.9

 

 
3.9

Income tax assets, net
3.2

 
(2.3
)
 
.9

Other assets
10.9

 

 
10.9

Total assets
$
895.6

 
$
(80.8
)
 
$
814.8

Liabilities:
 

 
 

 
 

Other liabilities
$
52.0

 
$
(2.3
)
 
$
49.7

Borrowings related to variable interest entities
766.9

 

 
766.9

Notes payable of VIEs held by insurance subsidiaries
82.5

 
(82.5
)
 

Total liabilities
$
901.4

 
$
(84.8
)
 
$
816.6


 
December 31, 2011
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
496.3

 
$

 
$
496.3

Notes receivable of VIEs held by insurance subsidiaries

 
(45.3
)
 
(45.3
)
Cash and cash equivalents held by variable interest entities
74.4

 

 
74.4

Accrued investment income
1.7

 

 
1.7

Income tax assets, net
6.8

 
(1.4
)
 
5.4

Other assets
7.7

 

 
7.7

Total assets
$
586.9

 
$
(46.7
)
 
$
540.2

Liabilities:
 

 
 

 
 

Other liabilities
$
30.3

 
$
(.1
)
 
$
30.2

Borrowings related to variable interest entities
519.9

 

 
519.9

Notes payable of VIEs held by insurance subsidiaries
49.3

 
(49.3
)
 

Total liabilities
$
599.5

 
$
(49.4
)
 
$
550.1



The investment portfolios held by the VIEs are primarily comprised of corporate fixed maturity securities which are almost entirely rated as below-investment grade securities.  At September 30, 2012, such securities had an amortized cost of $827.7 million; gross unrealized gains of $5.0 million; gross unrealized losses of $3.3 million; and an estimated fair value of $829.4 million.

The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at September 30, 2012, by contractual maturity.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
3.0

 
$
3.0

Due after one year through five years
413.8

 
413.1

Due after five years through ten years
410.9

 
413.3

Total
$
827.7

 
$
829.4



During the first nine months of 2012, we recognized net realized investment losses on the VIE investments of $.1 million, which were comprised of $.3 million of net gains from the sales of fixed maturities, and $.4 million of writedowns of investments for other than temporary declines in fair value recognized through net income.  During the first nine months of 2011, we recognized net realized investment losses on the VIE investments of $.2 million, which were comprised of $3.3 million of net gains from the sales of fixed maturities, and $3.5 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

At September 30, 2012, there were no investments held by the VIEs that were in default.

During the first nine months of 2012, $28.0 million of investments held by the VIEs were sold which resulted in gross investment losses (before income taxes) of $.2 million.

At September 30, 2012, the VIEs held:  (i) investments with a fair value of $228.8 million and gross unrealized losses of $1.7 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $74.7 million and gross unrealized losses of $1.6 million that had been in an unrealized loss position for greater than twelve months.

The investments held by the VIEs are evaluated for other-than-temporary declines in fair value in a manner that is consistent with the Company’s fixed maturities, available for sale.

In addition, the Company, in the normal course of business, makes passive investments in structured securities issued by VIEs for which the Company is not the investment manager.  These structured securities include asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, residential mortgage-backed securities and collateralized mortgage obligations.  Our maximum exposure to loss on these securities is limited to our cost basis in the investment.  We have determined that we are not the primary beneficiary of these structured securities due to the relative size of our investment in comparison to the total principal amount of the individual structured securities and the level of credit subordination which reduces our obligation to absorb gains or losses.

At September 30, 2012, we hold investments in various limited partnerships, in which we are not the primary beneficiary, totaling $28.3 million (classified as other invested assets).  At September 30, 2012, we had unfunded commitments to these partnerships of $20.0 million.  Our maximum exposure to loss on these investments is limited to the amount of our investment.
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS

Fair value is 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 and, therefore, represents an exit price, not an entry price.  We carry certain assets and liabilities at fair value on a recurring basis, including fixed maturities, equity securities, trading securities, investments held by VIEs, derivatives, cash and cash equivalents, separate account assets and embedded derivatives.  We carry our company-owned life insurance policy, which is backed by a series of mutual funds, at its cash surrender value and our hedge fund investments at their net asset values; in both cases, we believe these values approximate their fair values. In addition, we disclose fair value for certain financial instruments, including mortgage loans and policy loans, insurance liabilities for interest-sensitive products, investment borrowings, notes payable and borrowings related to VIEs.

The degree of judgment utilized in measuring the fair value of financial instruments is largely dependent on the level to which pricing is based on observable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information.  Financial instruments with readily available active quoted prices would be considered to have fair values based on the highest level of observable inputs, and little judgment would be utilized in measuring fair value.  Financial instruments that rarely trade would often have fair value based on a lower level of observable inputs, and more judgment would be utilized in measuring fair value.

Valuation Hierarchy

There is a three-level hierarchy for valuing assets or liabilities at fair value based on whether inputs are observable or unobservable.

Level 1 – includes assets and liabilities valued using inputs that are unadjusted quoted prices in active markets for identical assets or liabilities.  Our Level 1 assets primarily include cash and exchange traded securities.

Level 2 – includes assets and liabilities valued using inputs that are quoted prices for similar assets in an active market, quoted prices for identical or similar assets in a market that is not active, observable inputs, or observable inputs that can be corroborated by market data.  Level 2 assets and liabilities include those financial instruments that are valued by independent pricing services using models or other valuation methodologies.  These models are primarily industry-standard models that consider various inputs such as interest rate, credit spread, reported trades, broker/dealer quotes, issuer spreads and other inputs that are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace.  Financial assets in this category primarily include:  certain public and privately placed corporate fixed maturity securities; certain government or agency securities; certain mortgage and asset-backed securities; certain equity securities; most investments held by our consolidated VIEs; certain mutual fund and hedge fund investments; and most short-term investments; and non-exchange-traded derivatives such as call options to hedge liabilities related to our fixed index annuity products. Financial liabilities in this category include investment borrowings, notes payable and borrowings related to VIEs.

Level 3 – includes assets and liabilities valued using unobservable inputs that are used in model-based valuations that contain management assumptions.  Level 3 assets and liabilities include those financial instruments whose fair value is estimated based on non-binding broker prices or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information.  Financial assets in this category include certain corporate securities (primarily certain below-investment grade privately placed securities), certain structured securities, mortgage loans, and other less liquid securities.  Financial liabilities in this category include our insurance liabilities for interest-sensitive products, which includes embedded derivatives (including embedded derivatives related to our fixed index annuity products and to a modified coinsurance arrangement) since their values include significant unobservable inputs including actuarial assumptions.

At each reporting date, we classify assets and liabilities into the three input levels based on the lowest level of input that is significant to the measurement of fair value for each asset and liability reported at fair value.  This classification is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions.  Our assessment of the significance of a particular input to the fair value measurement and the ultimate classification of each asset and liability requires judgment and is subject to change from period to period based on the observability of the valuation inputs. Any transfers between levels are reported as having occurred at the beginning of the period. There were no significant transfers between Level 1 and Level 2 in the first nine months of 2012.

The vast majority of our fixed maturity and equity securities, including those held in trading portfolios and those held by consolidated VIEs, short-term and separate account assets use Level 2 inputs for the determination of fair value.  These fair values are obtained primarily from independent pricing services, which use Level 2 inputs for the determination of fair value.  Substantially all of our Level 2 fixed maturity securities and separate account assets were valued from independent pricing services.  Third party pricing services normally derive the security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information.  If there are no recently reported trades, the third party pricing services may use matrix or model processes to develop a security price where future cash flow expectations are developed and discounted at an estimated risk-adjusted market rate.  The number of prices obtained for a given security is dependent on the Company’s analysis of such prices as further described below.

For securities that are not priced by pricing services and may not be reliably priced using pricing models, we obtain broker quotes.  These broker quotes are non-binding and represent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs.  Approximately 22 percent of our Level 3 fixed maturity securities were valued using unadjusted broker quotes or broker-provided valuation inputs.  The remaining Level 3 fixed maturity investments do not have readily determinable market prices and/or observable inputs.  For these securities, we use internally developed valuations.  Key assumptions used to determine fair value for these securities may include risk-free rates, risk premiums, performance of underlying collateral and other factors involving significant assumptions which may not be reflective of an active market.  For certain investments, we use a matrix or model process to develop a security price where future cash flow expectations are developed and discounted at an estimated market rate.  The pricing matrix utilizes a spread level to determine the market price for a security.  The credit spread generally incorporates the issuer’s credit rating and other factors relating to the issuer’s industry and the security’s maturity.  In some instances issuer-specific spread adjustments, which can be positive or negative, are made based upon internal analysis of security specifics such as liquidity, deal size, and time to maturity.

As the Company is responsible for the determination of fair value, we have control processes designed to ensure that the fair values received from third-party pricing sources are reasonable and the valuation techniques and assumptions used appear reasonable and consistent with prevailing market conditions. Additionally, when inputs are provided by third-party pricing sources, we have controls in place to review those inputs for reasonableness. As part of these controls, we perform monthly quantitative and qualitative analysis on the prices received from third parties to determine whether the prices are reasonable estimates of fair value.  The Company’s analysis includes:  (i) a review of the methodology used by third party pricing services; (ii) where available, a comparison of multiple pricing services’ valuations for the same security; (iii) a review of month to month price fluctuations; (iv) a review to ensure valuations are not unreasonably stale; and (v) back testing to compare actual purchase and sale transactions with valuations received from third parties.  As a result of such procedures, the Company may conclude the prices received from third parties are not reflective of current market conditions.  In those instances, we may request additional pricing quotes or apply internally developed valuations.  However, the number of instances is insignificant and the aggregate change in value of such investments is not materially different from the original prices received.

The categorization of the fair value measurements of our investments priced by independent pricing services was based upon the Company’s judgment of the inputs or methodologies used by the independent pricing services to value different asset classes.  Such inputs include:  benchmark yields, reported trades, broker dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data.  The Company categorizes such fair value measurements based upon asset classes and the underlying observable or unobservable inputs used to value such investments.

Except for exchange traded derivatives which are classified as Level 1, the fair value measurements for derivative instruments, including embedded derivatives requiring bifurcation, are determined based on the consideration of several inputs including closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options; market interest rates; and non-performance risk.  For certain embedded derivatives, we may use actuarial assumptions in the determination of fair value.

The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at September 30, 2012 is as follows (dollars in millions):

 
Quoted prices in active markets
 for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
Corporate securities
$

 
$
16,506.2

 
$
317.3

 
$
16,823.5

United States Treasury securities and obligations of United States government corporations and agencies

 
171.1

 

 
171.1

States and political subdivisions

 
2,048.1

 

 
2,048.1

Debt securities issued by foreign governments

 
.8

 

 
.8

Asset-backed securities

 
1,433.9

 
42.8

 
1,476.7

Collateralized debt obligations

 

 
332.0

 
332.0

Commercial mortgage-backed securities

 
1,540.3

 
2.3

 
1,542.6

Mortgage pass-through securities

 
18.2

 
2.0

 
20.2

Collateralized mortgage obligations

 
2,284.2

 
43.1

 
2,327.3

Total fixed maturities, available for sale

 
24,002.8

 
739.5

 
24,742.3

Equity securities:
 
 
 
 
 
 
 
Corporate securities
20.5

 
119.2

 
2.2

 
141.9

Venture capital investments

 

 
38.1

 
38.1

Total equity securities
20.5

 
119.2

 
40.3

 
180.0

Trading securities:
 

 
 

 
 

 
 

Corporate securities

 
49.3

 
.6

 
49.9

United States Treasury securities and obligations of United States government corporations and agencies

 
4.9

 

 
4.9

States and political subdivisions

 
17.1

 

 
17.1

Asset-backed securities

 
50.3

 

 
50.3

Collateralized debt obligations

 

 
7.0

 
7.0

Commercial mortgage-backed securities

 
43.6

 

 
43.6

Mortgage pass-through securities

 
.2

 

 
.2

Collateralized mortgage obligations

 
24.1

 

 
24.1

Equity securities
.9

 
1.4

 

 
2.3

Total trading securities
.9

 
190.9

 
7.6

 
199.4

Investments held by variable interest entities - corporate securities

 
829.4

 

 
829.4

Other invested assets:
 
 
 
 
 
 
 
Company-owned life insurance

 
112.3

 

 
112.3

Hedge funds

 
16.3

 

 
16.3

Derivatives

 
81.8

 

 
81.8

Total other invested assets

 
210.4

 

 
210.4

Cash and cash equivalents - unrestricted:
 
 
 
 
 
 
 
Cash
202.0

 

 

 
202.0

Cash equivalents and short-term investments

 
213.3

 

 
213.3

Total cash and cash equivalents - unrestricted
202.0

 
213.3

 

 
415.3

Cash and cash equivalents held by variable interest entities
48.2

 

 

 
48.2

Assets held in separate accounts

 
15.7

 

 
15.7

Total assets carried at fair value by category
$
271.6

 
$
25,581.7

 
$
787.4

 
$
26,640.7

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
$

 
$

 
$
737.9

 
$
737.9

Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement

 

 
6.0

 
6.0

Total liabilities for insurance products

 

 
743.9

 
743.9

Total liabilities carried at fair value by category
$

 
$

 
$
743.9

 
$
743.9



For those financial instruments disclosed at fair value, we use the following methods and assumptions to determine the estimated fair values:

Mortgage loans and policy loans.  We discount future expected cash flows for loans included in our investment portfolio based on interest rates currently being offered for similar loans to borrowers with similar credit ratings.  We aggregate loans with similar characteristics in our calculations.  The fair value of policy loans approximates their carrying value.

Insurance liabilities for interest-sensitive products.  We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities.

Investment borrowings, notes payable and borrowings related to variable interest entities.  For publicly traded debt, we use current fair values.  For other notes, we use discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements.

The fair value measurements for our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):

 
September 30, 2012
 
December 31, 2011
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loans
$

 
$

 
$
1,718.3

 
$
1,718.3

 
$
1,597.2

 
$
1,735.4

 
$
1,602.8

Policy loans

 
274.1

 

 
274.1

 
274.1

 
279.7

 
279.7

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives (a)

 

 
12,186.4

 
12,186.4

 
12,186.4

 
13,165.5

 
13,165.5

Investment borrowings

 
1,702.5

 

 
1,702.5

 
1,650.9

 
1,735.7

 
1,676.5

Borrowings related to variable interest entities

 
748.3

 

 
748.3

 
766.9

 
485.1

 
519.9

Notes payable – direct corporate obligations

 
1,114.4

 

 
1,114.4

 
1,035.1

 
978.3

 
857.9


____________________
(a)
The estimated fair value of insurance liabilities for interest-sensitive products was approximately equal to its carrying value at September 30, 2012.  This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.


The categorization of fair value measurements, by input level, for our fixed maturity securities, equity securities, trading securities, certain other invested assets, assets held in separate accounts and embedded derivative instruments included in liabilities for insurance products at December 31, 2011 is as follows (dollars in millions):

 
Quoted prices in active markets
 for identical assets or liabilities
 (Level 1)
 
Significant other observable
inputs
(Level 2) (a)
 
 
 
Significant unobservable inputs
 (Level 3) (a)
 
 
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$

 
$
15,594.4

 
 
 
$
278.1

 
 
 
$
15,872.5

United States Treasury securities and obligations of United States government corporations and agencies

 
303.8

 
 
 
1.6

 
 
 
305.4

States and political subdivisions

 
1,952.3

 
 
 
2.1

 
 
 
1,954.4

Debt securities issued by foreign governments

 
1.4

 
 
 

 
 
 
1.4

Asset-backed securities

 
1,334.3

 
 
 
79.7

 
 
 
1,414.0

Collateralized debt obligations

 

 
 
 
327.3

 
 
 
327.3

Commercial mortgage-backed securities

 
1,415.7

 
 
 
17.3

 
 
 
1,433.0

Mortgage pass-through securities

 
29.8

 
 
 
2.2

 
 
 
32.0

Collateralized mortgage obligations

 
2,051.2

 
 
 
124.8

 
 
 
2,176.0

Total fixed maturities, available for sale

 
22,682.9

 
 
 
833.1

 
 
 
23,516.0

Equity securities
17.9

 
87.3

 
 
 
69.9

 
 
 
175.1

Trading securities:
 

 
 

 
 
 
 

 
 
 
 

Corporate securities

 
67.6

 
 
 

 
 
 
67.6

United States Treasury securities and obligations of United States government corporations and agencies

 
4.9

 
 
 

 
 
 
4.9

States and political subdivisions

 
15.6

 
 
 

 
 
 
15.6

Asset-backed securities

 
.1

 
 
 

 
 
 
.1

Commercial mortgage-backed securities

 

 
 
 
.4

 
 
 
.4

Mortgage pass-through securities

 
.2

 
 
 

 
 
 
.2

Collateralized mortgage obligations

 
.7

 
 
 

 
 
 
.7

Equity securities
.7

 
1.4

 
 
 

 
 
 
2.1

Total trading securities
.7

 
90.5

 
 
 
.4

 
 
 
91.6

Investments held by variable interest entities

 
496.3

 
 
 

 
 
 
496.3

Other invested assets

 
159.9

 
(b)
 

 
 
 
159.9

Assets held in separate accounts

 
15.0

 
 
 

 
 
 
15.0

Liabilities:
 

 
 

 
 
 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 
 
 

 
 
 
 

Interest-sensitive products

 

 
 
 
669.8

 
(c)
 
669.8

_____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
Includes company-owned life insurance and derivatives.
(c)
Includes $666.3 million of embedded derivatives associated with our fixed index annuity products and $3.5 million of embedded derivatives associated with a modified coinsurance agreement.

