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1. Nature of Operations and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Principal Financial Group, Inc. (“PFG”) have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. These interim unaudited consolidated financial statements should be read in conjunction with our annual audited financial statements as of December 31, 2015, included in our Form 10-K for the year ended December 31, 2015, filed with the United States Securities and Exchange Commission (“SEC”). The accompanying consolidated statement of financial position as of December 31, 2015, has been derived from the audited consolidated statement of financial position but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Consolidation
We have relationships with various special purpose entities and other legal entities that must be evaluated to determine if the entities meet the criteria of a variable interest entity (“VIE”) or a voting interest entity (“VOE”). This assessment is performed by reviewing contractual, ownership and other rights, including involvement of related parties, and requires use of judgment. First, we determine if we hold a variable interest in an entity by assessing if we have the right to receive expected losses and expected residual returns of the entity. If we hold a variable interest, then the entity is assessed to determine if it is a VIE. An entity is a VIE if the equity at risk is not sufficient to support its activities, if the equity holders lack a controlling financial interest or if the entity is structured with non-substantive voting rights. In addition to the previous criteria, if the entity is a limited partnership or similar entity, it is a VIE if the limited partners do not have the power to direct the entity’s most significant activities through substantive kick-out rights or participating rights. A VIE is evaluated to determine the primary beneficiary. The primary beneficiary of a VIE is the enterprise with (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When we are the primary beneficiary, we are required to consolidate the entity in our financial statements. We reassess our involvement with VIEs on a quarterly basis. For further information about VIEs, refer to Note 2, Variable Interest Entities.
If an entity is not a VIE, it is considered a VOE. VOEs are generally consolidated if we own a greater than 50% voting interest. If we determine our involvement in an entity no longer meets the requirements for consolidation under either the VIE or VOE models, the entity is deconsolidated. Entities in which we have significant management influence over the operating and financing decisions but are not required to consolidate, other than investments accounted for at fair value under the fair value option, are reported using the equity method.
Recent Accounting Pronouncements
Description |
Date of |
Effect on our |
Standards not yet adopted: |
||
Credit Losses |
January 1, 2020 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Leases |
January 1, 2019 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Financial instruments - recognition and measurements |
January 1, 2018 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Revenue recognition |
January 1, 2018 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Employee share-based payment accounting |
January 1, 2017 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Short-duration insurance contracts |
December 31, 2016 |
We are currently evaluating the impact this guidance will have on our consolidated financial statements. |
Standards adopted: |
||
Net asset value per share as a practical expedient for fair value |
January 1, 2016 |
The guidance was adopted |
Simplifying the presentation of debt issuance costs |
January 1, 2016 |
The guidance was adopted retrospectively and did not have a material impact on our consolidated financial statements. See Note 5, Long-Term Debt, for further details. |
Consolidations |
January 1, 2016 |
The guidance was adopted using the modified retrospective approach. See Note 2, Variable Interest Entities, for further details. |
Discontinued operations |
January 1, 2015 |
This guidance was adopted prospectively and did not have a material impact on our consolidated financial statements. |
Fair value of financial assets and liabilities of a consolidated collateralized financing entity |
January 1, 2015 |
This guidance was adopted using a modified retrospective approach and did not have a material impact on our consolidated financial statements. See Note 10, Fair Value Measurements, for further details. |
Separate Accounts
The separate accounts are legally segregated and are not subject to the claims that arise out of any of our other business. The client, rather than us, directs the investments and bears the investment risk of these funds. The separate account assets represent the fair value of funds that are separately administered by us for contracts with equity, real estate and fixed income investments and are presented as a summary total within the consolidated statements of financial position. An equivalent amount is reported as separate account liabilities, which represent the obligation to return the monies to the client. We receive fees for mortality, withdrawal and expense risks, as well as administrative, maintenance and investment advisory services that are included in the consolidated statements of operations. Net deposits, net investment income and realized and unrealized capital gains and losses of the separate accounts are not reflected in the consolidated statements of operations.
Separate account assets and separate account liabilities include certain international retirement accumulation products where the segregated funds and associated obligation to the client are consolidated within our financial statements. We have determined that summary totals are the most meaningful presentation for these funds.