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2012 (dollars in millions):


 
September 30, 2012
 
 
 
Beginning balance as of June 30, 2012 (a)
 
Purchases, sales, issuances and settlements, net (c)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3 (b)
 
Ending balance as of September 30, 2012
 
Amount of total gains (losses) for the three months ended September 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
321.0

 
$
14.0

 
$

 
$
7.3

 
$
12.5

 
$
(37.5
)
 
$
317.3

 
$

United States Treasury securities and obligations of United States government corporations and agencies
1.5

 
(1.5
)
 

 

 

 

 

 

States and political subdivisions
16.0

 

 

 

 

 
(16.0
)
 

 

Asset-backed securities
23.0

 
15.0

 

 
5.5

 

 
(.7
)
 
42.8

 

Collateralized debt obligations
330.1

 
(6.3
)
 

 
8.2

 

 

 
332.0

 

Commercial mortgage-backed securities

 

 

 

 
2.3

 

 
2.3

 

Mortgage pass-through securities
2.1

 
(.1
)
 

 

 

 

 
2.0

 

Collateralized mortgage obligations
4.5

 
(2.8
)
 
.1

 
1.0

 
44.6

 
(4.3
)
 
43.1

 

Total fixed maturities, available for sale
698.2

 
18.3

 
.1

 
22.0

 
59.4

 
(58.5
)
 
739.5

 

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
3.2

 
(1.0
)
 

 

 

 

 
2.2

 

Venture capital investments
58.0

 

 
(23.1
)
 
3.2

 

 

 
38.1

 
(23.1
)
Total equity securities
61.2

 
(1.0
)
 
(23.1
)
 
3.2

 

 

 
40.3

 
(23.1
)
Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Corporate securities

 

 

 

 
.6

 

 
.6

 

States and political subdivisions
.5

 

 

 

 

 
(.5
)
 

 

Collateralized debt obligations
3.4

 
2.8

 

 
.8

 

 

 
7.0

 
.8

Total trading securities
3.9

 
2.8

 

 
.8

 
.6

 
(.5
)
 
7.6

 
.8

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Interest-sensitive products
(705.9
)
 
(22.7
)
 
(15.3
)
 

 

 

 
(743.9
)
 
(15.3
)

____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service at the end of the period, whereas a broker quote was used as of the beginning of the period.
(c)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2012 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
27.0

 
$
(13.0
)
 
$

 
$

 
$
14.0

United States Treasury securities and obligations of United States government corporations and agencies

 
(1.5
)
 

 

 
(1.5
)
Asset-backed securities
15.0

 

 

 

 
15.0

Collateralized debt obligations

 
(6.3
)
 

 

 
(6.3
)
Mortgage pass-through securities

 
(.1
)
 

 

 
(.1
)
Collateralized mortgage obligations
11.0

 
(13.8
)
 

 

 
(2.8
)
Total fixed maturities, available for sale
53.0

 
(34.7
)
 

 

 
18.3

Equity securities - corporate securities

 
(1.0
)
 

 

 
(1.0
)
Trading securities - collateralized debt obligations
2.8

 

 

 

 
2.8

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(23.5
)
 
.2

 
(10.2
)
 
10.8

 
(22.7
)

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2012 (dollars in millions):


 
September 30, 2012
 
 
 
Beginning balance as of December 31, 2011 (a)
 
Purchases, sales, issuances and settlements, net (c)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3 (b)
 
Ending balance as of September 30, 2012
 
Amount of total gains (losses) for the nine months ended September 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
278.1

 
$
54.9

 
$

 
$
9.4

 
$
67.5

 
$
(92.6
)
 
$
317.3

 
$

United States Treasury securities and obligations of United States government corporations and agencies
1.6

 
(1.6
)
 

 

 

 

 

 

States and political subdivisions
2.1

 

 

 

 

 
(2.1
)
 

 

Asset-backed securities
79.7

 
11.4

 
(.2
)
 
5.8

 
.5

 
(54.4
)
 
42.8

 

Collateralized debt obligations
327.3

 
(11.6
)
 

 
16.3

 

 

 
332.0

 

Commercial mortgage-backed securities
17.3

 

 

 
.1

 

 
(15.1
)
 
2.3

 

Mortgage pass-through securities
2.2

 
(.2
)
 

 

 

 

 
2.0

 

Collateralized mortgage obligations
124.8

 
30.0

 
(.1
)
 
1.4

 

 
(113.0
)
 
43.1

 

Total fixed maturities, available for sale
833.1

 
82.9

 
(.3
)
 
33.0

 
68.0

 
(277.2
)
 
739.5

 

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
6.4

 
(1.0
)
 
(3.8
)
 
.6

 

 

 
2.2

 
(3.8
)
Venture capital investments
63.5

 

 
(26.0
)
 
.6

 

 

 
38.1

 
(26.0
)
Total equity securities
69.9

 
(1.0
)
 
(29.8
)
 
1.2

 

 

 
40.3

 
(29.8
)
Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Corporate securities

 

 

 
.1

 
.5

 

 
.6

 
.1

States and political subdivisions

 

 

 

 

 

 

 

Collateralized debt obligations

 
7.0

 

 

 

 

 
7.0

 

Commercial mortgage-backed securities
.4

 

 

 

 

 
(.4
)
 

 

Total trading securities
.4

 
7.0

 

 
.1

 
.5

 
(.4
)
 
7.6

 
.1

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Interest-sensitive products
(669.8
)
 
(52.1
)
 
(22.0
)
 

 

 

 
(743.9
)
 
(22.0
)

____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service at the end of the period, whereas a broker quote was used as of the beginning of the period.
(c)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2012 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
70.3

 
$
(15.4
)
 
$

 
$

 
$
54.9

United States Treasury securities and obligations of United States government corporations and agencies

 
(1.6
)
 

 

 
(1.6
)
Asset-backed securities
15.0

 
(3.6
)
 

 

 
11.4

Collateralized debt obligations
30.1

 
(41.7
)
 

 

 
(11.6
)
Mortgage pass-through securities

 
(.2
)
 

 

 
(.2
)
Collateralized mortgage obligations
45.3

 
(15.3
)
 

 

 
30.0

Total fixed maturities, available for sale
160.7

 
(77.8
)
 

 

 
82.9

Equity securities - corporate securities

 
(1.0
)
 

 

 
(1.0
)
Trading securities - collateralized debt obligations
7.0

 

 

 

 
7.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(75.3
)
 
41.9

 
(50.6
)
 
31.9

 
(52.1
)





The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2011 (dollars in millions):

 
 
September 30, 2011
 
 
 
 
Beginning balance as of June 30, 2011
 
Purchases, sales, issuances and settlements, net (a)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3
 
Ending balance as of September 30, 2011
 
Amount of total gains (losses) for the three months ended September 30, 2011 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
361.8

 
$
(111.2
)
 
$
4.9

 
$
5.4

 
$
.5

 
$
(17.6
)
 
$
243.8

 
$

United States Treasury securities and obligations of United States government corporations and agencies
 
1.7

 

 

 

 

 

 
1.7

 

States and political subdivisions
 

 

 

 
.1

 
2.0

 

 
2.1

 

Asset-backed securities
 
170.7

 
1.2

 

 

 
4.1

 
(113.4
)
 
62.6

 

Collateralized debt obligations
 
193.5

 
72.7

 

 
(6.1
)
 

 

 
260.1

 

Mortgage pass-through securities
 
3.2

 
(.2
)
 

 

 

 

 
3.0

 

Collateralized mortgage obligations
 
204.1

 
3.6

 

 
.7

 

 
(30.2
)
 
178.2

 

Total fixed maturities, available for sale
 
935.0

 
(33.9
)
 
4.9

 
0.1

 
6.6

 
(161.2
)
 
751.5

 

Equity securities
 
44.6

 
27.3

 

 
(.3
)
 

 

 
71.6

 

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Collateralized mortgage obligations
 

 

 

 

 

 

 

 

Total trading securities
 

 

 

 

 

 

 

 

Investments held by variable interest entities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 

 

 

 

 

 

 

 

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products
 
(613.4
)
 
16.3

 
(44.8
)
 

 

 

 
(641.9
)
 
(44.8
)

____________
(a)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2011 (dollars in millions):


 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
1.8

 
$
(113.0
)
 
$

 
$

 
$
(111.2
)
Asset-backed securities
4.2

 
(3.0
)
 

 

 
1.2

Collateralized debt obligations
84.2

 
(11.5
)
 

 

 
72.7

Mortgage pass-through securities

 
(.2
)
 

 

 
(.2
)
Collateralized mortgage obligations
20.5

 
(16.9
)
 

 

 
3.6

Total fixed maturities, available for sale
110.7

 
(144.6
)
 

 

 
(33.9
)
Equity securities
27.3

 

 

 

 
27.3

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(33.1
)
 
41.7

 
(2.6
)
 
10.3

 
16.3



The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2011 (dollars in millions):

 
 
September 30, 2011
 
 
 
 
Beginning balance as of December 31, 2010
 
Purchases, sales, issuances and settlements, net (a)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3
 
Ending balance as of September 30, 2011
 
Amount of total gains (losses) for the nine months ended September 30, 2011 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
1,907.8

 
$
(289.0
)
 
$
(16.1
)
 
$
12.7

 
$
39.0

 
$
(1,410.6
)
 
$
243.8

 
$
(11.5
)
United States Treasury securities and obligations of United States government corporations and agencies
 
2.0

 

 

 
(.3
)
 

 

 
1.7

 

States and political subdivisions
 
2.5

 
(2.8
)
 
(.1
)
 
.5

 
2.0

 

 
2.1

 

Asset-backed securities
 
182.3

 
(.6
)
 

 
2.5

 
15.1

 
(136.7
)
 
62.6

 

Collateralized debt obligations
 
256.5

 
3.5

 
1.8

 
(1.7
)
 

 

 
260.1

 

Mortgage pass-through securities
 
3.5

 
(.5
)
 

 

 

 

 
3.0

 

Collateralized mortgage obligations
 
197.1

 
48.5

 
(2.1
)
 
3.2

 
5.9

 
(74.4
)
 
178.2

 

Total fixed maturities, available for sale
 
2,551.7

 
(240.9
)
 
(16.5
)
 
16.9

 
62.0

 
(1,621.7
)
 
751.5

 
(11.5
)
Equity securities
 
6.9

 
64.0

 

 
.7

 

 

 
71.6

 

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Collateralized mortgage obligations
 
.4

 
(.4
)
 

 

 

 

 

 

Total trading securities
 
.4

 
(.4
)
 

 

 

 

 

 

Investments held by variable interest entities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 
6.7

 
(7.9
)
 
1.5

 
(.3
)
 

 

 

 

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products
 
(553.2
)
 
(35.0
)
 
(53.7
)
 

 

 

 
(641.9
)
 
(53.7
)

____________
(a)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2011 (dollars in millions):


 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
1.8

 
$
(290.8
)
 
$

 
$

 
$
(289.0
)
States and political subdivisions

 
(2.8
)
 

 

 
(2.8
)
Asset-backed securities
4.1

 
(4.7
)
 

 

 
(.6
)
Collateralized debt obligations
106.6

 
(103.1
)
 

 

 
3.5

Mortgage pass-through securities

 
(.5
)
 

 

 
(.5
)
Collateralized mortgage obligations
94.5

 
(46.0
)
 

 

 
48.5

Total fixed maturities, available for sale
207.0

 
(447.9
)
 

 

 
(240.9
)
Equity securities
64.0

 

 

 

 
64.0

Trading securities:
 
 
 
 
 
 
 
 
 
Collateralized mortgage obligations

 
(.4
)
 

 

 
(.4
)
Investments held by variable interest entities:
 
 
 
 
 
 
 
 
 
Corporate securities

 
(7.9
)
 

 

 
(7.9
)
Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(85.5
)
 
51.8

 
(28.4
)
 
27.1

 
(35.0
)



At September 30, 2012, 89 percent of our Level 3 fixed maturities, available for sale, were investment grade and 45 percent and 43 percent of our Level 3 fixed maturities, available for sale, consisted of collateralized debt obligations and corporate securities, respectively.

Realized and unrealized investment gains and losses presented in the preceding tables represent gains and losses during the time the applicable financial instruments were classified as Level 3.

Realized and unrealized gains (losses) on Level 3 assets are primarily reported in either net investment income for policyholder and reinsurer accounts and other special-purpose portfolios, net realized investment gains (losses) or insurance policy benefits within the consolidated statement of operations or accumulated other comprehensive income within shareholders’ equity based on the appropriate accounting treatment for the instrument.

The amount presented for gains (losses) included in our net loss for assets and liabilities still held as of the reporting date primarily represents impairments for fixed maturities, available for sale, changes in fair value of trading securities and certain derivatives and changes in fair value of embedded derivative instruments included in liabilities for insurance products that exist as of the reporting date.

The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at September 30, 2012 (dollars in millions):

 
Fair value at September 30, 2012
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
212.4

 
Discounted cash flow analysis
 
Discount margins
 
1.95% - 3.27% (2.78%)
Asset-backed securities (b)
33.0

 
Discounted cash flow analysis
 
Discount margins
 
2.96% - 3.28% (3.15%)
Collateralized debt obligations (c)
339.0

 
Discounted cash flow analysis
 
Recoveries
 
61% - 66% (ramp over 24 months)
 
 
 
 
 
Constant prepayment rate
 
20%
 
 
 
 
 
Discount margins
 
1.30% - 10.00% (2.39%)
 
 
 
 
 
Annual default rate
 
1.32% - 5.81% (3.27%)
 
 
 
 
 
Portfolio CCC %
 
1.90% - 22.17% (12.78%)
Equity securities (d)
2.2

 
Discounted cash flow analysis
 
Recoveries
 
21%
Venture capital investments (e)
38.1

 
Market multiples
 
EBITDA multiple
 
4.8 - 29.0 (11.46)
 
 
 
 
 
Revenue multiple
 
0.9 - 7.0 (4.2)
 
 
 
 
 
Book equity multiple
 
0.8 - 3.8 (2.3)
Other assets categorized as Level 3 (f)
162.7

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
787.4

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest sensitive products (g)
743.9

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 5.61% (5.55%)
 
 
 
 
 
Discount rates
 
0.0 - 3.5% (1.3%)
 
 
 
 
 
Surrender rates
 
4% - 43% (19%)
________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
(d)
Equity securities - The significant unobservable input used in the fair value measurement of our equity securities is the anticipated cash recovery. Significant increases (decreases) in the anticipated recovery would result in a significantly higher (lower) fair value measurement.
(e)
Venture capital investments - The significant unobservable inputs used in the fair value measurement of our venture capital investments are the EBITDA multiple and revenue multiple. Generally, a significant increase (decrease) in the EBITDA or revenue multiples in isolation would result in a significantly higher (lower) fair value measurement.
(f)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(g)
Interest sensitive products - The significant unobservable inputs used in the fair value measurement of our interest sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS (TABLES)
Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]
The following summarizes the increase (decrease) to the principal items impacted by the corrections (dollars in millions):

 
As reported in Form 10-Q
 
Corrections to shadow adjustments
 
As reported in Form 10-Q/A
Deferred acquisition costs
$
580.7

 
$
42.7

 
$
623.4

Income tax assets
594.5

 
105.0

 
699.5

  Change in total assets
 
 
$
147.7

 
 
 
 
 
 
 
 
Liabilities for insurance products
$
24,593.5

 
$
334.4

 
$
24,927.9

Accumulated other comprehensive income
1,421.1

 
(186.7
)
 
1,234.4

  Change to total liabilities and shareholders' equity
 
 
$
147.7

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
For the three months ended September 30, 2012
$
425.3

 
$
(186.7
)
 
$
238.6

For the nine months ended September 30, 2012
$
759.3

 
$
(186.7
)
 
$
572.6

INVESTMENTS (TABLES)
Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments.  These amounts, included in shareholders’ equity as of September 30, 2012 and December 31, 2011, were as follows (dollars in millions):

 
September 30,
2012
 
December 31,
2011
 
(Restated)
 
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
$
9.6

 
$
(4.4
)
Net unrealized gains on all other investments
2,914.8

 
1,733.2

Adjustment to present value of future profits (a)
(200.7
)
 
(214.8
)
Adjustment to deferred acquisition costs
(458.0
)
 
(289.3
)
Adjustment to insurance liabilities
(334.4
)
 

Unrecognized net loss related to deferred compensation plan
(8.8
)
 
(8.3
)
Deferred income tax liabilities
(688.1
)
 
(434.8
)
Accumulated other comprehensive income
$
1,234.4

 
$
781.6

_________
(a)
The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003 (the date our Predecessor emerged from bankruptcy).
At September 30, 2012, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, were as follows (dollars in millions):
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
 
Other-than-
temporary
impairments
included in
accumulated other
comprehensive
income
Corporate securities
$
14,586.6

 
$
2,265.7

 
$
(28.8
)
 
$
16,823.5

 
$

United States Treasury securities and obligations of United States government corporations and agencies
164.2

 
6.9

 

 
171.1

 

States and political subdivisions
1,785.6

 
267.9

 
(5.4
)
 
2,048.1

 

Debt securities issued by foreign governments
.8

 

 

 
.8

 

Asset-backed securities
1,391.3

 
92.0

 
(6.6
)
 
1,476.7

 

Collateralized debt obligations
327.6

 
5.2

 
(.8
)
 
332.0

 

Commercial mortgage-backed securities
1,400.7

 
142.7

 
(.8
)
 
1,542.6

 

Mortgage pass-through securities
18.8

 
1.4

 

 
20.2

 

Collateralized mortgage obligations
2,150.1

 
178.1

 
(.9
)
 
2,327.3

 
(7.3
)
Total fixed maturities, available for sale
$
21,825.7

 
$
2,959.9

 
$
(43.3
)
 
$
24,742.3

 
$
(7.3
)
The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at September 30, 2012, by contractual maturity.  Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.  In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as “structured securities”) frequently include provisions for periodic principal payments and permit periodic unscheduled payments.
 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
178.3

 
$
180.7

Due after one year through five years
1,558.1

 
1,697.5

Due after five years through ten years
4,491.1

 
5,038.7

Due after ten years
10,309.7

 
12,126.6

Subtotal
16,537.2

 
19,043.5

Structured securities
5,288.5

 
5,698.8

Total fixed maturities, available for sale
$
21,825.7

 
$
24,742.3

The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and nine months ended September 30, 2012 and 2011 (dollars in millions):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Credit losses on fixed maturity securities, available for sale, beginning of period
$
(1.7
)
 
$
(1.6
)
 
$
(2.0
)
 
$
(6.1
)
Add:  credit losses on other-than-temporary impairments not previously recognized

 

 

 

Less:  credit losses on securities sold

 
.7

 
.3

 
5.2

Less:  credit losses on securities impaired due to intent to sell (a)

 

 

 

Add:  credit losses on previously impaired securities

 

 

 

Less:  increases in cash flows expected on previously impaired securities

 

 

 

Credit losses on fixed maturity securities, available for sale, end of period
$
(1.7
)
 
$
(.9
)
 
$
(1.7
)
 
$
(.9
)
__________
(a)
Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 2012 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
States and political subdivisions
 
$
40.2

 
$
(2.0
)
 
$
68.7

 
$
(3.4
)
 
$
108.9

 
$
(5.4
)
Corporate securities
 
300.5

 
(9.2
)
 
278.1

 
(19.6
)
 
578.6

 
(28.8
)
Asset-backed securities
 
42.1

 
(.3
)
 
137.8

 
(6.3
)
 
179.9

 
(6.6
)
Collateralized debt obligations
 
12.7

 
(.1
)
 
47.2

 
(.7
)
 
59.9

 
(.8
)
Commercial mortgage-backed securities
 
16.0

 
(.1
)
 
14.3

 
(.7
)
 
30.3

 
(.8
)
Mortgage pass-through securities
 

 

 
2.0

 

 
2.0

 

Collateralized mortgage obligations
 
58.5

 
(.5
)
 
36.0

 
(.4
)
 
94.5

 
(.9
)
Total fixed maturities, available for sale
 
$
470.0

 
$
(12.2
)
 
$
584.1

 
$
(31.1
)
 
$
1,054.1

 
$
(43.3
)
Equity securities
 
$
2.1

 
$
(.1
)
 
$

 
$

 
$
2.1

 
$
(.1
)
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2011 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
9.1

 
$

 
$
.2

 
$

 
$
9.3

 
$

States and political subdivisions
 
6.9

 
(.2
)
 
155.4

 
(13.4
)
 
162.3

 
(13.6
)
Debt securities issued by foreign governments
 
.5

 

 

 

 
.5

 

Corporate securities
 
1,394.7

 
(57.0
)
 
466.2

 
(79.9
)
 
1,860.9

 
(136.9
)
Asset-backed securities
 
437.6

 
(14.5
)
 
147.5

 
(22.2
)
 
585.1

 
(36.7
)
Collateralized debt obligations
 
268.8

 
(6.3
)
 
1.7

 

 
270.5

 
(6.3
)
Commercial mortgage-backed securities
 
168.8

 
(5.2
)
 
33.0

 
(2.7
)
 
201.8

 
(7.9
)
Mortgage pass-through securities
 
1.2

 

 
2.2

 
(.1
)
 
3.4

 
(.1
)
Collateralized mortgage obligations
 
645.0

 
(20.8
)
 
29.7

 
(.6
)
 
674.7

 
(21.4
)
Total fixed maturities, available for sale
 
$
2,932.6

 
$
(104.0
)
 
$
835.9

 
$
(118.9
)
 
$
3,768.5

 
$
(222.9
)
Equity securities
 
$
41.6

 
$
(3.0
)
 
$
.4

 
$

 
$
42.0

 
$
(3.0
)
EARNINGS PER SHARE (TABLES)
Schedule of Earnings Per Share Reconciliation
A reconciliation of net income and shares used to calculate basic and diluted earnings per share is as follows (dollars in millions and shares in thousands):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net income (loss) for basic earnings per share
$
(5.0
)
 
$
179.5

 
$
119.8

 
$
271.3

Add:  interest expense on 7.0% Convertible Senior Debentures due 2016 (the “7.0% Debentures”), net of income taxes

 
3.7

 
11.1

 
11.1

Net income for diluted earnings per share
$
(5.0
)
 
$
183.2

 
$
130.9

 
$
282.4

Shares:
 

 
 

 
 

 
 

Weighted average shares outstanding for basic earnings per share
231,481

 
246,965

 
236,555

 
249,673

Effect of dilutive securities on weighted average shares:
 

 
 

 
 

 
 

7% Debentures

 
53,367

 
53,037

 
53,367

Stock option and restricted stock plans

 
2,353

 
2,639

 
2,712

Warrants

 
23

 
752

 
333

Dilutive potential common shares

 
55,743

 
56,428

 
56,412

Weighted average shares outstanding for diluted earnings per share
231,481

 
302,708

 
292,983

 
306,085

BUSINESS SEGMENTS (TABLES)
Operating information by segment was as follows (dollars in millions):
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Revenues:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy income:
 
 
 
 
 
 
 
Annuities
$
6.8

 
$
9.6

 
$
21.9

 
$
26.7

Health
335.1

 
334.0

 
1,010.6

 
1,017.1

Life
74.2

 
61.0

 
209.1

 
170.4

Net investment income (a)
221.6

 
158.0

 
642.1

 
564.5

Fee revenue and other income (a)
4.0

 
3.6

 
10.2

 
9.2

Total Bankers Life revenues
641.7

 
566.2

 
1,893.9

 
1,787.9

Washington National:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Health
143.4

 
141.2

 
429.0

 
423.1

Life
3.6

 
3.9

 
11.6

 
11.8

Other
.8

 
.8

 
2.2

 
3.0

Net investment income (a)
50.9

 
47.3

 
151.9

 
140.3

Fee revenue and other income (a)
.3

 
.4

 
.8

 
.9

Total Washington National revenues
199.0

 
193.6

 
595.5

 
579.1

Colonial Penn:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Health
1.3

 
1.4

 
4.0

 
4.5

Life
53.2

 
49.4

 
158.5

 
147.5

Net investment income (a)
9.9

 
10.1

 
30.1

 
30.9

Fee revenue and other income (a)
.2

 
.2

 
.6

 
.6

Total Colonial Penn revenues
64.6

 
61.1

 
193.2

 
183.5

Other CNO Business:
 

 
 

 
 

 
 

Insurance policy income:
 

 
 

 
 

 
 

Annuities
2.5

 
3.4

 
8.3

 
8.6

Health
6.2

 
6.9

 
19.3

 
21.3

Life
62.9

 
61.7

 
196.2

 
184.9

Other
.2

 
.2

 
.6

 
1.4

Net investment income (a)
86.7

 
74.6

 
259.2

 
256.0

Total Other CNO Business revenues
158.5

 
146.8

 
483.6

 
472.2

Corporate operations:
 

 
 

 
 

 
 

Net investment income
19.4

 
(6.7
)
 
49.8

 
10.4

Fee and other income
.7

 
.7

 
2.0

 
1.8

Total corporate revenues
20.1

 
(6.0
)
 
51.8

 
12.2

Total revenues
1,083.9

 
961.7

 
3,218.0

 
3,034.9


(continued on next page)
(continued from previous page)
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Expenses:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy benefits
$
434.6

 
$
360.6

 
$
1,252.2

 
$
1,174.3

Amortization
35.6

 
44.1

 
143.0

 
159.5

Interest expense on investment borrowings
1.3

 
1.2

 
4.1

 
3.5

Other operating costs and expenses
89.6

 
80.9

 
267.4

 
236.9

Total Bankers Life expenses
561.1

 
486.8

 
1,666.7

 
1,574.2

Washington National:
 

 
 

 
 

 
 

Insurance policy benefits
111.1

 
119.0

 
340.5

 
349.5

Amortization
11.2

 
10.8

 
34.7

 
35.6

Interest expense on investment borrowings
.7

 
.2

 
2.2

 
.2

Other operating costs and expenses
42.1

 
42.4

 
125.6

 
126.5

Total Washington National expenses
165.1

 
172.4

 
503.0

 
511.8

Colonial Penn:
 

 
 

 
 

 
 

Insurance policy benefits
38.3

 
36.0

 
120.0

 
112.7

Amortization
3.5

 
3.5

 
11.1

 
11.0

Other operating costs and expenses
25.4

 
22.9

 
73.9

 
66.3

Total Colonial Penn expenses
67.2

 
62.4

 
205.0

 
190.0

Other CNO Business:
 

 
 

 
 

 
 

Insurance policy benefits
157.1

 
111.5

 
401.0

 
358.2

Amortization
10.5

 
10.4

 
25.1

 
28.4

Interest expense on investment borrowings
5.0

 
5.3

 
15.1

 
15.2

Other operating costs and expenses
39.5

 
16.8

 
96.4

 
55.1

Total Other CNO Business expenses
212.1

 
144.0

 
537.6

 
456.9

Corporate operations:
 

 
 

 
 

 
 

Interest expense on corporate debt
16.3

 
18.7

 
50.4

 
58.6

Interest expense on borrowings of variable interest entities
5.8

 
2.4

 
14.5

 
8.4

Interest expense on investment borrowings
.1

 
.1

 
.4

 
.1

Loss on extinguishment of debt
198.5

 
1.1

 
199.2

 
3.1

Other operating costs and expenses
20.9

 
19.0

 
54.5

 
43.0

Total corporate expenses
241.6

 
41.3

 
319.0

 
113.2

Total expenses
1,247.1

 
906.9

 
3,231.3

 
2,846.1

Income (loss) before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes:
 

 
 
 
 

 
 

Bankers Life
80.6

 
79.4

 
227.2

 
213.7

Washington National
33.9

 
21.2

 
92.5

 
67.3

Colonial Penn
(2.6
)
 
(1.3
)
 
(11.8
)
 
(6.5
)
Other CNO Business
(53.6
)
 
2.8

 
(54.0
)
 
15.3

Corporate operations
(221.5
)
 
(47.3
)
 
(267.2
)
 
(101.0
)
Income (loss) before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
$
(163.2
)
 
$
54.8

 
$
(13.3
)
 
$
188.8

___________________
(a)
It is not practicable to provide additional components of revenue by product or services.

A reconciliation of segment revenues and expenses to consolidated revenues and expenses is as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Total segment revenues
$
1,083.9

 
$
961.7

 
$
3,218.0

 
$
3,034.9

Net realized investment gains
9.1

 
30.6

 
63.9

 
38.6

Consolidated revenues
$
1,093.0

 
$
992.3

 
$
3,281.9

 
$
3,073.5

 
 
 
 
 
 
 
 
Total segment expenses
$
1,247.1

 
$
906.9

 
$
3,231.3

 
$
2,846.1

Insurance policy benefits - fair value changes in embedded derivative liabilities
4.6

 
33.9

 
10.7

 
33.9

Amortization related to fair value changes in embedded derivative liabilities
(1.6
)
 
(14.1
)
 
(4.0
)
 
(14.1
)
Amortization related to net realized investment gains
1.7

 
3.9

 
5.9

 
3.7

Consolidated expenses
$
1,251.8

 
$
930.6

 
$
3,243.9

 
$
2,869.6

INCOME TAXES (TABLES)
The components of income tax expense were as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Current tax expense
$
2.4

 
$
2.3

 
$
9.1

 
$
7.2

Deferred tax expense (benefit)
11.1

 
22.9

 
76.4

 
68.4

Valuation allowance applicable to current year income
(31.8
)
 

 
(31.8
)
 

Income tax expense (benefit) calculated based on estimated annual effective tax rate
(18.3
)
 
25.2

 
53.7

 
75.6

Income tax expense (benefit) on discrete items:
 
 
 
 
 
 
 
Valuation allowance reduction applicable to income in future years
(111.2
)
 
(143.0
)
 
(111.2
)
 
(143.0
)
Deferred tax benefit related to loss on extinguishment of debt and other items
(24.3
)
 

 
(24.3
)
 

Total income tax benefit
$
(153.8
)
 
$
(117.8
)
 
$
(81.8
)
 
$
(67.4
)
A reconciliation of the U.S. statutory corporate tax rate to the estimated annual tax rate, before discrete items, reflected in the consolidated statement of operations is as follows:
 

Nine months ended
 
September 30,
 
2012
 
2011
U.S. statutory corporate rate
35.0
 %
 
35.0
 %
Valuation allowance reduction applicable to current year income
(13.8
)
 

Nondeductible amounts
.5

 
1.8

State taxes
1.0

 
1.0

Provision for tax issues, tax credits and other

 
(.8
)
Estimated annual effective tax rate
22.7
 %
 
37.0
 %
The components of the Company’s income tax assets and liabilities were as follows (dollars in millions):
 
September 30,
2012
 
December 31,
2011
 
(Restated)
 
 
Deferred tax assets:
 
 
 
Net federal operating loss carryforwards
$
1,366.2

 
$
1,445.2

Net state operating loss carryforwards
16.3

 
16.8

Tax credits
37.7

 
32.6

Capital loss carryforwards
305.4

 
342.3

Deductible temporary differences:


 
 

Insurance liabilities
754.8

 
744.4

Other
81.7

 
64.8

Gross deferred tax assets
2,562.1

 
2,646.1

Deferred tax liabilities:
 

 
 

Investments
(21.9
)
 
(24.2
)
Present value of future profits and deferred acquisition costs
(333.7
)
 
(363.7
)
Accumulated other comprehensive income
(688.1
)
 
(434.8
)
Gross deferred tax liabilities
(1,043.7
)
 
(822.7
)
Net deferred tax assets before valuation allowance
1,518.4

 
1,823.4

Valuation allowance
(795.4
)
 
(938.4
)
Net deferred tax assets
723.0

 
885.0

Current income taxes accrued
(23.5
)
 
(19.6
)
Income tax assets, net
$
699.5

 
$
865.4

.

As of September 30, 2012, we had $3.9 billion of federal NOLs and $.9 billion of capital loss carryforwards. The following table summarizes the expiration dates of our loss carryforwards assuming the IRS does not ultimately agree with the positions we have taken with respect to the allocation of CODI and the loss on our investment in Senior Health, both as further described below (dollars in millions):

Year of expiration
 
Net operating loss carryforwards (a)
 
Capital loss
 
Total loss
 
 
Life
 
Non-life
 
carryforwards
 
carryforwards
2013
 
$

 
 
 
$

 
 
 
$
836.7

 
(b)
 
$
836.7

2014
 

 
 
 

 
 
 
28.6

 
 
 
28.6

2015
 

 
 
 

 
 
 
7.2

 
 
 
7.2

2018
 
550.9

 
(a)
 

 
 
 

 
 
 
550.9

2021
 
29.5

 
 
 

 
 
 

 
 
 
29.5

2022
 
204.1

 
 
 

 
 
 

 
 
 
204.1

2023
 

 
(b)
 
2,602.8

 
(a)
 

 
 
 
2,602.8

2024
 

 
 
 
3.2

 
 
 

 
 
 
3.2

2025
 

 
 
 
118.8

 
 
 

 
 
 
118.8

2027
 

 
 
 
216.8

 
 
 

 
 
 
216.8

2028
 

 
 
 
.5

 
 
 

 
 
 
.5

2029
 

 
 
 
148.9

 
 
 

 
 
 
148.9

2031
 

 
 
 
28.0

 
 
 

 
 
 
28.0

Total
 
$
784.5

 
 
 
$
3,119.0

 
 
 
$
872.5

 
 
 
$
4,776.0

 _________________________
(a)
The life/non-life allocation summarized above assumes the IRS does not ultimately agree with the tax position we have taken in our tax returns with respect to the allocation of CODI.  If the IRS ultimately agrees with our tax position, approximately $631 million of the non-life NOLs expiring in 2023 would be characterized as life NOLs expiring in 2018.
(b)
The allocation of the capital loss carryforwards summarized above assumes the IRS does not ultimately agree with the tax position we have taken with respect to our investment in Senior Health, which was worthless when it was transferred to the Independent Trust in 2008. If the IRS ultimately agrees with our tax position of classifying this loss as ordinary, capital loss carryforwards expiring in 2013 would decrease and life NOLs expiring in 2023 would increase by $742 million.

NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (TABLES)
The following notes payable were direct corporate obligations of the Company as of September 30, 2012 and December 31, 2011 (dollars in millions):

 
September 30,
2012
 
December 31,
2011
New Senior Secured Credit Agreement (as defined below)
$
675.0

 
$

7.0% Debentures
93.0

 
293.0

Previous Senior Secured Credit Agreement (as defined below)

 
255.2

6.375% Senior Secured Notes due October 2020 (the "6.375% Notes")
275.0

 

9.0% Senior Secured Notes due January 2018 (the “9.0% Notes”)
1.2

 
275.0

Senior Health Note due November 12, 2013 (the “Senior Health Note”)

 
50.0

Unamortized discount on New Senior Secured Credit Agreement
(5.5
)
 

Unamortized discount on 7.0% Debentures
(3.6
)
 
(12.9
)
Unamortized discount on Previous Senior Secured Credit Agreement

 
(2.4
)
Direct corporate obligations
$
1,035.1

 
$
857.9

cheduled Repayment of our Direct Corporate Obligations

The scheduled repayment of our direct corporate obligations was as follows at September 30, 2012 (dollars in millions):

Year ending September 30,
 
2013
$
55.4

2014
54.3

2015
79.3

2016
79.3

2017
97.2

Thereafter
678.7

 
$
1,044.2

INVESTMENT BORROWINGS (TABLES)
Schedule of Terms of Federal Home Loan Bank Borrowing [Table Text Block]
The following summarizes the terms of the borrowings (dollars in millions):

Amount
 
Maturity
 
Interest rate at
borrowed
 
date
 
September 30, 2012
$
100.0

 
November 2013
 
Variable rate – 0.515%
67.0

 
February 2014
 
Fixed rate – 1.830%
50.0

 
August 2014
 
Variable rate – 0.565%
100.0

 
August 2014
 
Variable rate – 0.476%
50.0

 
September 2015
 
Variable rate – 0.747%
150.0

 
October 2015
 
Variable rate – 0.571%
146.0

 
November 2015
 
Fixed rate – 5.300%
100.0

 
December 2015
 
Fixed rate – 4.710%
100.0

 
June 2016
 
Variable rate – 0.657%
75.0

 
June 2016
 
Variable rate – 0.621%
100.0

 
October 2016
 
Variable rate – 0.641%
50.0

 
November 2016
 
Variable rate – 0.684%
50.0

 
November 2016
 
Variable rate – 0.687%
100.0

 
June 2017
 
Variable rate – 0.751%
100.0

 
July 2017
 
Fixed rate – 3.900%
50.0

 
August 2017
 
Variable rate – 0.635%
75.0

 
August 2017
 
Variable rate – 0.577%
100.0

 
October 2017
 
Variable rate – 0.885%
37.0

 
November 2017
 
Fixed rate – 3.750%
50.0

 
July 2018
 
Variable rate – 0.917%
$
1,650.0

 
 
 
 
CHANGES IN COMMON STOCK (TABLES)
Schedule of Stock by Class
Changes in the number of shares of common stock outstanding were as follows (shares in thousands):

Balance, December 31, 2011
241,305

 
 
Treasury stock purchased and retired
(12,894
)
 
 
Stock options exercised
692

 
 
Restricted stock vested
404

 
(a)
Balance, September 30, 2012
229,507

 
 
________
(a)
Such amount was reduced by 143 thousand shares which were tendered to the Company for the payment of federal and state taxes owed on the vesting of restricted stock.
RECENTLY ISSUED ACCOUNTING STANDARDS (Tables)
The adoption of ASU 2010-26 affected prior period information as follows (dollars in millions, except per share amounts):

 
Three months ended
 
Nine months ended
 
September 30, 2011
 
September 30, 2011
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
Amortization
$
87.2

 
$
(28.6
)
 
$
58.6

 
$
325.4

 
$
(101.3
)
 
$
224.1

Other operating costs and expenses
127.6

 
54.4

 
182.0

 
367.1

 
160.7

 
527.8

Total benefits and expenses
904.8

 
25.8

 
930.6

 
2,810.2

 
59.4

 
2,869.6

Income before income taxes
87.5

 
(25.8
)
 
61.7

 
263.3

 
(59.4
)
 
203.9

Tax expense on period income
34.5

 
(9.3
)
 
25.2

 
96.9

 
(21.3
)
 
75.6

Net income
196.0

 
(16.5
)
 
179.5

 
309.4

 
(38.1
)
 
271.3

 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
  Basic:
 
 
 
 
 
 
 
 
 
 
 
    Net income
$
.79

 
$
(.06
)
 
$
.73

 
$
1.24

 
$
(.15
)
 
$
1.09

  Diluted:
 
 
 
 
 
 
 
 
 
 
 
    Net income
.66

 
(.05
)
 
.61

 
1.05

 
(.13
)
 
.92



 
Nine months ended
 
September 30, 2011
 
As originally reported
 
Effect of adoption of ASU 2010-26
 
As adjusted
Cash flows from operating activities:
 
 
 
 
 
  Deferrable policy acquisition costs
$
(328.6
)
 
$
163.7

 
$
(164.9
)
  Other operating costs
(349.9
)
 
(163.7
)
 
(513.6
)
Net cash used by operating activities
562.2

 

 
562.2

Changes in deferred acquisition costs were as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(Restated)
 
 
 
(Restated)
 
 
Balance, beginning of period
$
653.5

 
$
975.5

 
$
797.1

 
$
999.6

Additions
46.7

 
58.3

 
141.4

 
164.9

Amortization
(44.5
)
 
(35.5
)
 
(146.4
)
 
(134.7
)
Amounts related to fair value adjustment of fixed maturities, available for sale
(32.3
)
 
(163.8
)
 
(168.7
)
 
(195.3
)
Balance, end of period
$
623.4

 
$
834.5

 
$
623.4

 
$
834.5

CONSOLIDATED STATEMENT CASH FLOWS (TABLES)
The following reconciles net income to net cash provided by operating activities (dollars in millions):

 
Nine months ended
 
September 30,
 
2012
 
2011
Cash flows from operating activities:
 
 
 
Net income
$
119.8

 
$
271.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Amortization and depreciation
235.2

 
243.6

Income taxes
(87.3
)
 
(69.8
)
Insurance liabilities
242.8

 
244.4

Accrual and amortization of investment income
(123.1
)
 
62.9

Deferral of policy acquisition costs
(141.4
)
 
(164.9
)
Net realized investment gains
(63.9
)
 
(38.6
)
Loss on extinguishment of debt
199.2

 
3.1

Other
43.3

 
10.2

Net cash provided by operating activities
$
424.6

 
$
562.2

Non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):

 
Nine months ended
 
September 30,
 
2012
 
2011
Stock option and restricted stock plans
$
10.7

 
$
10.2

INVESTMENTS IN VARIABLE INTEREST ENTITIES (TABLES)
The following table provides supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):

 
September 30, 2012
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
829.4

 
$

 
$
829.4

Notes receivable of VIEs held by insurance subsidiaries

 
(78.5
)
 
(78.5
)
Cash and cash equivalents held by variable interest entities
48.2

 

 
48.2

Accrued investment income
3.9

 

 
3.9

Income tax assets, net
3.2

 
(2.3
)
 
.9

Other assets
10.9

 

 
10.9

Total assets
$
895.6

 
$
(80.8
)
 
$
814.8

Liabilities:
 

 
 

 
 

Other liabilities
$
52.0

 
$
(2.3
)
 
$
49.7

Borrowings related to variable interest entities
766.9

 

 
766.9

Notes payable of VIEs held by insurance subsidiaries
82.5

 
(82.5
)
 

Total liabilities
$
901.4

 
$
(84.8
)
 
$
816.6


 
December 31, 2011
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
496.3

 
$

 
$
496.3

Notes receivable of VIEs held by insurance subsidiaries

 
(45.3
)
 
(45.3
)
Cash and cash equivalents held by variable interest entities
74.4

 

 
74.4

Accrued investment income
1.7

 

 
1.7

Income tax assets, net
6.8

 
(1.4
)
 
5.4

Other assets
7.7

 

 
7.7

Total assets
$
586.9

 
$
(46.7
)
 
$
540.2

Liabilities:
 

 
 

 
 

Other liabilities
$
30.3

 
$
(.1
)
 
$
30.2

Borrowings related to variable interest entities
519.9

 

 
519.9

Notes payable of VIEs held by insurance subsidiaries
49.3

 
(49.3
)
 

Total liabilities
$
599.5

 
$
(49.4
)
 
$
550.1

The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at September 30, 2012, by contractual maturity.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
3.0

 
$
3.0

Due after one year through five years
413.8

 
413.1

Due after five years through ten years
410.9

 
413.3

Total
$
827.7

 
$
829.4

FAIR VALUE MEASUREMENTS (TABLES)
The fair value measurements for our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):

 
September 30, 2012
 
December 31, 2011
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage loans
$

 
$

 
$
1,718.3

 
$
1,718.3

 
$
1,597.2

 
$
1,735.4

 
$
1,602.8

Policy loans

 
274.1

 

 
274.1

 
274.1

 
279.7

 
279.7

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives (a)

 

 
12,186.4

 
12,186.4

 
12,186.4

 
13,165.5

 
13,165.5

Investment borrowings

 
1,702.5

 

 
1,702.5

 
1,650.9

 
1,735.7

 
1,676.5

Borrowings related to variable interest entities

 
748.3

 

 
748.3

 
766.9

 
485.1

 
519.9

Notes payable – direct corporate obligations

 
1,114.4

 

 
1,114.4

 
1,035.1

 
978.3

 
857.9


____________________
(a)
The estimated fair value of insurance liabilities for interest-sensitive products was approximately equal to its carrying value at September 30, 2012.  This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.