As of June 30, 2016 and December 31, 2015, the separate account assets included a separate account valued at $126.4 million and $158.2 million, respectively, which primarily included shares of our stock that were allocated and issued to eligible participants of qualified employee benefit plans administered by us as part of the policy credits issued under our 2001 demutualization. These shares are included in both basic and diluted earnings per share calculations. In the consolidated statements of financial position, the separate account shares are recorded at fair value and are reported as separate account assets with a corresponding separate account liability to eligible participants of the qualified plan. Changes in fair value of the separate account shares are reflected in both the separate account assets and separate account liabilities and do not impact our results of operations.
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2. Variable Interest Entities
We have relationships with various types of entities which may be VIEs. Certain VIEs are consolidated in our financial results. See Note 1, Nature of Operations and Significant Accounting Policies, under the caption “Consolidation” for further details of our consolidation accounting policies. We did not provide financial or other support to investees designated as VIEs for the periods ended June 30, 2016 and December 31, 2015.
Adoption of New Consolidation Guidance
Both the variable interest and voting interest consolidation models were changed under authoritative guidance effective January 1, 2016. The guidance eliminated the investment company deferral for portions of the variable interest model. Prior to January 1, 2016, the primary beneficiary of an investment company VIE was the enterprise who absorbed the majority of the entity’s expected losses, received a majority of the expected residual returns or both. The new guidance requires all VIEs to be assessed under one method to determine the primary beneficiary.
The determination of whether interests in limited partnerships and similar entities are VIEs or VOEs has also changed under the pronouncement, by requiring evaluation of the equity holders’ rights to determine if they have the power to direct the entity’s most significant activities through substantive kick-out rights or participating rights. Limited partnerships and similar entities without these rights are VIEs.
We adopted the guidance using the modified retrospective approach effective January 1, 2016. Under the modified retrospective approach, the cumulative effect of initially applying the new guidance is recognized as of the date of initial application, and comparative periods are not restated. The changes resulting from the adoption were:
· |
The adoption resulted in the deconsolidation of $8.6 billion of both assets and liabilities of certain mandatory privatized social security funds in which we provide asset management services. Prior to January 1, 2016, the funds were consolidated as VOEs and the funds were presented in separate account assets and liabilities in the statement of financial position. The deconsolidation did not have a material impact to our consolidated statements of operations and did not result in a cumulative effect of the change on retained earnings. |
· |
The adoption of the guidance resulted in consolidation of certain sponsored investment funds in which we provide asset management services. We consolidated $180.1 million of assets and $0.6 million of liabilities. Additionally, we recorded $179.5 million of redeemable noncontrolling interest related to these funds. The consolidation of these funds did not have a material impact to our consolidated statements of operations and did not result in a cumulative effect of the change on retained earnings. |
· |
We invest in partnerships and other funds. Prior to new accounting guidance certain of these investments were VOEs. Upon adoption of new accounting guidance, some of these investments are now considered VIEs. We are not the primary beneficiary of these VIEs. |
· |
We provide asset management and other services to certain investment structures for which we earn performance-based management fees. These structures were considered VIEs prior to new accounting guidance, and we had a variable interest. We were not the primary beneficiary of these entities as we did not have the obligation to absorb losses or the right to receive benefits of the entities that could be potentially significant to the VIE. Subsequent to new accounting guidance, we no longer consider our fees a variable interest for those investment structures where our fees are deemed to be commensurate with the services provided, consistent with fees for similar services negotiated at arms-length, and we do not have additional interests in the entity that would absorb a significant amount of the entity’s expected losses and expected residual returns of the entity. |
Consolidated Variable Interest Entities
Grantor Trusts
We contributed undated subordinated floating rate notes to three grantor trusts. The trusts separated their cash flows by issuing an interest-only certificate and a residual certificate related to each note contributed. Each interest-only certificate entitles the holder to interest on the stated note for a specified term, while the residual certificate entitles the holder to interest payments subsequent to the term of the interest-only certificate and to all principal payments. We retained the interest-only certificates and the residual certificates were subsequently sold to third parties. We have determined these grantor trusts are VIEs due to insufficient equity to sustain them. We determined we are the primary beneficiary as a result of our contribution of securities into the trusts and our significant continuing interest in the trusts.