The categorization of fair value measurements, by input level, for our fixed maturity securities, equity securities, trading securities, certain other invested assets, assets held in separate accounts and embedded derivative instruments included in liabilities for insurance products at December 31, 2011 is as follows (dollars in millions):

 
Quoted prices in active markets
 for identical assets or liabilities
 (Level 1)
 
Significant other observable
inputs
(Level 2) (a)
 
 
 
Significant unobservable inputs
 (Level 3) (a)
 
 
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$

 
$
15,594.4

 
 
 
$
278.1

 
 
 
$
15,872.5

United States Treasury securities and obligations of United States government corporations and agencies

 
303.8

 
 
 
1.6

 
 
 
305.4

States and political subdivisions

 
1,952.3

 
 
 
2.1

 
 
 
1,954.4

Debt securities issued by foreign governments

 
1.4

 
 
 

 
 
 
1.4

Asset-backed securities

 
1,334.3

 
 
 
79.7

 
 
 
1,414.0

Collateralized debt obligations

 

 
 
 
327.3

 
 
 
327.3

Commercial mortgage-backed securities

 
1,415.7

 
 
 
17.3

 
 
 
1,433.0

Mortgage pass-through securities

 
29.8

 
 
 
2.2

 
 
 
32.0

Collateralized mortgage obligations

 
2,051.2

 
 
 
124.8

 
 
 
2,176.0

Total fixed maturities, available for sale

 
22,682.9

 
 
 
833.1

 
 
 
23,516.0

Equity securities
17.9

 
87.3

 
 
 
69.9

 
 
 
175.1

Trading securities:
 

 
 

 
 
 
 

 
 
 
 

Corporate securities

 
67.6

 
 
 

 
 
 
67.6

United States Treasury securities and obligations of United States government corporations and agencies

 
4.9

 
 
 

 
 
 
4.9

States and political subdivisions

 
15.6

 
 
 

 
 
 
15.6

Asset-backed securities

 
.1

 
 
 

 
 
 
.1

Commercial mortgage-backed securities

 

 
 
 
.4

 
 
 
.4

Mortgage pass-through securities

 
.2

 
 
 

 
 
 
.2

Collateralized mortgage obligations

 
.7

 
 
 

 
 
 
.7

Equity securities
.7

 
1.4

 
 
 

 
 
 
2.1

Total trading securities
.7

 
90.5

 
 
 
.4

 
 
 
91.6

Investments held by variable interest entities

 
496.3

 
 
 

 
 
 
496.3

Other invested assets

 
159.9

 
(b)
 

 
 
 
159.9

Assets held in separate accounts

 
15.0

 
 
 

 
 
 
15.0

Liabilities:
 

 
 

 
 
 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 
 
 

 
 
 
 

Interest-sensitive products

 

 
 
 
669.8

 
(c)
 
669.8

_____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
Includes company-owned life insurance and derivatives.
(c)
Includes $666.3 million of embedded derivatives associated with our fixed index annuity products and $3.5 million of embedded derivatives associated with a modified coinsurance agreement.
The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at September 30, 2012 is as follows (dollars in millions):

 
Quoted prices in active markets
 for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
Corporate securities
$

 
$
16,506.2

 
$
317.3

 
$
16,823.5

United States Treasury securities and obligations of United States government corporations and agencies

 
171.1

 

 
171.1

States and political subdivisions

 
2,048.1

 

 
2,048.1

Debt securities issued by foreign governments

 
.8

 

 
.8

Asset-backed securities

 
1,433.9

 
42.8

 
1,476.7

Collateralized debt obligations

 

 
332.0

 
332.0

Commercial mortgage-backed securities

 
1,540.3

 
2.3

 
1,542.6

Mortgage pass-through securities

 
18.2

 
2.0

 
20.2

Collateralized mortgage obligations

 
2,284.2

 
43.1

 
2,327.3

Total fixed maturities, available for sale

 
24,002.8

 
739.5

 
24,742.3

Equity securities:
 
 
 
 
 
 
 
Corporate securities
20.5

 
119.2

 
2.2

 
141.9

Venture capital investments

 

 
38.1

 
38.1

Total equity securities
20.5

 
119.2

 
40.3

 
180.0

Trading securities:
 

 
 

 
 

 
 

Corporate securities

 
49.3

 
.6

 
49.9

United States Treasury securities and obligations of United States government corporations and agencies

 
4.9

 

 
4.9

States and political subdivisions

 
17.1

 

 
17.1

Asset-backed securities

 
50.3

 

 
50.3

Collateralized debt obligations

 

 
7.0

 
7.0

Commercial mortgage-backed securities

 
43.6

 

 
43.6

Mortgage pass-through securities

 
.2

 

 
.2

Collateralized mortgage obligations

 
24.1

 

 
24.1

Equity securities
.9

 
1.4

 

 
2.3

Total trading securities
.9

 
190.9

 
7.6

 
199.4

Investments held by variable interest entities - corporate securities

 
829.4

 

 
829.4

Other invested assets:
 
 
 
 
 
 
 
Company-owned life insurance

 
112.3

 

 
112.3

Hedge funds

 
16.3

 

 
16.3

Derivatives

 
81.8

 

 
81.8

Total other invested assets

 
210.4

 

 
210.4

Cash and cash equivalents - unrestricted:
 
 
 
 
 
 
 
Cash
202.0

 

 

 
202.0

Cash equivalents and short-term investments

 
213.3

 

 
213.3

Total cash and cash equivalents - unrestricted
202.0

 
213.3

 

 
415.3

Cash and cash equivalents held by variable interest entities
48.2

 

 

 
48.2

Assets held in separate accounts

 
15.7

 

 
15.7

Total assets carried at fair value by category
$
271.6

 
$
25,581.7

 
$
787.4

 
$
26,640.7

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
$

 
$

 
$
737.9

 
$
737.9

Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement

 

 
6.0

 
6.0

Total liabilities for insurance products

 

 
743.9

 
743.9

Total liabilities carried at fair value by category
$

 
$

 
$
743.9

 
$
743.9

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2012 (dollars in millions):


 
September 30, 2012
 
 
 
Beginning balance as of June 30, 2012 (a)
 
Purchases, sales, issuances and settlements, net (c)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3 (b)
 
Ending balance as of September 30, 2012
 
Amount of total gains (losses) for the three months ended September 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
321.0

 
$
14.0

 
$

 
$
7.3

 
$
12.5

 
$
(37.5
)
 
$
317.3

 
$

United States Treasury securities and obligations of United States government corporations and agencies
1.5

 
(1.5
)
 

 

 

 

 

 

States and political subdivisions
16.0

 

 

 

 

 
(16.0
)
 

 

Asset-backed securities
23.0

 
15.0

 

 
5.5

 

 
(.7
)
 
42.8

 

Collateralized debt obligations
330.1

 
(6.3
)
 

 
8.2

 

 

 
332.0

 

Commercial mortgage-backed securities

 

 

 

 
2.3

 

 
2.3

 

Mortgage pass-through securities
2.1

 
(.1
)
 

 

 

 

 
2.0

 

Collateralized mortgage obligations
4.5

 
(2.8
)
 
.1

 
1.0

 
44.6

 
(4.3
)
 
43.1

 

Total fixed maturities, available for sale
698.2

 
18.3

 
.1

 
22.0

 
59.4

 
(58.5
)
 
739.5

 

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
3.2

 
(1.0
)
 

 

 

 

 
2.2

 

Venture capital investments
58.0

 

 
(23.1
)
 
3.2

 

 

 
38.1

 
(23.1
)
Total equity securities
61.2

 
(1.0
)
 
(23.1
)
 
3.2

 

 

 
40.3

 
(23.1
)
Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Corporate securities

 

 

 

 
.6

 

 
.6

 

States and political subdivisions
.5

 

 

 

 

 
(.5
)
 

 

Collateralized debt obligations
3.4

 
2.8

 

 
.8

 

 

 
7.0

 
.8

Total trading securities
3.9

 
2.8

 

 
.8

 
.6

 
(.5
)
 
7.6

 
.8

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Interest-sensitive products
(705.9
)
 
(22.7
)
 
(15.3
)
 

 

 

 
(743.9
)
 
(15.3
)

____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service at the end of the period, whereas a broker quote was used as of the beginning of the period.
(c)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2012 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
27.0

 
$
(13.0
)
 
$

 
$

 
$
14.0

United States Treasury securities and obligations of United States government corporations and agencies

 
(1.5
)
 

 

 
(1.5
)
Asset-backed securities
15.0

 

 

 

 
15.0

Collateralized debt obligations

 
(6.3
)
 

 

 
(6.3
)
Mortgage pass-through securities

 
(.1
)
 

 

 
(.1
)
Collateralized mortgage obligations
11.0

 
(13.8
)
 

 

 
(2.8
)
Total fixed maturities, available for sale
53.0

 
(34.7
)
 

 

 
18.3

Equity securities - corporate securities

 
(1.0
)
 

 

 
(1.0
)
Trading securities - collateralized debt obligations
2.8

 

 

 

 
2.8

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(23.5
)
 
.2

 
(10.2
)
 
10.8

 
(22.7
)

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2012 (dollars in millions):


 
September 30, 2012
 
 
 
Beginning balance as of December 31, 2011 (a)
 
Purchases, sales, issuances and settlements, net (c)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3 (b)
 
Ending balance as of September 30, 2012
 
Amount of total gains (losses) for the nine months ended September 30, 2012 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
278.1

 
$
54.9

 
$

 
$
9.4

 
$
67.5

 
$
(92.6
)
 
$
317.3

 
$

United States Treasury securities and obligations of United States government corporations and agencies
1.6

 
(1.6
)
 

 

 

 

 

 

States and political subdivisions
2.1

 

 

 

 

 
(2.1
)
 

 

Asset-backed securities
79.7

 
11.4

 
(.2
)
 
5.8

 
.5

 
(54.4
)
 
42.8

 

Collateralized debt obligations
327.3

 
(11.6
)
 

 
16.3

 

 

 
332.0

 

Commercial mortgage-backed securities
17.3

 

 

 
.1

 

 
(15.1
)
 
2.3

 

Mortgage pass-through securities
2.2

 
(.2
)
 

 

 

 

 
2.0

 

Collateralized mortgage obligations
124.8

 
30.0

 
(.1
)
 
1.4

 

 
(113.0
)
 
43.1

 

Total fixed maturities, available for sale
833.1

 
82.9

 
(.3
)
 
33.0

 
68.0

 
(277.2
)
 
739.5

 

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
6.4

 
(1.0
)
 
(3.8
)
 
.6

 

 

 
2.2

 
(3.8
)
Venture capital investments
63.5

 

 
(26.0
)
 
.6

 

 

 
38.1

 
(26.0
)
Total equity securities
69.9

 
(1.0
)
 
(29.8
)
 
1.2

 

 

 
40.3

 
(29.8
)
Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Corporate securities

 

 

 
.1

 
.5

 

 
.6

 
.1

States and political subdivisions

 

 

 

 

 

 

 

Collateralized debt obligations

 
7.0

 

 

 

 

 
7.0

 

Commercial mortgage-backed securities
.4

 

 

 

 

 
(.4
)
 

 

Total trading securities
.4

 
7.0

 

 
.1

 
.5

 
(.4
)
 
7.6

 
.1

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

Interest-sensitive products
(669.8
)
 
(52.1
)
 
(22.0
)
 

 

 

 
(743.9
)
 
(22.0
)

____________
(a)
We revised the hierarchy classification of certain fixed maturities, equity securities, trading securities and other invested assets as we believe the observability of the inputs more closely represent Level 2 valuations.
(b)
For our fixed maturity securities, the majority of our transfers out of Level 3 are the result of obtaining a valuation from an independent pricing service at the end of the period, whereas a broker quote was used as of the beginning of the period.
(c)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2012 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
70.3

 
$
(15.4
)
 
$

 
$

 
$
54.9

United States Treasury securities and obligations of United States government corporations and agencies

 
(1.6
)
 

 

 
(1.6
)
Asset-backed securities
15.0

 
(3.6
)
 

 

 
11.4

Collateralized debt obligations
30.1

 
(41.7
)
 

 

 
(11.6
)
Mortgage pass-through securities

 
(.2
)
 

 

 
(.2
)
Collateralized mortgage obligations
45.3

 
(15.3
)
 

 

 
30.0

Total fixed maturities, available for sale
160.7

 
(77.8
)
 

 

 
82.9

Equity securities - corporate securities

 
(1.0
)
 

 

 
(1.0
)
Trading securities - collateralized debt obligations
7.0

 

 

 

 
7.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(75.3
)
 
41.9

 
(50.6
)
 
31.9

 
(52.1
)





The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2011 (dollars in millions):

 
 
September 30, 2011
 
 
 
 
Beginning balance as of June 30, 2011
 
Purchases, sales, issuances and settlements, net (a)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3
 
Ending balance as of September 30, 2011
 
Amount of total gains (losses) for the three months ended September 30, 2011 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
361.8

 
$
(111.2
)
 
$
4.9

 
$
5.4

 
$
.5

 
$
(17.6
)
 
$
243.8

 
$

United States Treasury securities and obligations of United States government corporations and agencies
 
1.7

 

 

 

 

 

 
1.7

 

States and political subdivisions
 

 

 

 
.1

 
2.0

 

 
2.1

 

Asset-backed securities
 
170.7

 
1.2

 

 

 
4.1

 
(113.4
)
 
62.6

 

Collateralized debt obligations
 
193.5

 
72.7

 

 
(6.1
)
 

 

 
260.1

 

Mortgage pass-through securities
 
3.2

 
(.2
)
 

 

 

 

 
3.0

 

Collateralized mortgage obligations
 
204.1

 
3.6

 

 
.7

 

 
(30.2
)
 
178.2

 

Total fixed maturities, available for sale
 
935.0

 
(33.9
)
 
4.9

 
0.1

 
6.6

 
(161.2
)
 
751.5

 

Equity securities
 
44.6

 
27.3

 

 
(.3
)
 

 

 
71.6

 

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Collateralized mortgage obligations
 

 

 

 

 

 

 

 

Total trading securities
 

 

 

 

 

 

 

 

Investments held by variable interest entities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 

 

 

 

 

 

 

 

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products
 
(613.4
)
 
16.3

 
(44.8
)
 

 

 

 
(641.9
)
 
(44.8
)

____________
(a)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2011 (dollars in millions):


 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
1.8

 
$
(113.0
)
 
$

 
$

 
$
(111.2
)
Asset-backed securities
4.2

 
(3.0
)
 

 

 
1.2

Collateralized debt obligations
84.2

 
(11.5
)
 

 

 
72.7

Mortgage pass-through securities

 
(.2
)
 

 

 
(.2
)
Collateralized mortgage obligations
20.5

 
(16.9
)
 

 

 
3.6

Total fixed maturities, available for sale
110.7

 
(144.6
)
 

 

 
(33.9
)
Equity securities
27.3

 

 

 

 
27.3

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(33.1
)
 
41.7

 
(2.6
)
 
10.3

 
16.3



The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2011 (dollars in millions):

 
 
September 30, 2011
 
 
 
 
Beginning balance as of December 31, 2010
 
Purchases, sales, issuances and settlements, net (a)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in other comprehensive income (loss)
 
Transfers into Level 3
 
Transfers out of Level 3
 
Ending balance as of September 30, 2011
 
Amount of total gains (losses) for the nine months ended September 30, 2011 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
1,907.8

 
$
(289.0
)
 
$
(16.1
)
 
$
12.7

 
$
39.0

 
$
(1,410.6
)
 
$
243.8

 
$
(11.5
)
United States Treasury securities and obligations of United States government corporations and agencies
 
2.0

 

 

 
(.3
)
 

 

 
1.7

 

States and political subdivisions
 
2.5

 
(2.8
)
 
(.1
)
 
.5

 
2.0

 

 
2.1

 

Asset-backed securities
 
182.3

 
(.6
)
 

 
2.5

 
15.1

 
(136.7
)
 
62.6

 

Collateralized debt obligations
 
256.5

 
3.5

 
1.8

 
(1.7
)
 

 

 
260.1

 

Mortgage pass-through securities
 
3.5

 
(.5
)
 

 

 

 

 
3.0

 

Collateralized mortgage obligations
 
197.1

 
48.5

 
(2.1
)
 
3.2

 
5.9

 
(74.4
)
 
178.2

 

Total fixed maturities, available for sale
 
2,551.7

 
(240.9
)
 
(16.5
)
 
16.9

 
62.0

 
(1,621.7
)
 
751.5

 
(11.5
)
Equity securities
 
6.9

 
64.0

 

 
.7

 

 

 
71.6

 

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Collateralized mortgage obligations
 
.4

 
(.4
)
 

 

 

 

 

 

Total trading securities
 
.4

 
(.4
)
 

 

 

 

 

 

Investments held by variable interest entities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 
6.7

 
(7.9
)
 
1.5

 
(.3
)
 

 

 

 

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products
 
(553.2
)
 
(35.0
)
 
(53.7
)
 

 

 

 
(641.9
)
 
(53.7
)

____________
(a)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2011 (dollars in millions):


 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
1.8

 
$
(290.8
)
 
$

 
$

 
$
(289.0
)
States and political subdivisions

 
(2.8
)
 

 

 
(2.8
)
Asset-backed securities
4.1

 
(4.7
)
 

 

 
(.6
)
Collateralized debt obligations
106.6

 
(103.1
)
 

 

 
3.5

Mortgage pass-through securities

 
(.5
)
 

 

 
(.5
)
Collateralized mortgage obligations
94.5

 
(46.0
)
 

 

 
48.5

Total fixed maturities, available for sale
207.0

 
(447.9
)
 

 

 
(240.9
)
Equity securities
64.0

 

 

 

 
64.0

Trading securities:
 
 
 
 
 
 
 
 
 
Collateralized mortgage obligations

 
(.4
)
 

 

 
(.4
)
Investments held by variable interest entities:
 
 
 
 
 
 
 
 
 
Corporate securities

 
(7.9
)
 

 

 
(7.9
)
Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products
(85.5
)
 
51.8

 
(28.4
)
 
27.1

 
(35.0
)
The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at September 30, 2012 (dollars in millions):

 
Fair value at September 30, 2012
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
212.4

 
Discounted cash flow analysis
 
Discount margins
 
1.95% - 3.27% (2.78%)
Asset-backed securities (b)
33.0

 
Discounted cash flow analysis
 
Discount margins
 
2.96% - 3.28% (3.15%)
Collateralized debt obligations (c)
339.0

 
Discounted cash flow analysis
 
Recoveries
 
61% - 66% (ramp over 24 months)
 
 
 
 
 
Constant prepayment rate
 
20%
 
 
 
 
 
Discount margins
 
1.30% - 10.00% (2.39%)
 
 
 
 
 
Annual default rate
 
1.32% - 5.81% (3.27%)
 
 
 
 
 
Portfolio CCC %
 
1.90% - 22.17% (12.78%)
Equity securities (d)
2.2

 
Discounted cash flow analysis
 
Recoveries
 
21%
Venture capital investments (e)
38.1

 
Market multiples
 
EBITDA multiple
 
4.8 - 29.0 (11.46)
 
 
 
 
 
Revenue multiple
 
0.9 - 7.0 (4.2)
 
 
 
 
 
Book equity multiple
 
0.8 - 3.8 (2.3)
Other assets categorized as Level 3 (f)
162.7

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
787.4

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest sensitive products (g)
743.9

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 5.61% (5.55%)
 
 
 
 
 
Discount rates
 
0.0 - 3.5% (1.3%)
 
 
 
 
 
Surrender rates
 
4% - 43% (19%)
________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of our asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
(d)
Equity securities - The significant unobservable input used in the fair value measurement of our equity securities is the anticipated cash recovery. Significant increases (decreases) in the anticipated recovery would result in a significantly higher (lower) fair value measurement.
(e)
Venture capital investments - The significant unobservable inputs used in the fair value measurement of our venture capital investments are the EBITDA multiple and revenue multiple. Generally, a significant increase (decrease) in the EBITDA or revenue multiples in isolation would result in a significantly higher (lower) fair value measurement.
(f)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(g)
Interest sensitive products - The significant unobservable inputs used in the fair value measurement of our interest sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
CORRECTION TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Jun. 30, 2012
Dec. 31, 2011
Jun. 30, 2011
Dec. 31, 2010
Deferred acquisition costs
$ 623.4 
$ 834.5 
$ 623.4 
$ 834.5 
$ 653.5 
$ 797.1 
$ 975.5 
$ 999.6 
Income tax assets, net
699.5 
 
699.5 
 
 
865.4 
 
 
Total assets
34,156.0 
 
34,156.0 
 
 
32,921.9 
 
 
Liabilities for insurance products
24,927.9 
 
24,927.9 
 
 
 
 
 
Accumulated other comprehensive income
1,234.4 
 
1,234.4 
 
 
781.6 
 
 
Total liabilities and shareholders' equity
34,156.0 
 
34,156.0 
 
 
32,921.9 
 
 
Comprehensive income
238.6 
534.9 
572.6 
769.5 
 
 
 
 
Correction of Component of Accumulated Other Comprehensive Income [Member] |
Scenario, Previously Reported [Member]
 
 
 
 
 
 
 
 
Deferred acquisition costs
580.7 
 
580.7 
 
 
 
 
 
Income tax assets, net
594.5 
 
594.5 
 
 
 
 
 
Liabilities for insurance products
24,593.5 
 
24,593.5 
 
 
 
 
 
Accumulated other comprehensive income
1,421.1 
 
1,421.1 
 
 
 
 
 
Comprehensive income
425.3 
 
759.3 
 
 
 
 
 
Correction of Component of Accumulated Other Comprehensive Income [Member] |
Restatement Adjustment [Member]
 
 
 
 
 
 
 
 
Deferred acquisition costs
42.7 
 
42.7 
 
 
 
 
 
Income tax assets, net
105.0 
 
105.0 
 
 
 
 
 
Total assets
147.7 
 
147.7 
 
 
 
 
 
Liabilities for insurance products
334.4 
 
334.4 
 
 
 
 
 
Accumulated other comprehensive income
(186.7)
 
(186.7)
 
 
 
 
 
Total liabilities and shareholders' equity
147.7 
 
147.7 
 
 
 
 
 
Comprehensive income
$ (186.7)
 
$ (186.7)
 
 
 
 
 
INVESTMENTS - AVAILABLE FOR SALE SECURITIES (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
 
 
Trading securities
$ 199.4 
$ 91.6 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
9.6 
(4.4)
Net unrealized gains (losses) on all other investments
2,914.8 
1,733.2 
Adjustment to present value of future profits (a)
(200.7)1
(214.8)1
Adjustment to deferred acquisition costs
(458.0)
(289.3)
Adjustment to insurance liabilities
(334.4)
Unrecognized net loss related to deferred compensation plan
(8.8)
(8.3)
Deferred income tax liabilities
(688.1)
(434.8)
Accumulated other comprehensive income
1,234.4 
781.6 
Reduction to Present Value of Future Profits Due to Unrealized Gains That Would Result in Premium Deficiency if Unrealized Gains Were Realized
(166.5)
 
Reduction to Deferred Acquisition Costs Due to Unrealized Gains That Would Result in Premium Deficiency if Unrealized Gains Were Realized
(150.8)
 
Increase to insurance liabilities due to unrealized gains that would result in premium deficiency if unrealized gains were realized
(334.4)
Increase to Deferred Tax Assets Due to Unrealized Gains That Would Result in Premium Deficiency if Unrealized Gains Were Realized
234.6 
 
Available-for-sale Debt Securities Amortized Cost Basis
21,825.7 
 
Available-for-sale Securities, Gross Unrealized Gains
2,959.9 
 
Available-for-sale Securities, Gross Unrealized Losses
(43.3)
 
Available-for-sale Securities, Fair Value Disclosure
24,742.3 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
(7.3)
 
Available-for-sale Securities, Debt Maturities [Abstract]
 
 
Available-for-sale Securities, Debt Maturities, within One Year, Amortized Cost Basis
178.3 
 
Available-for-sale Securities, Debt Maturities, within One Year, Fair Value
180.7 
 
Available-for-sale Securities, Debt Maturities, after One Through Five Years, Amortized Cost Basis
1,558.1 
 
Available-for-sale Securities, Debt Maturities, after One Through Five Years, Fair Value
1,697.5 
 
Available-for-sale Securities, Debt Maturities, after Five Through Ten Years, Amortized Cost Basis
4,491.1 
 
Available-for-sale Securities, Debt Maturities, after Five Through Ten Years, Fair Value
5,038.7 
 
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis
10,309.7 
 
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value
12,126.6 
 
Available For Sale Securities, Debt Maturities, Amortized Cost, Subtotal
16,537.2 
 
Available For Sale Securities, Debt Maturities, Fair Value, Subtotal
19,043.5 
 
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Amortized Cost Basis
5,288.5 
 
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value
5,698.8 
 
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis
21,825.7 
21,779.1 
Available-for-sale Securities, Debt Securities
24,742.3 
23,516.0 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
470.0 
2,932.6 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(12.2)
(104.0)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
584.1 
835.9 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(31.1)
(118.9)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
1,054.1 
3,768.5 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(43.3)
(222.9)
Corporate securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
14,586.6 
 
Available-for-sale Securities, Gross Unrealized Gains
2,265.7 
 
Available-for-sale Securities, Gross Unrealized Losses
(28.8)
 
Available-for-sale Securities, Fair Value Disclosure
16,823.5 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
300.5 
1,394.7 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(9.2)
(57.0)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
278.1 
466.2 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(19.6)
(79.9)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
578.6 
1,860.9 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(28.8)
(136.9)
US Treasury and Government [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
164.2 
 
Available-for-sale Securities, Gross Unrealized Gains
6.9 
 
Available-for-sale Securities, Gross Unrealized Losses
 
Available-for-sale Securities, Fair Value Disclosure
171.1 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
 
9.1 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
 
0.2 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
9.3 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
 
US States and Political Subdivisions Debt Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
1,785.6 
 
Available-for-sale Securities, Gross Unrealized Gains
267.9 
 
Available-for-sale Securities, Gross Unrealized Losses
(5.4)
 
Available-for-sale Securities, Fair Value Disclosure
2,048.1 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
40.2 
6.9 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(2.0)
(0.2)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
68.7 
155.4 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(3.4)
(13.4)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
108.9 
162.3 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(5.4)
(13.6)
Foreign Government Debt Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
0.8 
 
Available-for-sale Securities, Gross Unrealized Gains
 
Available-for-sale Securities, Gross Unrealized Losses
 
Available-for-sale Securities, Fair Value Disclosure
0.8 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
 
0.5 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
0.5 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
 
Asset-backed Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
1,391.3 
 
Available-for-sale Securities, Gross Unrealized Gains
92.0 
 
Available-for-sale Securities, Gross Unrealized Losses
(6.6)
 
Available-for-sale Securities, Fair Value Disclosure
1,476.7 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
42.1 
437.6 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(0.3)
(14.5)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
137.8 
147.5 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(6.3)
(22.2)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
179.9 
585.1 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(6.6)
(36.7)
Collateralized Debt Obligations [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
327.6 
 
Available-for-sale Securities, Gross Unrealized Gains
5.2 
 
Available-for-sale Securities, Gross Unrealized Losses
(0.8)
 
Available-for-sale Securities, Fair Value Disclosure
332.0 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
12.7 
268.8 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(0.1)
(6.3)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
47.2 
1.7 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(0.7)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
59.9 
270.5 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(0.8)
(6.3)
Commercial Mortgage Backed Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
1,400.7 
 
Available-for-sale Securities, Gross Unrealized Gains
142.7 
 
Available-for-sale Securities, Gross Unrealized Losses
(0.8)
 
Available-for-sale Securities, Fair Value Disclosure
1,542.6 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
16.0 
168.8 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(0.1)
(5.2)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
14.3 
33.0 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(0.7)
(2.7)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
30.3 
201.8 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(0.8)
(7.9)
Mortgage Pass Through Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
18.8 
 
Available-for-sale Securities, Gross Unrealized Gains
1.4 
 
Available-for-sale Securities, Gross Unrealized Losses
 
Available-for-sale Securities, Fair Value Disclosure
20.2 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
1.2 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
2.0 
2.2 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(0.1)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
2.0 
3.4 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(0.1)
Collateralized Mortgage Backed Securities [Member]
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
Available-for-sale Debt Securities Amortized Cost Basis
2,150.1 
 
Available-for-sale Securities, Gross Unrealized Gains
178.1 
 
Available-for-sale Securities, Gross Unrealized Losses
(0.9)
 
Available-for-sale Securities, Fair Value Disclosure
2,327.3 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
(7.3)
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
58.5 
645.0 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(0.5)
(20.8)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
36.0 
29.7 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
(0.4)
(0.6)
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
94.5 
674.7 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
(0.9)
(21.4)
Equity Securities [Member]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
2.1 
41.6 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses
(0.1)
(3.0)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
0.4 
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
2.1 
42.0 
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses
$ (0.1)
$ (3.0)
INVESTMENTS - SCHEDULE OF OTHER THAN TEMPORARY IMPAIRMENT (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
 
 
 
 
Other-than-temporary impairments included in accumulated other comprehensive income
$ 7.3 
 
$ 7.3 
 
Available-for-sale Securities [Member]
 
 
 
 
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
 
 
 
 
Credit losses on fixed maturity securities, available for sale, beginning of period
(1.7)
(1.6)
(2.0)
(6.1)
Add: credit losses on other-than-temporary impairments not previously recognized
Less: credit losses on securities sold
0.7 
0.3 
5.2 
Less: credit losses on securities impaired due to intent to sell
1
1
1
1
Add: credit losses on previously impaired securities
Less: increases in cash flows expected on previously impaired securities
Credit losses on fixed maturity securities, available for sale, end of period
$ (1.7)
$ (0.9)
$ (1.7)
$ (0.9)
INVESTMENTS - REALIZED GAINS (LOSSES) (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
security
Sep. 30, 2011
Gain (Loss) on Investments [Abstract]
 
 
 
 
Net realized investment gains (losses)
$ 9.1 
$ 30.6 
$ 63.9 
$ 38.6 
Gain (Loss) on Investments, Excluding Other-than-temporary Impairments and Changes in Fair Value of Fixed Maturity Investments with Embedded Derivatives
 
 
89.0 
 
Net realized investment gains, excluding impairment losses
32.2 
33.5 
98.4 
64.9 
Sales of investments
 
 
1,852.5 
4,390.5 
Gain on embedded derivative related to change in fair value of certain fixed maturity investments
 
 
9.4 
 
Total other-than-temporary impairment losses
(23.1)
(2.9)
(34.5)
(26.3)
Aggregate amortized cost of fixed maturity securities in default or considered nonperforming
0.4 
 
0.4 
 
Carrying value of nonperforming fixed maturity securities
0.5 
 
0.5 
 
Value of sold fixed maturity investments
 
 
393.8 
 
Gross investment losses from sale of fixed maturity investments, before tax
 
 
$ 15.3 
 
Investments sold at a loss
 
 
 
Continuous unrealized loss position exceeding amortized cost, percent
 
 
20.00% 
 
EARNINGS PER SHARE (SCHEDULE OF BASIC AND DILUTED EPS CALCULATIONS) (DETAILS) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
 
 
 
 
Net income (loss) for basic earnings per share
$ (5.0)
$ 179.5 
$ 119.8 
$ 271.3 
Add: interest expense on 7.0% Convertible Senior Debentures due 2016 (the “7.0% Debentures”), net of income taxes
3.7 
11.1 
11.1 
Net income for diluted earnings per share
$ (5.0)
$ 183.2 
$ 130.9 
$ 282.4 
Shares:
 
 
 
 
Weighted average shares outstanding for basic earnings per share
231,481,000 
246,965,000 
236,555,000 
249,673,000 
Effect of dilutive securities on weighted average shares:
 
 
 
 
7% Debentures
53,367,000 
53,037,000 
53,367,000 
Stock option and restricted stock plans
2,353,000 
2,639,000 
2,712,000 
Warrants
23,000 
752,000 
333,000 
Dilutive potential common shares
55,743,000 
56,428,000 
56,412,000 
Weighted average shares outstanding for diluted earnings per share
231,481,000 
302,708,000 
292,983,000 
306,085,000 
EARNINGS PER SHARE (DETAILS) (USD $)
3 Months Ended
Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Interest on Convertible Debt, Net of Tax
$ 3,700,000 
Incremental Common Shares Attributable to Conversion of Debt Securities
56,651,000 
Antidilutive Securities Excluded From Computation Of Earnings Per Share Related to Debt, Amount
52,366,000 
Antidilutive Securities Excluded From Computation Of Earnings Per Share Related to Share-based Compensation, Amount
2,968,000 
Antidilutive Securities Excluded From Computation Of Earnings Per Share Related to Warrants, Amount
1,317,000 
Debt Instrument, Interest Rate, Stated Percentage
7.00% 
Conversion Price for Convertible Senior Debentures
$ 5.49 
Conversion Rate for Convertible Senior Debentures
182.1494 
Par Value of Each Convertible Senior Debenture
$ 1,000 
Convertible Subordinated Debt [Member]
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
Debt Instrument, Interest Rate, Stated Percentage
7.00% 
BUSINESS SEGMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Revenues:
 
 
 
 
Fee revenue and other income
$ 5.2 
$ 4.9 
$ 13.6 
$ 12.5 
Revenues
1,083.9 
961.7 
3,218.0 
3,034.9 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
745.7 
661.0 
2,124.4 
2,028.6 
Loss on extinguishment of debt
198.5 
1.1 
199.2 
3.1 
Other operating costs and expenses
217.5 
182.0 
617.8 
527.8 
Total expenses
1,247.1 
906.9 
3,231.3 
2,846.1 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
(163.2)
54.8 
(13.3)
188.8 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
1,083.9 
961.7 
3,218.0 
3,034.9 
Net realized investment gains (losses)
9.1 
30.6 
63.9 
38.6 
Consolidated revenues
1,093.0 
992.3 
3,281.9 
3,073.5 
Total segment expenses
1,247.1 
906.9 
3,231.3 
2,846.1 
Insurance policy benefits - fair value changes in embedded derivative liabilities
4.6 
33.9 
10.7 
33.9 
Amortization related to fair value changes in embedded derivative liabilities
(1.6)
(14.1)
(4.0)
(14.1)
Amortization related to net realized investment gains (losses)
1.7 
3.9 
5.9 
3.7 
Consolidated expenses
1,251.8 
930.6 
3,243.9 
2,869.6 
Bankers Life [Member]
 
 
 
 
Revenues:
 
 
 
 
Annuities
6.8 
9.6 
21.9 
26.7 
Health
335.1 
334.0 
1,010.6 
1,017.1 
Life
74.2 
61.0 
209.1 
170.4 
Net investment income
221.6 1
158.0 1
642.1 1
564.5 1
Fee revenue and other income
4.0 1
3.6 1
10.2 1
9.2 1
Revenues
641.7 
566.2 
1,893.9 
1,787.9 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
434.6 
360.6 
1,252.2 
1,174.3 
Amortization
35.6 
44.1 
143.0 
159.5 
Interest expense on investment borrowings
1.3 
1.2 
4.1 
3.5 
Other operating costs and expenses
89.6 
80.9 
267.4 
236.9 
Total expenses
561.1 
486.8 
1,666.7 
1,574.2 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
80.6 
79.4 
227.2 
213.7 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
641.7 
566.2 
1,893.9 
1,787.9 
Total segment expenses
561.1 
486.8 
1,666.7 
1,574.2 
Washington National [Member]
 
 
 
 
Revenues:
 
 
 
 
Health
143.4 
141.2 
429.0 
423.1 
Life
3.6 
3.9 
11.6 
11.8 
Other
0.8 
0.8 
2.2 
3.0 
Net investment income
50.9 1
47.3 1
151.9 1
140.3 1
Fee revenue and other income
0.3 1
0.4 1
0.8 1
0.9 1
Revenues
199.0 
193.6 
595.5 
579.1 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
111.1 
119.0 
340.5 
349.5 
Amortization
11.2 
10.8 
34.7 
35.6 
Interest expense on investment borrowings
0.7 
0.2 
2.2 
0.2 
Other operating costs and expenses
42.1 
42.4 
125.6 
126.5 
Total expenses
165.1 
172.4 
503.0 
511.8 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
33.9 
21.2 
92.5 
67.3 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
199.0 
193.6 
595.5 
579.1 
Total segment expenses
165.1 
172.4 
503.0 
511.8 
Colonial Penn [Member]
 
 
 
 
Revenues:
 
 
 
 
Health
1.3 
1.4 
4.0 
4.5 
Life
53.2 
49.4 
158.5 
147.5 
Net investment income
9.9 1
10.1 1
30.1 1
30.9 1
Fee revenue and other income
0.2 1
0.2 1
0.6 1
0.6 1
Revenues
64.6 
61.1 
193.2 
183.5 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
38.3 
36.0 
120.0 
112.7 
Amortization
3.5 
3.5 
11.1 
11.0 
Other operating costs and expenses
25.4 
22.9 
73.9 
66.3 
Total expenses
67.2 
62.4 
205.0 
190.0 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
(2.6)
(1.3)
(11.8)
(6.5)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
64.6 
61.1 
193.2 
183.5 
Total segment expenses
67.2 
62.4 
205.0 
190.0 
Other CNO Business [Member]
 
 
 
 
Revenues:
 
 
 
 
Annuities
2.5 
3.4 
8.3 
8.6 
Health
6.2 
6.9 
19.3 
21.3 
Life
62.9 
61.7 
196.2 
184.9 
Other
0.2 
0.2 
0.6 
1.4 
Net investment income
86.7 1
74.6 1
259.2 1
256.0 1
Revenues
158.5 
146.8 
483.6 
472.2 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
157.1 
111.5 
401.0 
358.2 
Amortization
10.5 
10.4 
25.1 
28.4 
Interest expense on investment borrowings
5.0 
5.3 
15.1 
15.2 
Other operating costs and expenses
39.5 
16.8 
96.4 
55.1 
Total expenses
212.1 
144.0 
537.6 
456.9 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
(53.6)
2.8 
(54.0)
15.3 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
158.5 
146.8 
483.6 
472.2 
Total segment expenses
212.1 
144.0 
537.6 
456.9 
Corporate Operations [Member]
 
 
 
 
Revenues:
 
 
 
 
Net investment income
19.4 
(6.7)
49.8 
10.4 
Fee revenue and other income
0.7 
0.7 
2.0 
1.8 
Revenues
20.1 
(6.0)
51.8 
12.2 
Benefits and expenses:
 
 
 
 
Interest expense on investment borrowings
0.1 
0.1 
0.4 
0.1 
Interest expense on corporate debt
16.3 
18.7 
50.4 
58.6 
Interest expense on borrowings of variable interest entities
5.8 
2.4 
14.5 
8.4 
Loss on extinguishment of debt
198.5 
1.1 
199.2 
3.1 
Other operating costs and expenses
20.9 
19.0 
54.5 
43.0 
Total expenses
241.6 
41.3 
319.0 
113.2 
Income before net realized investment losses and fair value changes in embedded derivative liabilities (net of related amortization) and income taxes
(221.5)
(47.3)
(267.2)
(101.0)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
20.1 
(6.0)
51.8 
12.2 
Total segment expenses
$ 241.6 
$ 41.3 
$ 319.0 
$ 113.2 
ACCOUNTING FOR DERIVATIVES (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Equity Swap [Member]
Dec. 31, 2011
Equity Swap [Member]
Sep. 30, 2012
Equity Swap [Member]
Investment Income [Member]
Sep. 30, 2011
Equity Swap [Member]
Investment Income [Member]
Sep. 30, 2012
Embedded Derivative Financial Instruments [Member]
Dec. 31, 2011
Embedded Derivative Financial Instruments [Member]
Sep. 30, 2012
Embedded Derivative Associated With Modified Coinsurance Agreement [Member]
Dec. 31, 2011
Embedded Derivative Associated With Modified Coinsurance Agreement [Member]
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
 