Collateralized Private Investment Vehicles
We invest in cash and synthetic collateralized debt obligations, collateralized bond obligations, collateralized loan obligations and other collateralized structures, which are VIEs due to insufficient equity to sustain the entities (collectively known as “collateralized private investment vehicles”). The performance of the notes of these synthetic structures is primarily linked to a synthetic portfolio by derivatives; each note has a specific loss attachment and detachment point. The notes and related derivatives are collateralized by a pool of permitted investments. The investments are held by a trustee and can only be liquidated to settle obligations of the trusts. These obligations primarily include derivatives and the notes due at maturity or termination of the trusts. We determined we are the primary beneficiary for one of these synthetic entities because we act as the investment manager of the underlying portfolio and we have the power to make decisions and to receive benefits and the obligation to absorb losses that could be potentially significant to the VIE.
Commercial Mortgage-Backed Securities
We sold commercial mortgage loans to a real estate mortgage investment conduit trust. The trust issued various commercial mortgage-backed securities (“CMBS”) certificates using the cash flows of the underlying commercial mortgages it purchased. This is considered a VIE due to insufficient equity to sustain itself. We have determined we are the primary beneficiary as we retained the special servicing role for the assets within the trust as well as the ownership of the bond class that controls the unilateral kick-out rights of the special servicer.
Mandatory Retirement Savings Funds
We hold an equity interest in Chilean mandatory privatized social security funds in which we provide asset management services. We determined that the mandatory privatized social security funds, which also include contributions for voluntary pension savings, voluntary non-pension savings and compensation savings accounts, are VIEs. This is because the equity holders as a group lack the power, due to voting rights or similar rights, to direct the activities of the entity that most significantly impact the entity’s economic performance and also because equity investors are protected from below-average market investment returns relative to the industry’s return, due to a regulatory guarantee that we provide. Further we concluded that we are the primary beneficiary through our power to make decisions and our significant variable interest in the funds. The purpose of the funds, which reside in legally segregated entities, is to provide long-term retirement savings. The obligation to the customer is directly related to the assets held in the funds and, as such, we present the assets as separate account assets and the obligation as separate account liabilities within our consolidated statements of financial position.
Principal International Hong Kong offers retirement pension schemes in which we provide trustee, administration and asset management services to employers and employees under the Hong Kong Mandatory Provident Fund (“MPF”) and Occupational Retirement Schemes Ordinance (“ORSO”) pension schemes. Each pension scheme has various guaranteed and non-guaranteed constituent funds, or investment options, in which customers can invest their money. The guaranteed funds provide either a guaranteed rate of return to the customer or a minimum guarantee on withdrawals under certain qualifying events. We have determined the guaranteed funds are VIEs due to the fact the equity holders, as a group, lack the obligation to absorb expected losses due to the guarantee we provide. We concluded that we are the primary beneficiary because we have the power to make decisions and to receive benefits and the obligation to absorb losses that could be potentially significant to the VIE. Therefore, we consolidate the underlying assets and liabilities of the funds and present as separate accounts or within the general account, depending on the terms of the guarantee.
Real Estate
We invest in several real estate limited partnerships and limited liability companies. The entities invest in real estate properties. Certain of these entities are VIEs based on the combination of our significant economic interest and related voting rights. We determined we are the primary beneficiary as a result of our power to control the entities through our significant ownership. Due to the nature of these real estate investments, the investment balance will fluctuate as we purchase and sell interests in the entities and as capital expenditures are made to improve the underlying real estate.
Sponsored Investment Funds
We sponsor and invest in certain investment funds for which we provide asset management services. Although our asset management fee is commensurate with the services provided and consistent with fees for similar services negotiated at arms-length, we have a variable interest for funds where our other interests are more than insignificant. The funds are VIEs as the equity holders lack power through voting rights to direct the activities of the entity that most significantly impact its economic performance. We determined we are the primary beneficiary of the VIEs where our interest in the entity is more than insignificant and we are the asset manager.