 
 
 
 
 
Derivative Instruments, Gain (Loss) Recognized in Income, Net
 
 
 
 
$ 37.5 
$ (25.7)
 
 
 
 
Other Derivatives Not Designated as Hedging Instruments Assets at Fair Value
 
 
81.9 
37.9 
 
 
 
 
 
 
Other Derivatives Not Designated as Hedging Instruments Liabilities at Fair Value
 
 
 
 
 
 
737.9 
666.3 
6.0 
3.5 
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net
$ 6.7 
$ 19.8 
 
 
 
 
 
 
 
 
REINSURANCE (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
 
 
Ceded Premiums Written
$ 48.0 
$ 58.3 
$ 164.5 
$ 176.3 
Reinsurance Effect on Claims and Benefits Incurred, Amount Ceded
56.4 
45.4 
172.2 
160.2 
Assumed Premiums Written
15.9 
18.1 
54.7 
64.6 
Coventry Health Care Marketing and Quota Share Agreements [Member]
 
 
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
 
 
Assumed Premiums Written
$ 11.4 
$ 12.8 
$ 39.9 
$ 47.6 
INCOME TAXES (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Income Tax Disclosure [Abstract]
 
 
 
 
 
Loss on extinguishment of debt
$ 198.5 
$ 1.1 
$ 199.2 
$ 3.1 
 
Income Tax Expense (Benefit) [Abstract]
 
 
 
 
 
Current tax expense
2.4 
2.3 
9.1 
7.2 
 
Deferred tax expense (benefit)
11.1 
22.9 
76.4 
68.4 
 
Valuation allowance applicable to current year income
(31.8)
(31.8)
 
Income tax expense (benefit) calculated based on estimated annual effective tax rate
(18.3)
25.2 
53.7 
75.6 
 
Valuation allowance reduction impacting income in future years
(111.2)
(143.0)
(111.2)
(143.0)
 
Deferred tax benefit related to loss on extinguishment of debt and other items
(24.3)
(24.3)
 
Total income tax benefit
(153.8)
(117.8)
(81.8)
(67.4)
 
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract]
 
 
 
 
 
U.S. statutory corporate rate
 
 
35.00% 
35.00% 
 
Valuation allowance reduction applicable to current year income
 
 
(13.80%)
0.00% 
 
Nondeductible amounts
 
 
0.50% 
1.80% 
 
State taxes
 
 
1.00% 
1.00% 
 
Provision for tax issues, tax credits and other
 
 
0.00% 
(0.80%)
 
Estimated annual effective tax rate
 
 
22.70% 
37.00% 
 
Components of Deferred Tax Assets [Abstract]
 
 
 
 
 
Net federal operating loss carryforwards
1,366.2 
 
1,366.2 
 
1,445.2 
Net state operating loss carryforwards
16.3 
 
16.3 
 
16.8 
Tax credits
37.7 
 
37.7 
 
32.6 
Capital loss carryforwards
305.4 
 
305.4 
 
342.3 
Insurance liabilities
754.8 
 
754.8 
 
744.4 
Other
81.7 
 
81.7 
 
64.8 
Gross deferred tax assets
2,562.1 
 
2,562.1 
 
2,646.1 
Deferred tax liabilities:
 
 
 
 
 
Investments
(21.9)
 
(21.9)
 
(24.2)
Present value of future profits and deferred acquisition costs
(333.7)
 
(333.7)
 
(363.7)
Accumulated other comprehensive income
(688.1)
 
(688.1)
 
(434.8)
Gross deferred tax liabilities
(1,043.7)
 
(1,043.7)
 
(822.7)
Net deferred tax assets before valuation allowance
1,518.4 
 
1,518.4 
 
1,823.4 
Valuation allowance
(795.4)
 
(795.4)
 
(938.4)
Net deferred tax assets
723.0 
 
723.0 
 
885.0 
Current income taxes accrued
(23.5)
 
(23.5)
 
(19.6)
Income tax assets, net
699.5 
 
699.5 
 
865.4 
Estimated deferred tax assets realized through future taxable earnings
 
 
893 
 
 
Identified reductions in deferred tax valuation allowance to be recognized in 2012
155.0 
 
 
 
 
Decrease in valuation allowance for deferred tax assets
(143.0)
(143.0)
(143.0)
(143.0)
 
Identified reductions in deferred tax allowance to be recognized in future period
12.0 
 
 
 
 
Reduction valuation allowance due to increase in taxable income
43.8 
 
 
 
 
Change in valuation allowance, amount to be recognized in current period
31.8 
 
 
 
 
Reduction in valuation allowance for deferred tax assets
111.2 
 
 
 
 
Deferred tax valuation assumption for annual taxable income growth (percent)
5.00% 
 
5.00% 
 
 
Normalized average annual taxable income for last three years
 
 
293 
 
 
Normalized average annual taxable income for last three years in prior projection
 
 
$ 260 
 
 
Loss limitation based on income of life insurance company (percent)
35.00% 
 
35.00% 
 
 
Loss limitation based on loss of non-life entities (percent)
35.00% 
 
35.00% 
 
 
Debenture interest rate
7.00% 
 
7.00% 
 
 
Federal long term tax exempt rate (percent)
3.02% 
 
3.02% 
 
 
Ownership change threshold restricting NOL usage (percent)
50.00% 
 
50.00% 
 
 
INCOME TAXES - OPERATING LOSS CARRYFORWARDS (DETAILS) (USD $)
1 Months Ended 9 Months Ended 12 Months Ended
Jul. 31, 2006
Sep. 30, 2012
Dec. 31, 2008
Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
 
 
 
 
Other Tax Carryforward, Gross Amount
 
$ 872,500,000 
 
 
Total loss carryforwards
 
4,776,000,000 
 
 
Net operating loss carryforward to be reclassified as non life net operating loss carryforwards
 
631,000,000 
 
 
Loss on Investment in Senior Health
 
 
742,000,000 
 
Net state operating loss carryforwards
 
16,300,000 
 
16,800,000 
Cancellation of Debt Income Realized
2,500,000,000 
 
 
 
Valuation Allowance, Deferred Tax Asset, Change in Amount Due to Classifying Loss as Ordinary
 
140,000,000 
 
 
Carryforward Expiration 2013 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Other Tax Carryforward, Expiration Dates
 
2013 
 
 
Other Tax Carryforward, Gross Amount
 
836,700,000 
 
 
Total loss carryforwards
 
836,700,000 
 
 
Carryforward Expiration 2014 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Other Tax Carryforward, Expiration Dates
 
2014 
 
 
Other Tax Carryforward, Gross Amount
 
28,600,000 
 
 
Total loss carryforwards
 
28,600,000 
 
 
Carryforward Expiration 2015 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Other Tax Carryforward, Expiration Dates
 
2015 
 
 
Other Tax Carryforward, Gross Amount
 
7,200,000 
 
 
Total loss carryforwards
 
7,200,000 
 
 
Carryforward Expiration 2018 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2018 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
550,900,000 
 
 
Carryforward Expiration 2021 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2021 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
29,500,000 
 
 
Carryforward Expiration 2022 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2022 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
204,100,000 
 
 
Carryforward Expiration 2023 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2023 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
2,602,800,000 
 
 
Carryforward Expiration 2024 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2024 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
3,200,000 
 
 
Carryforward Expiration 2025 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2025 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
118,800,000 
 
 
Carryforward Expiration 2027 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2027 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
216,800,000 
 
 
Carryforward Expiration 2028 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2028 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
500,000 
 
 
Carryforward Expiration 2029 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2029 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
148,900,000 
 
 
Carryforward Expiration 2031 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards, expiration dates
 
2031 
 
 
Other Tax Carryforward, Gross Amount
 
 
 
Total loss carryforwards
 
28,000,000 
 
 
Internal Revenue Service (IRS) [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
3,900,000,000 
 
 
Non Life Insurance Companies [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
3,119,000,000 
 
 
Valuation Allowance, Deferred Tax Asset, Change in Amount Due to Cancellation of Debt Income Issue
 
140,000,000 
 
 
Amount of Tax Losses on Investment in Conseco Finance Corp
3,800,000,000 
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2013 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2014 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2015 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2018 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2021 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2022 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2023 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
2,602,800,000 1
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2024 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
3,200,000 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2025 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
118,800,000 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2027 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
216,800,000 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2028 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
500,000 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2029 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
148,900,000 
 
 
Non Life Insurance Companies [Member] |
Carryforward Expiration 2031 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
28,000,000 
 
 
Life Insurance Companies [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
784,500,000 
 
 
Amount of Tax Losses on Investment in Conseco Finance Corp
2,100,000,000 
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2013 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2014 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2015 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2018 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
550,900,000 1
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2021 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
29,500,000 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2022 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
204,100,000 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2023 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
2
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2024 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2025 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2027 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2028 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2029 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
 
 
Life Insurance Companies [Member] |
Carryforward Expiration 2031 [Member]
 
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
 
Operating loss carryforwards
 
$ 0 
 
 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (SCHEDULE OF DIRECT CORPORATE OBLIGATIONS) (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Debt Instrument [Line Items]
 
 
Debenture interest rate
7.00% 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
$ 1,035.1 
$ 857.9 
New Senior Secured Credit Agreement [Member]
 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
675.0 
Unamortized Discount
(5.5)
Convertible Subordinated Debt [Member]
 
 
Debt Instrument [Line Items]
 
 
Debenture interest rate
7.00% 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
93.0 
293.0 
Unamortized Discount
(3.6)
(12.9)
Previous Senior Secured Credit Agreement [Member]
 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
255.2 
Unamortized Discount
(2.4)
Senior Secured Note 6.375% [Member]
 
 
Debt Instrument [Line Items]
 
 
Debenture interest rate
6.375% 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
 
Senior Secured Notes 9 Percent [Member]
 
 
Debt Instrument [Line Items]
 
 
Debenture interest rate
9.00% 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
1.2 
275.0 
Other Notes Payable [Member]
 
 
Debt Instruments [Abstract]
 
 
Direct corporate obligations
$ 0 
$ 50.0 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 0 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 0 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Sep. 30, 2012
New Senior Secured Credit Agreement [Member]
Dec. 31, 2011
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Senior Secured Note 6.375% [Member]
Dec. 31, 2011
Senior Secured Note 6.375% [Member]
Sep. 30, 2012
Previous Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Previous Senior Secured Credit Agreement [Member]
Dec. 31, 2011
Previous Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Other Notes Payable [Member]
Dec. 31, 2011
Other Notes Payable [Member]
Sep. 30, 2012
Senior Secured Notes 9 Percent [Member]
Dec. 31, 2011
Senior Secured Notes 9 Percent [Member]
Sep. 30, 2012
Convertible Subordinated Debt [Member]
Dec. 31, 2011
Convertible Subordinated Debt [Member]
Sep. 28, 2012
Senior Notes [Member]
Pari Passu Intercreditor Agreement [Member]
Sep. 30, 2012
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
Sep. 30, 2012
Senior Notes [Member]
Other Notes Payable [Member]
Sep. 28, 2012
Senior Notes [Member]
Senior Secured Notes 9 Percent [Member]
Sep. 30, 2012
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Notes Payable to Banks [Member]
Previous Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Notes Payable to Banks [Member]
Previous Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Notes Payable, Other Payables [Member]
Convertible Subordinated Debt [Member]
Sep. 28, 2012
Maximum [Member]
Senior Notes [Member]
Pari Passu Intercreditor Agreement [Member]
Sep. 30, 2012
Maximum [Member]
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
Sep. 28, 2012
Maximum [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Minimum [Member]
Senior Notes [Member]
Senior Secured Note 6.375% [Member]
Sep. 28, 2012
Minimum [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Term Loan Facility, Six-Year [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Term Loan Facility, Four-Year [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Revolving Credit Facility [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Uncommitted Subfacility [Member]
Maximum [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Letter of Credit [Member]
Maximum [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Eurodollar Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Eurodollar Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate [Member]
Revolving Credit Facility [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate Subject to Eurodollar Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate Subject to Eurodollar Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Base Rate Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate Floor [Member]
Term Loan Facility, Six-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Base Rate Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 28, 2012
Base Rate Floor [Member]
Term Loan Facility, Four-Year [Member]
Notes Payable to Banks [Member]
New Senior Secured Credit Agreement [Member]
Sep. 30, 2012
Paulson & Co. Inc. [Member]
Notes Payable, Other Payables [Member]
Convertible Subordinated Debt [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes Payable
$ 1,035.1 
 
$ 1,035.1 
 
$ 857.9 
$ 675.0 
$ 0 
 
$ 0 
$ 0 
$ 0 
$ 255.2 
$ 0 
$ 50.0 
$ 1.2 
$ 275.0 
$ 93.0 
$ 293.0 
 
$ 275.0 
 
$ 1.2 
 
 
 
 
 
 
 
 
 
 
 
$ 425.0 
 
$ 250.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 200.0 
Debt Instrument, Interest Rate, Stated Percentage
7.00% 
 
7.00% 
 
 
 
 
6.375% 
 
 
 
 
 
 
9.00% 
 
7.00% 
 
 
6.375% 
 
9.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Redemption Percentage of Aggregate Principal Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Redemption Percentage of Aggregate Principal Amount with Cash from Equity Offerings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Price Percentage of Aggregate Principal Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106.375% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Mandatory Accelerated Repurchase, Percentage of Aggregate Principal Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Percentage of Trustees or Holders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Risk-Based Capital Ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
225.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Limit of Restricted Payments Permitted, Cash Dividends on Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Limit of Restricted Payments Permitted, Percent of Net Excess Cash Flow
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Limit of Restricted Payments Permitted, Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
175.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Limit of Restricted Payments Permitted, Amount of Allowed Additional Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
244 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Limit of Restricted Payments Permitted, Debt to Total Capitalization Ratio Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Term of Agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 years 
 
4 years 
 
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Maximum Borrowing Capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.0 
5.0 
5.0 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Annual Amortization Percentage of Loan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Annual Amortization Percentage of Loan in First and Second Year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Annual Amortization Percentage of Loan in Third and Fourth Year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Increase, Additional Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Net Cash Proceeds from Asset Sales and Casualty Events
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Net Cash Proceeds Received for Restricted Subsidiaries from Debt Issuances
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Mandatory Prepayments, Percentage of Restricted Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt to Capitalization Ratio, Threshold Requiring Equal Debt Repayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22.50% 
 
17.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Mandatory Prepayments, Reduced Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33.33% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt to Capitalization Ratio, Maximum Threshold for Repayment Requirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Debt to Capitalization Ratio, Percentage Required No Mandatory Prepayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Basis Spread on Variable Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.50% 
 
 
3.75% 
3.25% 
2.75% 
2.25% 
2.50% 
1.25% 
1.00% 
5.00% 
2.25% 
4.25% 
2.00% 
 
Debt to Capitalization Ratio Required
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt to Capitalization Ratio at Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Coverage Ratio Required
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Adjusted Capital to Company Action Level Risk-Based Capital Ratio, After Stated Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate Adjusted Capital to Company Action Level Risk Based Capital Ratio at Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
361.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum Combined Statutory Capital and Surplus
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,300.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined Statutory Capital and Surplus at Period End
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,766.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mandatory Debt Repayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Removal of Collateral Restrictions, Amount of Outstanding Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Terms, Removal of Collateral Restrictions, Period of Time After Default and Holders Make Certain Representations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
180 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Cash Tender Offer to Repay Long-term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
273.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Long-term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
326.3 
 
 
223.8 
 
355.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Discount Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.80% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Long-term Debt, Portion Related to Tender Offer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
313.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Long-term Debt, Portion Related to Consent Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Long-term Debt, Portion Related to Accrued and Unpaid Interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of Notes Payable
 
 
779.0 
130.7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) on Extinguishment of Debt
(198.5)
(1.1)
(199.2)
(3.1)
 
 
 
 
 
 
(5.1)
 
 
 
(57.8)
 
(136.3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) on Extinguishment of Debt, Portion Related to Unamortized Discount
 
 
 
 
 
 
 
 
 
$ (4.4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (SCHEDULE OF FUTURE REPAYMENTS) (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Year ending September 30,
 
2013
$ 55.4 
2014
54.3 
2015
79.3 
2016
79.3 
2017
97.2 
Thereafter
678.7 
Long-term Debt
$ 1,044.2 
INVESTMENT BORROWINGS (DETAILS) (USD $)
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
$ 1,650,900,000 
 
$ 1,676,500,000 
Interest rate
7.00% 
 
 
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Carrying value of FHLB common stock
82,500,000 
 
 
Investment borrowings
1,650,000,000 
 
1,650,000,000 
Estimated fair value of collateralized investments for FHLB borrowings
2,000,000,000 
 
 
Interest expense on FHLB borrowings
21,300,000 
18,900,000 
 
Aggregate fee to prepay all fixed rate FHLB borrowings
51,600,000 
 
 
Repurchase Agreements [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Assets sold under agreements to repurchase
 
24,800,000 
Other Borrowings [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
900,000 
 
1,700,000 
Borrowings Due November 2013 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Nov. 30, 2013 
 
 
Interest rate
0.515% 
 
 
Borrowings Due February 2014 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
67,000,000 
 
 
Maturity date
Feb. 28, 2014 
 
 
Interest rate
1.83% 
 
 
Borrowings Due August 2014 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
50,000,000 
 
 
Maturity date
Aug. 31, 2014 
 
 
Interest rate
0.565% 
 
 
Borrowings Due August 2014 Rate 2 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Aug. 31, 2014 
 
 
Interest rate
0.476% 
 
 
Borrowings Due September 2015 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
50,000,000 
 
 
Maturity date
Sep. 30, 2015 
 
 
Interest rate
0.747% 
 
 
Borrowings Due October 2015 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
150,000,000 
 
 
Maturity date
Oct. 31, 2015 
 
 
Interest rate
0.571% 
 
 
Borrowings Due November 2015 Rate Two [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
146,000,000 
 
 
Maturity date
Nov. 30, 2015 
 
 
Interest rate
5.30% 
 
 
Borrowings Due December 2015 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Dec. 31, 2015 
 
 
Interest rate
4.71% 
 
 
Borrowings Due June 2016 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Jun. 30, 2016 
 
 
Interest rate
0.657% 
 
 
Borrowings Due June 2016 Rate Two [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
75,000,000 
 
 
Maturity date
Jun. 30, 2016 
 
 
Interest rate
0.621% 
 
 
Borrowings Due October 2016 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Oct. 31, 2016 
 
 
Interest rate
0.641% 
 
 
Borrowings Due November 2016 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
50,000,000 
 
 
Maturity date
Nov. 30, 2016 
 
 
Interest rate
0.684% 
 
 
Borrowings Due November 2016 Rate Two [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
50,000,000 
 
 
Maturity date
Nov. 30, 2016 
 
 
Interest rate
0.687% 
 
 
Borrowings Due June 2017 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Jun. 30, 2017 
 
 
Interest rate
0.751% 
 
 
Borrowings Due July 2017 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Jul. 31, 2017 
 
 
Interest rate
3.90% 
 
 
Borrowings Due August 2017 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
50,000,000 
 
 
Maturity date
Aug. 31, 2017 
 
 
Interest rate
0.635% 
 
 
Borrowings Due August 2017 Rate 2 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
75,000,000 
 
 
Maturity date
Aug. 31, 2017 
 
 
Interest rate
0.577% 
 
 
Borrowings Due October 2017 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
100,000,000 
 
 
Maturity date
Oct. 31, 2017 
 
 
Interest rate
0.885% 
 
 
Borrowings Due November 2017 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
37,000,000 
 
 
Maturity date
Nov. 30, 2017 
 
 
Interest rate
3.75% 
 
 
Borrowings Due July 2018 [Member] |
Federal Home Loan Bank Advances [Member]
 
 
 
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
 
 
 
Investment borrowings
$ 50,000,000 
 
 
Maturity date
Jul. 31, 2018 
 
 
Interest rate
0.917% 
 
 
CHANGES IN COMMON STOCK (DETAILS) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2012
Sep. 30, 2011
Class of Stock [Line Items]
 
 
 
Stock Repurchase Program, Authorized Amount
 
$ 100.0 
 
Stock Repurchase Program, Increase in Authorized Amount
 
200.0 
 
Stock Repurchased and Retired During Period, Shares
 
12,894,178 
 
Stock Repurchased and Retired During Period, Value
 
99.5 
55.7 
Common Stock Disclosures [Abstract]
 
 
 
Balance, December 31, 2011
 
241,304,503 
 
Balance, September 30, 2012
229,506,690 
229,506,690 
 
Shares Paid for Tax Withholding for Share Based Compensation
 
143,000 
 
Stock Repurchase Program, Remaining Repurchase Authorized Amount
130.7 
130.7 
 
Common Stock, Dividends, Per Share, Cash Paid
$ 0.02 
 
 
Dividends, Common Stock
 
9.4 
 
Stock Options [Member]
 
 
 
Common Stock Disclosures [Abstract]
 
 
 
Shares issued under employee benefit compensation plans
 
691,950 
 
Restricted Stock [Member]
 
 
 
Common Stock Disclosures [Abstract]
 
 
 
Shares issued under employee benefit compensation plans
 
404,415 1
 
Common Stock Including Additional Paid in Capital [Member]
 
 
 
Class of Stock [Line Items]
 
 
 
Stock Repurchased and Retired During Period, Value
 
99.5 
55.7 
Common Stock Disclosures [Abstract]
 
 
 
Dividends, Common Stock
 
$ 0 
 
SALES INDUCEMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Deferred Sales Inducements [Abstract]
 
 
 
Deferred Sales Inducements, Additions
$ 3.1 
$ 9.7 
 
Deferred Sales Inducements, Amortization Expense
20.5 
21.2 
 
Deferred Sales Inducements, Net
131.8 
 
149.2 
Persistency Bonus Benefits Included in Insurance Liabilities
$ 36.6 
 
$ 50.0 
RECENTLY ISSUED ACCOUNTING STANDARDS (DETAILS) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Changes from Adoption of New Accounting Standard, Statement of Operations [Abstract]
 
 
 
 
Amortization
$ 60.9 
$ 58.6 
$ 215.8 
$ 224.1 
Other operating costs and expenses
217.5 
182.0 
617.8 
527.8 
Total benefits and expenses
1,251.8 
930.6 
3,243.9 
2,869.6 
Income before income taxes
(158.8)
61.7 
38.0 
203.9 
Tax expense on period income
(10.8)
25.2 
61.2 
75.6 
Net income (loss)
(5.0)
179.5 
119.8 
271.3 
Earnings Per Share, Basic
$ (0.02)
$ 0.73 
$ 0.51 
$ 1.09 
Earnings Per Share, Diluted
$ (0.02)
$ 0.61 
$ 0.45 
$ 0.92 
Changes from Adoption of New Accounting Standard, Statements of Cash Flows [Abstract]
 
 
 
 
Policy acquisition costs
 
 
(141.4)
(164.9)
Other operating costs
 
 
(558.6)
(513.6)
Net cash provided by operating activities
 
 
424.6 
562.2 
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward]
 
 
 
 
Balance, beginning of period
653.5 
975.5 
797.1 
999.6 
Deferred Policy Acquisition Costs, Additions
46.7 
58.3 
141.4 
164.9 
Deferred Policy Acquisition Cost, Amortization Expense
(44.5)
(35.5)
(146.4)
(134.7)
Deferred Policy Acquisition Cost, Related to Fair Value Adjustment of Fixed Maturities
(32.3)
(163.8)
(168.7)
(195.3)
Balance, end of period
623.4 
834.5 
623.4 
834.5 
As originally reported [Member]
 
 
 
 
Changes from Adoption of New Accounting Standard, Statement of Operations [Abstract]
 
 
 
 
Amortization
 
87.2 
 
325.4 
Other operating costs and expenses
 
127.6 
 
367.1 
Total benefits and expenses
 
904.8 
 
2,810.2 
Income before income taxes
 
87.5 
 
263.3 
Tax expense on period income
 
34.5 
 
96.9 
Net income (loss)
 
196.0 
 
309.4 
Earnings Per Share, Basic
 
$ 0.79 
 
$ 1.24 
Earnings Per Share, Diluted
 
$ 0.66 
 
$ 1.05 
Changes from Adoption of New Accounting Standard, Statements of Cash Flows [Abstract]
 
 
 
 
Policy acquisition costs
 
 
 
328.6 
Other operating costs
 
 
 
349.9 
Net cash provided by operating activities
 
 
 
562.2 
Effect of adoption of ASU 2010-26 [Member]
 
 
 
 
Changes from Adoption of New Accounting Standard, Statement of Operations [Abstract]
 
 
 
 
Amortization
 
(28.6)
 
(101.3)
Other operating costs and expenses
 
54.4 
 
160.7 
Total benefits and expenses
 
25.8 
 
59.4 
Income before income taxes
 
(25.8)
 
(59.4)
Tax expense on period income
 
(9.3)
 
(21.3)
Net income (loss)
 
(16.5)
 
(38.1)
Earnings Per Share, Basic
 
$ (0.06)
 
$ (0.15)
Earnings Per Share, Diluted
 
$ (0.05)
 
$ (0.13)
Changes from Adoption of New Accounting Standard, Statements of Cash Flows [Abstract]
 
 
 
 
Policy acquisition costs
 
 
 
(163.7)
Other operating costs
 
 
 
163.7 
Net cash provided by operating activities
 
 
 
As adjusted [Member]
 
 
 
 
Changes from Adoption of New Accounting Standard, Statement of Operations [Abstract]
 
 
 
 
Amortization
 
58.6 
 
224.1 
Other operating costs and expenses
 
182.0 
 
527.8 
Total benefits and expenses
 
930.6 
 
2,869.6 
Income before income taxes
 
61.7 
 
203.9 
Tax expense on period income
 
25.2 
 
75.6 
Net income (loss)
 
179.5 
 
271.3 
Earnings Per Share, Basic
 
$ 0.73 
 
$ 1.09 
Earnings Per Share, Diluted
 
$ 0.61 
 
$ 0.92 
Changes from Adoption of New Accounting Standard, Statements of Cash Flows [Abstract]
 
 
 
 
Policy acquisition costs
 
 
 
164.9 
Other operating costs
 
 
 
513.6 
Net cash provided by operating activities
 
 
 
$ 562.2 
CONSOLIDATED STATEMENT CASH FLOWS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$ (5.0)
$ 179.5 
$ 119.8 
$ 271.3 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Amortization and depreciation
 
 
235.2 
243.6 
Income taxes
 
 
(87.3)
(69.8)
Insurance liabilities
 
 
242.8 
244.4 
Accrual and amortization of investment income
 
 
(123.1)
62.9 
Deferral of policy acquisition costs
 
 
(141.4)
(164.9)
Net realized investment (gains) losses
(9.1)
(30.6)
(63.9)
(38.6)
Loss on extinguishment of debt
198.5 
1.1 
199.2 
3.1 
Other
 
 
43.3 
10.2 
Net cash provided by operating activities
 
 
424.6 
562.2 
Other Noncash Investing and Financing Items [Abstract]
 
 
 
 
Stock option and restricted stock plans
 
 
$ 10.7 
$ 10.2 
INVESTMENTS IN VARIABLE INTEREST ENTITIES (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Variable Interest Entity [Line Items]
 
 
 
Investments held by variable interest entities
$ 829.4 
 
$ 496.3 
Cash and cash equivalents held by variable interest entities
48.2 
 
74.4 
Borrowings related to variable interest entities
766.9 
 
519.9 
Variable interest entity amortized cost securities held
827.7 
 
 
Variable interest entity, gross unrealized gains fixed maturity securities
5.0 
 
 
Variable interest entity gross unrealized losses fixed maturity securities
3.3 
 
 
Variable interest entities net realized gain (loss) on investments
(0.1)
(0.2)
 
Variable interest entities net gains from sale of fixed maturity investments
0.3 
3.3 
 
Total other-than-temporary impairment losses on investments held by variable interest entities
0.4 
3.5 
 
Variable Interest Entities, Investments Sold
28.0 
 
 
Variable Interest Entity, Available For Sale Securities, Gross Investment Losses From Sale, Before Tax
(0.2)
 
 
Investments held in limited partnerships
28.3 
 
 
Unfunded committments to limited partnerships
20.0 
 
 
VIEs [Member]
 
 
 
Variable Interest Entity [Line Items]
 
 
 
Investments held by variable interest entities
829.4 
 
496.3 
Notes receivable of VIEs held by insurance subsidiaries
 
Cash and cash equivalents held by variable interest entities
48.2 
 
74.4 
Accrued investment income
3.9 
 
1.7 
Income tax assets, net
3.2 
 
6.8 
Other assets
10.9 
 
7.7 
Total assets
895.6 
 
586.9 
Other liabilities
52.0 
 
30.3 
Borrowings related to variable interest entities
766.9 
 
519.9 
Notes payable of VIEs held by insurance subsidiaries
82.5 
 
49.3 
Total liabilities
901.4 
 
599.5 
Eliminations [Member]
 
 
 
Variable Interest Entity [Line Items]
 
 
 
Investments held by variable interest entities
 
Notes receivable of VIEs held by insurance subsidiaries
(78.5)
 
(45.3)
Cash and cash equivalents held by variable interest entities
 
Accrued investment income
 
Income tax assets, net
(2.3)
 
(1.4)
Other assets
 
Total assets
(80.8)
 
(46.7)
Other liabilities
(2.3)
 
(0.1)
Borrowings related to variable interest entities
 
Notes payable of VIEs held by insurance subsidiaries
(82.5)
 
(49.3)
Total liabilities
(84.8)
 
(49.4)
Net Effect On Consolidated Balance Sheet [Member]
 
 
 
Variable Interest Entity [Line Items]
 
 
 
Investments held by variable interest entities
829.4 
 
496.3 
Notes receivable of VIEs held by insurance subsidiaries
(78.5)
 
(45.3)
Cash and cash equivalents held by variable interest entities
48.2 
 
74.4 
Accrued investment income
3.9 
 
1.7 
Income tax assets, net
0.9 
 
5.4 
Other assets
10.9 
 
7.7 
Total assets
814.8 
 
540.2 
Other liabilities
49.7 
 
30.2 
Borrowings related to variable interest entities
766.9 
 
519.9 
Notes payable of VIEs held by insurance subsidiaries
 
Total liabilities
816.6 
 
550.1 
Less Than Twelve Months [Member]
 
 
 
Variable Interest Entity [Line Items]
 
 
 
Fair value investments held by variable interest entity that had been in an unrealized loss position
228.8 
 
 
Gross unrealized losses on investments held by variable interest entity
1.7 
 
 
Greater Than Twelve Months [Member]
 
 
 
Variable Interest Entity [Line Items]
 
 
 
Fair value investments held by variable interest entity that had been in an unrealized loss position
74.7 
 
 
Gross unrealized losses on investments held by variable interest entity
$ 1.6 
 
 
INVESTMENTS IN VARIABLE INTEREST ENTITIES - SCHEDULE OF VIEs (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Investment Holdings [Line Items]
 
Total amortized cost
$ 827.7 
Total fair value
829.4 
Amortized Cost [Member]
 
Investment Holdings [Line Items]
 
Due in one year or less
3.0 
Due after one year through five years
413.8 
Due after five years through ten years
410.9 
Total amortized cost
827.7 
Estimated Fair Value [Member]
 
Investment Holdings [Line Items]
 
Due in one year or less
3.0 
Due after one year through five years
413.1 
Due after five years through ten years
413.3 
Total fair value
$ 829.4 
FAIR VALUE MEASUREMENTS - NARRATIVE (DETAILS)
9 Months Ended
Sep. 30, 2012
Fair Value Disclosures [Abstract]
 
Fair value of level 3 fixed maturity securities valued using broker quotes, percentage
22.00% 
Available for sale fixed maturities classified as level 3, investment grade, percent
89.00% 
Available for Sale Maturities with Significant Unobservable Inputs, Collateralized Debt Obligations, Percent
45.00% 
Available for sale fixed maturities classified as level 3, corporate securities, percent
43.00% 
FAIR VALUE MEASUREMENTS - CATEGORIZATION OF FAIR VALUE MEASUREMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Mortgage loans
$ 1,597.2 
$ 1,602.8 
Policy loans
274.1 
279.7 
Fair Value, Measurements, Recurring [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Mortgage loans
1,597.2 
1,602.8 
Policy loans
274.1 
279.7 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives
12,186.4 1
13,165.5 1
Investment borrowings
1,650.9 
1,676.5 
Borrowings related to variable interest entities
766.9 
519.9 
Notes Payable, Fair Value Disclosure
1,035.1 
857.9 
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Equity securities
20.5 
17.9 
Mortgage loans
 
Policy loans
 
Trading securities
0.9 
0.7 
Investments held by variable interest entities
 
Other invested assets
Cash and cash equivalents - unrestricted
202.0 
 
Cash and cash equivalents held by variable interest entities
48.2 
 
Assets held in separate accounts
Total assets carried at fair value by category
271.6 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
Total liabilities carried at fair value by category
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives
1
 
Investment borrowings
 
Borrowings related to variable interest entities
 
Notes Payable, Fair Value Disclosure
 
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
24,002.8 
22,682.9 2
Equity securities
119.2 
87.3 2
Mortgage loans
 
Policy loans
274.1 
 
Trading securities
190.9 
90.5 2
Investments held by variable interest entities
 
496.3 2
Other invested assets
210.4 
159.9 2 3
Cash and cash equivalents - unrestricted
213.3 
 
Cash and cash equivalents held by variable interest entities
 
Assets held in separate accounts
15.7 
15.0 2
Total assets carried at fair value by category
25,581.7 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
2
Total liabilities carried at fair value by category
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives
1
 
Investment borrowings
1,702.5 
 
Borrowings related to variable interest entities
748.3 
 
Notes Payable, Fair Value Disclosure
1,114.4 
 
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
739.5 
833.1 2
Equity securities
40.3 
69.9 2
Mortgage loans
1,718.3 
 
Policy loans
 
Trading securities
7.6 
0.4 2
Investments held by variable interest entities
 
2
Other invested assets
2
Cash and cash equivalents - unrestricted
 
Cash and cash equivalents held by variable interest entities
 
Assets held in separate accounts
2
Total assets carried at fair value by category
787.4 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
743.9 
669.8 2 4
Total liabilities carried at fair value by category
743.9 
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives
12,186.4 1
 
Investment borrowings
 
Borrowings related to variable interest entities
 
Notes Payable, Fair Value Disclosure
 
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
24,742.3 
23,516.0 
Equity securities
180.0 
175.1 
Mortgage loans
1,718.3 
1,735.4 
Policy loans
274.1 
279.7 
Trading securities
199.4 
91.6 
Investments held by variable interest entities
 
496.3 
Other invested assets
210.4 
159.9 
Cash and cash equivalents - unrestricted
415.3 
 
Cash and cash equivalents held by variable interest entities
48.2 
 
Assets held in separate accounts
15.7 
15.0 
Total assets carried at fair value by category
26,640.7 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
743.9 
669.8 
Total liabilities carried at fair value by category
743.9 
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Insurance liabilities for interest-sensitive products excluding embedded derivatives
12,186.4 1
13,165.5 1
Investment borrowings
1,702.5 
1,735.7 
Borrowings related to variable interest entities
748.3 
485.1 
Notes Payable, Fair Value Disclosure
1,114.4 
978.3 
Venture Capital Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Equity securities
 
Venture Capital Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Equity securities
 
Venture Capital Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Equity securities
38.1 
 
Venture Capital Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Equity securities
38.1 
 
Foreign Government Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Foreign Government Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
0.8 
1.4 2
Foreign Government Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2
Foreign Government Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
0.8 
1.4 
Corporate securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Equity securities
20.5 
 
Trading securities
Corporate securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
16,506.2 
15,594.4 2
Equity securities
119.2 
 
Trading securities
49.3 
67.6 2
Corporate securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
317.3 
278.1 2
Equity securities
2.2 
 
Trading securities
0.6 
2
Corporate securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
16,823.5 
15,872.5 
Equity securities
141.9 
 
Trading securities
49.9 
67.6 
US Treasury and Government [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
US Treasury and Government [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
171.1 
303.8 2
Trading securities
4.9 
4.9 2
US Treasury and Government [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
1.6 2
Trading securities
2
US Treasury and Government [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
171.1 
305.4 
Trading securities
4.9 
4.9 
US States and Political Subdivisions Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
US States and Political Subdivisions Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2,048.1 
1,952.3 2
Trading securities
17.1 
15.6 2
US States and Political Subdivisions Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2.1 2
Trading securities
2
US States and Political Subdivisions Debt Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2,048.1 
1,954.4 
Trading securities
17.1 
15.6 
Asset-backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
Asset-backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
1,433.9 
1,334.3 2
Trading securities
50.3 
0.1 2
Asset-backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
42.8 
79.7 2
Trading securities
2
Asset-backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
1,476.7 
1,414.0 
Trading securities
50.3 
0.1 
Collateralized Debt Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
 
Collateralized Debt Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2
Trading securities
 
Collateralized Debt Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
332.0 
327.3 2
Trading securities
7.0 
 
Collateralized Debt Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
332.0 
327.3 
Trading securities
7.0 
 
Commercial Mortgage Backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
Commercial Mortgage Backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
1,540.3 
1,415.7 2
Trading securities
43.6 
2
Commercial Mortgage Backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2.3 
17.3 2
Trading securities
0.4 2
Commercial Mortgage Backed Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
1,542.6 
1,433.0 
Trading securities
43.6 
0.4 
Mortgage Pass Through Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
Mortgage Pass Through Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
18.2 
29.8 2
Trading securities
0.2 
0.2 2
Mortgage Pass Through Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2.0 
2.2 2
Trading securities
2
Mortgage Pass Through Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
20.2 
32.0 
Trading securities
0.2 
0.2 
Collateralized Mortgage Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
Trading securities
Collateralized Mortgage Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2,284.2 
2,051.2 2
Trading securities
24.1 
0.7 2
Collateralized Mortgage Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
43.1 
124.8 2
Trading securities
2
Collateralized Mortgage Obligations [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Fixed maturities, available for sale
2,327.3 
2,176.0 
Trading securities
24.1 
0.7 
Equity Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Trading securities
0.9 
0.7 
Equity Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Trading securities
1.4 
1.4 2
Equity Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Trading securities
2
Equity Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Trading securities
2.3 
2.1 
Embedded Derivatives Associated with Fixed Index Annuity Products [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
 
Embedded Derivatives Associated with Fixed Index Annuity Products [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
 
Embedded Derivatives Associated with Fixed Index Annuity Products [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
737.9 
 
Embedded Derivatives Associated with Fixed Index Annuity Products [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
737.9 
 
Embedded Derivative Associated With Modified Coinsurance Agreement [Member]
 
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Embedded derivatives
6.0 
3.5 
Embedded Derivative Associated With Modified Coinsurance Agreement [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
 
Embedded Derivative Associated With Modified Coinsurance Agreement [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
 
Embedded Derivative Associated With Modified Coinsurance Agreement [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
6.0 
 
Embedded Derivative Associated With Modified Coinsurance Agreement [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Liabilities, Fair Value Disclosure [Abstract]
 
 
Liabilities For Interest Sensitive Products, Fair Value Disclosure
6.0 
 
Embedded Derivative Financial Instruments [Member]
 
 
Fair Value, Assets and Liabilities Meaured on Recurring Basis with Carrying Amount [Abstract]
 
 
Embedded derivatives
737.9 
666.3 
Company-Owned Life Insurance [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Company-Owned Life Insurance [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
112.3 
 
Company-Owned Life Insurance [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Company-Owned Life Insurance [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
112.3 
 
Hedge Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Hedge Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
16.3 
 
Hedge Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Hedge Funds [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
16.3 
 
Derivatives [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Derivatives [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
81.8 
 
Derivatives [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
 
Derivatives [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Other invested assets
81.8 
 
Cash [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
202.0 
 
Cash [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
 
Cash [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
 
Cash [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
202.0 
 
Cash Equivalents and Short-Term Investments [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
 
Cash Equivalents and Short-Term Investments [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
213.3 
 
Cash Equivalents and Short-Term Investments [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
 
Cash Equivalents and Short-Term Investments [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Cash and cash equivalents - unrestricted
213.3 
 
Corporate Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 1 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Investments held by variable interest entities
 
Corporate Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 2 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Investments held by variable interest entities
829.4 
 
Corporate Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Fair Value, Inputs, Level 3 [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Investments held by variable interest entities
 
Corporate Securities [Member] |
Fair Value, Measurements, Recurring [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Investments held by variable interest entities
$ 829.4 
 