Assets and Liabilities of Consolidated Variable Interest Entities
The carrying amounts of our consolidated VIE assets, which can only be used to settle obligations of consolidated VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse are as follows:
|
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June 30, 2016 |
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December 31, 2015 |
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Total |
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Total |
|
Total |
|
Total |
||||
|
|
assets |
|
liabilities |
|
assets |
|
liabilities |
||||
|
|
(in millions) |
||||||||||
Grantor trusts (1) |
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$ |
243.2 |
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$ |
229.1 |
|
$ |
257.9 |
|
$ |
231.8 |
Collateralized private investment vehicles (2) |
|
82.4 |
|
65.3 |
|
100.4 |
|
85.9 | ||||
CMBS |
|
15.1 |
|
— |
|
18.4 |
|
— |
||||
Mandatory retirement savings funds (3) |
|
36,518.8 |
|
36,186.8 |
|
33,941.3 |
|
33,639.3 | ||||
Real estate (4) |
|
428.3 |
|
66.1 |
|
384.2 |
|
71.3 | ||||
Sponsored investment funds (5) |
|
379.3 |
|
3.4 |
|
— |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
37,667.1 |
|
$ |
36,550.7 |
|
$ |
34,702.2 |
|
$ |
34,028.3 |
|
|
|
|
|
|
|
|
|
|
|
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(1) |
The assets of grantor trusts are primarily fixed maturities, available-for-sale. The liabilities are primarily other liabilities that reflect an embedded derivative of the forecasted transaction to deliver the underlying securities. |
(2) |
The assets of the collateralized private investment vehicles are primarily fixed maturities, trading. The liabilities include derivative liabilities and an obligation to redeem notes at maturity or termination of the trusts, which are reported in other liabilities. |
(3) |
The assets of the mandatory retirement savings funds include separate account assets and equity securities, trading. The liabilities include separate account liabilities and contractholder funds. |
(4) |
The assets of the real estate VIEs primarily include real estate, other investments and cash. Liabilities primarily include long-term debt and other liabilities. |
(5) |
The assets of sponsored investment funds are primarily fixed maturities and equity securities reported in other investments and cash. The consolidated statements of financial position included a $266.6 million redeemable noncontrolling interest for sponsored investment funds as of June 30, 2016. |
Unconsolidated Variable Interest Entities
Invested Securities
We hold a variable interest in a number of VIEs where we are not the primary beneficiary. Our investments in these VIEs are reported in fixed maturities, available-for-sale; fixed maturities, trading; equity securities, trading and other investments in the consolidated statements of financial position and are described below.
Unconsolidated VIEs include certain CMBS, residential mortgage-backed pass-through securities (“RMBS”) and other asset-backed securities (“ABS”). All of these entities were deemed VIEs because the equity within these entities is insufficient to sustain them. We determined we are not the primary beneficiary in the entities within these categories of investments. This determination was based primarily on the fact we do not own the class of security that controls the unilateral right to replace the special servicer or equivalent function.
As previously discussed, we invest in several types of collateralized private investment vehicles, which are VIEs. These include cash and synthetic structures that we do not manage. We have determined we are not the primary beneficiary of these collateralized private investment vehicles primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.
We have invested in various VIE trusts as a debt holder. All of these entities are classified as VIEs due to insufficient equity to sustain them. We have determined we are not the primary beneficiary primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.
We have invested in partnerships and other funds, which are classified as VIEs. The entities are VIEs as equity holders lack the power to control the most significant activities of the entities because the equity holders do not have either the ability by a simple majority to exercise substantive kick-out rights or substantive participating rights. We have determined we are not the primary beneficiary because we do not have the power to direct the most significant activities of the entities.
We hold an equity interest in Mexican mandatory privatized social security funds in which we provide asset management services. Our equity interest in the funds is considered a variable interest. We concluded the funds are VIEs because the equity holders as a group lack decision-making ability through their voting rights. We are not the primary beneficiary of the VIEs because although we, as the asset manager, have the power to direct the activities of the VIEs, we do not have a potentially significant variable interest in the funds.