FAIR VALUE MEASUREMENTS - UNOBSERVABLE INPUT RECONCILIATION (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
$ 698.2 1
$ 935.0 
$ 833.1 
$ 2,551.7 
Purchases, sales, issuances and settlements, net
18.3 2
(33.9)3
82.9 4
(240.9)5
Total realized and unrealized gains (losses) included in net income
0.1 
4.9 
(0.3)
(16.5)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
22.0 
0.1 
33.0 
16.9 
Transfers into level 3
59.4 
6.6 
68.0 
62.0 
Transfers out of level 3
(58.5)4
(161.2)
(277.2)1
(1,621.7)
Fair value, measurement with unobservable inputs reconciliation, ending balance
739.5 
751.5 
739.5 
751.5 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
(11.5)
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Purchases, sales, issuances and settlements, net
(1.0)
 
 
 
Trading Securities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
3.9 1
0.4 
0.4 
Purchases, sales, issuances and settlements, net
2.8 2
3
7.0 4
(0.4)5
Total realized and unrealized gains (losses) included in net income
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0.8 
0.1 
Transfers into level 3
0.6 
0.5 
Transfers out of level 3
(0.5)4
(0.4)1
Fair value, measurement with unobservable inputs reconciliation, ending balance
7.6 
7.6 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
0.8 
0.1 
Corporate securities [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
321.0 1
361.8 
278.1 
1,907.8 
Purchases, sales, issuances and settlements, net
14.0 2
(111.2)3
54.9 4
(289.0)5
Total realized and unrealized gains (losses) included in net income
4.9 
(16.1)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
7.3 
5.4 
9.4 
12.7 
Transfers into level 3
12.5 
0.5 
67.5 
39.0 
Transfers out of level 3
(37.5)4
(17.6)
(92.6)1
(1,410.6)
Fair value, measurement with unobservable inputs reconciliation, ending balance
317.3 
243.8 
317.3 
243.8 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
(11.5)
Corporate securities [Member] |
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
3.2 1
 
6.4 
 
Purchases, sales, issuances and settlements, net
(1.0)2
 
(1.0)4
 
Total realized and unrealized gains (losses) included in net income
 
(3.8)
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.6 
 
Transfers into level 3
 
 
Transfers out of level 3
4
 
1
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
2.2 
 
2.2 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
(3.8)
 
US Treasury and Government [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
1.5 1
1.7 
1.6 
2.0 
Purchases, sales, issuances and settlements, net
(1.5)2
3
(1.6)4
5
Total realized and unrealized gains (losses) included in net income
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.3)
Transfers into level 3
Transfers out of level 3
4
1
Fair value, measurement with unobservable inputs reconciliation, ending balance
1.7 
1.7 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
US States and Political Subdivisions Debt Securities [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
16.0 1
2.1 
2.5 
Purchases, sales, issuances and settlements, net
2
3
4
(2.8)5
Total realized and unrealized gains (losses) included in net income
(0.1)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0.1 
0.5 
Transfers into level 3
2.0 
2.0 
Transfers out of level 3
(16.0)4
(2.1)1
Fair value, measurement with unobservable inputs reconciliation, ending balance
2.1 
2.1 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
Asset-backed Securities [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
23.0 1
170.7 
79.7 
182.3 
Purchases, sales, issuances and settlements, net
15.0 2
1.2 3
11.4 4
(0.6)5
Total realized and unrealized gains (losses) included in net income
(0.2)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
5.5 
5.8 
2.5 
Transfers into level 3
4.1 
0.5 
15.1 
Transfers out of level 3
(0.7)4
(113.4)
(54.4)1
(136.7)
Fair value, measurement with unobservable inputs reconciliation, ending balance
42.8 
62.6 
42.8 
62.6 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
Collateralized debt obligations [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
330.1 1
193.5 
327.3 
256.5 
Purchases, sales, issuances and settlements, net
(6.3)2
72.7 3
(11.6)4
3.5 5
Total realized and unrealized gains (losses) included in net income
1.8 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
8.2 
(6.1)
16.3 
(1.7)
Transfers into level 3
Transfers out of level 3
4
1
Fair value, measurement with unobservable inputs reconciliation, ending balance
332.0 
260.1 
332.0 
260.1 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
Mortgage Pass Through Securities [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
2.1 1
3.2 
2.2 
3.5 
Purchases, sales, issuances and settlements, net
(0.1)2
(0.2)3
(0.2)4
(0.5)5
Total realized and unrealized gains (losses) included in net income
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
Transfers into level 3
Transfers out of level 3
4
1
Fair value, measurement with unobservable inputs reconciliation, ending balance
2.0 
3.0 
2.0 
3.0 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
Collateralized Mortgage Obligations [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
4.5 1
204.1 
124.8 
197.1 
Purchases, sales, issuances and settlements, net
(2.8)2
3.6 3
30.0 4
48.5 5
Total realized and unrealized gains (losses) included in net income
0.1 
(0.1)
(2.1)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
1.0 
0.7 
1.4 
3.2 
Transfers into level 3
44.6 
5.9 
Transfers out of level 3
(4.3)4
(30.2)
(113.0)1
(74.4)
Fair value, measurement with unobservable inputs reconciliation, ending balance
43.1 
178.2 
43.1 
178.2 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
Equity Securities [Member] |
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
61.2 1
44.6 
69.9 
6.9 
Purchases, sales, issuances and settlements, net
(1.0)2
27.3 3
(1.0)4
64.0 5
Total realized and unrealized gains (losses) included in net income
(23.1)
(29.8)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
3.2 
(0.3)
1.2 
0.7 
Transfers into level 3
Transfers out of level 3
4
1
Fair value, measurement with unobservable inputs reconciliation, ending balance
40.3 
71.6 
40.3 
71.6 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
(23.1)
(29.8)
Venture Capital Funds [Member] |
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
58.0 1
 
63.5 
 
Purchases, sales, issuances and settlements, net
2
 
4
 
Total realized and unrealized gains (losses) included in net income
(23.1)
 
(26.0)
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
3.2 
 
0.6 
 
Transfers into level 3
 
 
Transfers out of level 3
4
 
1
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
38.1 
 
38.1 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
(23.1)
 
(26.0)
 
Commercial Mortgage Backed Securities [Member] |
Fixed maturities, available for sale [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
17.3 
 
Purchases, sales, issuances and settlements, net
4
 
 
Total realized and unrealized gains (losses) included in net income
 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.1 
 
Transfers into level 3
2.3 
 
 
Transfers out of level 3
1
 
(15.1)
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
2.3 
 
2.3 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
 
Interest Sensitive Products [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
(15.3)
(44.8)
(22.0)
(53.7)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliations, liability value, beginning balance
(705.9)1
(613.4)
(669.8)
(553.2)
Purchases, sales, issuances and settlements, net
(22.7)2
16.3 3
(52.1)4
(35.0)5
Total realized and unrealized gains (losses) included in net income
(15.3)
(44.8)
(22.0)
(53.7)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
Transfers into level 3
Transfers out of level 3
4
1
Fair value, measurement with unobservable inputs reconciliations, liability value, ending balance
(743.9)
(641.9)
(743.9)
(641.9)
US States and Political Subdivisions Debt Securities [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
0.5 1
 
 
Purchases, sales, issuances and settlements, net
2
 
4
 
Total realized and unrealized gains (losses) included in net income
 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
 
Transfers into level 3
 
 
Transfers out of level 3
(0.5)4
 
1
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
 
Collateralized Debt Obligations [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
3.4 1
 
 
Purchases, sales, issuances and settlements, net
2.8 2
 
7.0 4
 
Total realized and unrealized gains (losses) included in net income
 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0.8 
 
 
Transfers into level 3
 
 
Transfers out of level 3
4
 
1
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
7.0 
 
7.0 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
0.8 
 
 
Corporate securities [Member] |
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Purchases, sales, issuances and settlements, net
 
 
(1.0)
 
Corporate securities [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
1
 
 
Purchases, sales, issuances and settlements, net
4
 
 
Total realized and unrealized gains (losses) included in net income
 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.1 
 
Transfers into level 3
0.6 
 
0.5 
 
Transfers out of level 3
1
 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
0.6 
 
0.6 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
0.1 
 
Collateralized Mortgage Obligations [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
0.4 
0.4 
Purchases, sales, issuances and settlements, net
 
3
4
(0.4)5
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into level 3
 
Transfers out of level 3
 
(0.4)1
Fair value, measurement with unobservable inputs reconciliation, ending balance
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
Corporate Securities [Member] |
Corporate Securities Held By Variable Interest Entities [Member] |
Investments Held By Variable Interest Entities [Member]
 
 
 
 
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
 
6.7 
Purchases, sales, issuances and settlements, net
 
3
 
(7.9)5
Total realized and unrealized gains (losses) included in net income
 
 
1.5 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
 
(0.3)
Transfers into level 3
 
 
Transfers out of level 3
 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
 
Amount of total gains (losses) included in net income related to assets and liabilities still held at the reporting date
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
 
Purchases, sales, issuances and settlements, net
 
 
 
$ (7.9)
[2] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2012 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$27.0 $(13.0) $— $— $14.0United States Treasury securities and obligations of United States government corporations and agencies— (1.5) — — (1.5)Asset-backed securities15.0 — — — 15.0Collateralized debt obligations— (6.3) — — (6.3)Mortgage pass-through securities— (.1) — — (.1)Collateralized mortgage obligations11.0 (13.8) — — (2.8)Total fixed maturities, available for sale53.0 (34.7) — — 18.3Equity securities - corporate securities— (1.0) — — (1.0)Trading securities - collateralized debt obligations2.8 — — — 2.8Liabilities: Liabilities for insurance products: Interest-sensitive products(23.5) .2 (10.2) 10.8 (22.7)
[3] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2011 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$1.8 $(113.0) $— $— $(111.2)Asset-backed securities4.2 (3.0) — — 1.2Collateralized debt obligations84.2 (11.5) — — 72.7Mortgage pass-through securities— (.2) — — (.2)Collateralized mortgage obligations20.5 (16.9) — — 3.6Total fixed maturities, available for sale110.7 (144.6) — — (33.9)Equity securities27.3 — — — 27.3Liabilities: Liabilities for insurance products: Interest-sensitive products(33.1) 41.7 (2.6) 10.3 16.3
[5] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2011 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$1.8 $(290.8) $— $— $(289.0)States and political subdivisions— (2.8) — — (2.8)Asset-backed securities4.1 (4.7) — — (.6)Collateralized debt obligations106.6 (103.1) — — 3.5Mortgage pass-through securities— (.5) — — (.5)Collateralized mortgage obligations94.5 (46.0) — — 48.5Total fixed maturities, available for sale207.0 (447.9) — — (240.9)Equity securities64.0 — — — 64.0Trading securities: Collateralized mortgage obligations— (.4) — — (.4)Investments held by variable interest entities: Corporate securities— (7.9) — — (7.9)Liabilities: Liabilities for insurance products: Interest-sensitive products(85.5) 51.8 (28.4) 27.1 (35.0)
FAIR VALUE MEASUREMENTS - UNOBSERVABLE INPUT ACTIVITY (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Available-for-sale Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
$ 53.0 
$ 110.7 
$ 160.7 
$ 207.0 
Sales
(34.7)
(144.6)
(77.8)
(447.9)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
18.3 1
(33.9)2
82.9 3
(240.9)4
Available-for-sale Securities [Member] |
Corporate Debt Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
27.0 
1.8 
70.3 
1.8 
Sales
(13.0)
(113.0)
(15.4)
(290.8)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
14.0 1
(111.2)2
54.9 3
(289.0)4
Available-for-sale Securities [Member] |
US Treasury and Government [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
Sales
(1.5)
 
(1.6)
 
Issuances
 
 
Settlements
 
 
Purchases, sales, issuances and settlements, net
(1.5)1
2
(1.6)3
4
Available-for-sale Securities [Member] |
US States and Political Subdivisions Debt Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
 
Sales
 
 
 
(2.8)
Issuances
 
 
 
Settlements
 
 
 
Purchases, sales, issuances and settlements, net
1
2
3
(2.8)4
Available-for-sale Securities [Member] |
Asset-backed Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
15.0 
4.2 
15.0 
4.1 
Sales
(3.0)
(3.6)
(4.7)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
15.0 1
1.2 2
11.4 3
(0.6)4
Available-for-sale Securities [Member] |
Collateralized Debt Obligations [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
84.2 
30.1 
106.6 
Sales
(6.3)
(11.5)
(41.7)
(103.1)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
(6.3)1
72.7 2
(11.6)3
3.5 4
Available-for-sale Securities [Member] |
Mortgage Pass Through Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
Sales
(0.1)
(0.2)
(0.2)
(0.5)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
(0.1)1
(0.2)2
(0.2)3
(0.5)4
Available-for-sale Securities [Member] |
Collateralized Mortgage Obligations [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
11.0 
20.5 
45.3 
94.5 
Sales
(13.8)
(16.9)
(15.3)
(46.0)
Issuances
Settlements
Purchases, sales, issuances and settlements, net
(2.8)1
3.6 2
30.0 3
48.5 4
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Sales
(1.0)
 
 
 
Issuances
 
 
 
Settlements
 
 
 
Purchases, sales, issuances and settlements, net
(1.0)
 
 
 
Equity Securities Classification [Member] |
Equity Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
27.3 
 
64.0 
Sales
 
 
Issuances
 
 
Settlements
 
 
Purchases, sales, issuances and settlements, net
(1.0)1
27.3 2
(1.0)3
64.0 4
Equity Securities Classification [Member] |
Corporate Debt Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
 
Purchases, sales, issuances and settlements, net
(1.0)1
 
(1.0)3
 
Trading Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases, sales, issuances and settlements, net
2.8 1
2
7.0 3
(0.4)4
Collateralized Mortgage Obligations [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
 
Sales
 
 
 
(0.4)
Issuances
 
 
 
Settlements
 
 
 
Purchases, sales, issuances and settlements, net
 
2
3
(0.4)4
Collateralized Debt Obligations [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
2.8 
 
7.0 
 
Sales
 
 
Issuances
 
 
Settlements
 
 
Purchases, sales, issuances and settlements, net
2.8 1
 
7.0 3
 
Corporate Debt Securities [Member] |
Equity Securities Classification [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
 
Sales
 
 
(1.0)
 
Issuances
 
 
 
Settlements
 
 
 
Purchases, sales, issuances and settlements, net
 
 
(1.0)
 
Corporate Debt Securities [Member] |
Trading Securities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases, sales, issuances and settlements, net
3
 
 
Interest Sensitive Products [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
(23.5)
(33.1)
(75.3)
(85.5)
Sales
0.2 
41.7 
41.9 
51.8 
Issuances
(10.2)
(2.6)
(50.6)
(28.4)
Settlements
10.8 
10.3 
31.9 
27.1 
Purchases, sales, issuances and settlements, net
(22.7)1
16.3 2
(52.1)3
(35.0)4
Corporate Securities [Member] |
Investments Held By Variable Interest Entities [Member] |
Corporate Securities Held By Variable Interest Entities [Member]
 
 
 
 
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases, sales, issuances and settlements, net
 
2
 
(7.9)4
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, Sales, Issues, Settlements [Abstract]
 
 
 
 
Purchases
 
 
 
Sales
 
 
 
(7.9)
Issuances
 
 
 
Settlements
 
 
 
Purchases, sales, issuances and settlements, net
 
 
 
$ (7.9)
[1] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2012 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$27.0 $(13.0) $— $— $14.0United States Treasury securities and obligations of United States government corporations and agencies— (1.5) — — (1.5)Asset-backed securities15.0 — — — 15.0Collateralized debt obligations— (6.3) — — (6.3)Mortgage pass-through securities— (.1) — — (.1)Collateralized mortgage obligations11.0 (13.8) — — (2.8)Total fixed maturities, available for sale53.0 (34.7) — — 18.3Equity securities - corporate securities— (1.0) — — (1.0)Trading securities - collateralized debt obligations2.8 — — — 2.8Liabilities: Liabilities for insurance products: Interest-sensitive products(23.5) .2 (10.2) 10.8 (22.7)
[2] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2011 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$1.8 $(113.0) $— $— $(111.2)Asset-backed securities4.2 (3.0) — — 1.2Collateralized debt obligations84.2 (11.5) — — 72.7Mortgage pass-through securities— (.2) — — (.2)Collateralized mortgage obligations20.5 (16.9) — — 3.6Total fixed maturities, available for sale110.7 (144.6) — — (33.9)Equity securities27.3 — — — 27.3Liabilities: Liabilities for insurance products: Interest-sensitive products(33.1) 41.7 (2.6) 10.3 16.3
[4] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2011 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$1.8 $(290.8) $— $— $(289.0)States and political subdivisions— (2.8) — — (2.8)Asset-backed securities4.1 (4.7) — — (.6)Collateralized debt obligations106.6 (103.1) — — 3.5Mortgage pass-through securities— (.5) — — (.5)Collateralized mortgage obligations94.5 (46.0) — — 48.5Total fixed maturities, available for sale207.0 (447.9) — — (240.9)Equity securities64.0 — — — 64.0Trading securities: Collateralized mortgage obligations— (.4) — — (.4)Investments held by variable interest entities: Corporate securities— (7.9) — — (7.9)Liabilities: Liabilities for insurance products: Interest-sensitive products(85.5) 51.8 (28.4) 27.1 (35.0)
FAIR VALUE MEASUREMENTS - ADDITIONAL INFORMATION (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Equity Securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Equity Securities [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
Estimate of Fair Value, Fair Value Disclosure [Member]
Sep. 30, 2012
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Minimum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Minimum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Minimum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Minimum [Member]
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Maximum [Member]
Corporate securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Maximum [Member]
Asset-backed securities [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Maximum [Member]
Collateralized debt obligations [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Maximum [Member]
Venture capital investments [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Interest Sensitive Products [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Interest Sensitive Products [Member]
Minimum [Member]
Fair Value, Inputs, Level 3 [Member]
Sep. 30, 2012
Interest Sensitive Products [Member]
Maximum [Member]
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
$ 28,087.4 
$ 26,364.3 
 
$ 787.4 
 
$ 212.4 1
 
$ 33.0 2
 
$ 339.0 3
 
$ 2.2 4
 
$ 38.1 5
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Investments
265.0 
202.8 
 
162.7 6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities For Interest Sensitive Products
$ 12,930.3 
$ 13,165.5 
 
$ 743.9 7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Discount Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.95% 
2.96% 
1.30% 
 
 
3.27% 
3.28% 
10.00% 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Discount Rate
 
 
 
 
2.78% 
 
3.15% 
 
2.39% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Recoveries
 
 
 
 
 
 
 
 
 
 
21.00% 
 
 
 
 
 
 
61.00% 
 
 
 
 
66.00% 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Constant Prepayment Rate
 
 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Annual Default Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.32% 
 
 
 
 
5.81% 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Annual Default Rate
 
 
 
 
 
 
 
 
3.27% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Portfolio CCC Percent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.90% 
 
 
 
 
22.17% 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Portfolio CCC Percent
 
 
 
 
 
 
 
 
12.78% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, EBITDA Multiple
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.8 
 
 
 
 
29.0 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average EBITDA Multiple
 
 
 
 
 
 
 
 
 
 
 
 
11.46 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Revenue Multiple
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.9 
 
 
 
 
7.0 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Revenue Multiple
 
 
 
 
 
 
 
 
 
 
 
 
4.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Book Equity Multiple
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.8 
 
 
 
 
3.8 
 
 
 
Investments, Fair Value Disclosure, Significant Assumptions, Weighted Average Book Equity Multiple
 
 
 
 
 
 
 
 
 
 
 
 
2.3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities, Fair Value Disclosure, Significant Assumptions, Projected Portfolio Yields
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.35% 
5.61% 
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Projected Portfolio Yields
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.55% 
 
 
Liabilities, Fair Value Disclosure, Significant Assumptions, Discount Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.00% 
 
 
 
 
3.50% 
 
 
 
 
 
 
 
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Discount Rates
 
 
1.30% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities, Fair Value Disclosure, Significant Assumptions, Surrender Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.00% 
 
 
 
 
43.00% 
 
 
 
 
 
 
 
Liabilities, Fair Value Disclosure, Significant Assumptions, Weighted Average Surrender Rates
 
 
19.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[3] Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.