The carrying value and maximum loss exposure for our unconsolidated VIEs were as follows:
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Maximum exposure to |
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Asset carrying value |
|
loss (1) |
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(in millions) |
||||
June 30, 2016 |
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Fixed maturities, available-for-sale: |
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|
|
|
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Corporate |
|
$ |
380.6 |
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$ |
290.7 |
Residential mortgage-backed pass-through securities |
|
2,819.7 |
|
2,689.4 | ||
Commercial mortgage-backed securities |
|
4,330.6 |
|
4,302.5 | ||
Collateralized debt obligations |
|
871.8 |
|
898.8 | ||
Other debt obligations |
|
4,821.7 |
|
4,758.0 | ||
Fixed maturities, trading: |
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|
|
|
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Residential mortgage-backed pass-through securities |
|
22.8 |
|
22.8 | ||
Commercial mortgage-backed securities |
|
2.7 |
|
2.7 | ||
Collateralized debt obligations |
|
35.5 |
|
35.5 | ||
Equity securities, trading |
|
77.0 |
|
77.0 | ||
Other investments: |
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|
|
|
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Other limited partnership and fund interests |
|
698.4 |
|
1,220.3 | ||
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|
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|
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December 31, 2015 |
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|
|
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Fixed maturities, available-for-sale: |
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|
|
|
||
Corporate |
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$ |
453.4 |
|
$ |
359.8 |
Residential mortgage-backed pass-through securities |
|
2,627.5 |
|
2,549.4 | ||
Commercial mortgage-backed securities |
|
3,919.8 |
|
3,932.5 | ||
Collateralized debt obligations |
|
667.5 |
|
692.7 | ||
Other debt obligations |
|
4,530.8 |
|
4,527.3 | ||
Fixed maturities, trading: |
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|
|
|
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Residential mortgage-backed pass-through securities |
|
25.9 |
|
25.9 | ||
Commercial mortgage-backed securities |
|
2.3 |
|
2.3 | ||
Collateralized debt obligations |
|
35.1 |
|
35.1 | ||
Other investments: |
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|
|
|
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Other limited partnership and fund interests |
|
255.6 |
|
255.6 |
(1) |
Our risk of loss is limited to our initial investment measured at amortized cost for fixed maturities, available-for-sale. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading and equity securities, trading. Our risk of loss is limited to our carrying value plus any unfunded commitments and/or guarantees for our other investments. Unfunded commitments are not liabilities on our consolidated statements of financial position because we are only required to fund additional equity when called upon to do so by the general partner or investment manager. |
Money Market Funds
We are the investment manager for certain money market mutual funds. Prior to new accounting guidance effective January 1, 2016, these funds were deemed to be VIEs. Under the prior guidance we were not considered the primary beneficiary of these VIEs since our involvement is limited primarily to being a service provider, and our variable interest does not absorb the majority of the variability of the entities’ net assets.
Effective January 1, 2016, new accounting guidance provides a scope exception for money market funds registered under Rule 2a-7 of the Investment Company Act of 1940 or similar funds. The scope exception eliminates the requirement to assess money market mutual funds under any consolidation model.
As of June 30, 2016 and December 31, 2015, these funds held $1.0 billion and $1.3 billion in total assets, respectively. We have no contractual obligation to contribute to the funds; however, we provided support to these money market mutual funds through the waiver of fees and expense reimbursements. The amount of fees waived and expenses reimbursed was insignificant.
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3. Investments
Fixed Maturities and Equity Securities
Fixed maturities include bonds, ABS, redeemable preferred stock and certain nonredeemable preferred securities. Equity securities include mutual funds, common stock, nonredeemable preferred stock and required regulatory investments. We classify fixed maturities and equity securities as either available-for-sale or trading at the time of the purchase and, accordingly, carry them at fair value. See Note 10, Fair Value Measurements, for methodologies related to the determination of fair value. Unrealized gains and losses related to available-for-sale securities, excluding those in fair value hedging relationships, are reflected in stockholders’ equity, net of adjustments associated with deferred acquisition costs (“DAC”) and related actuarial balances, derivatives in cash flow hedge relationships and applicable income taxes. Unrealized gains and losses related to hedged portions of available-for-sale securities in fair value hedging relationships and mark-to-market adjustments on certain trading securities are reflected in net realized capital gains (losses). Mark-to-market adjustments related to certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reflected in net investment income.
The cost of fixed maturities is adjusted for amortization of premiums and accrual of discounts, both computed using the interest method. The cost of fixed maturities and equity securities classified as available-for-sale is adjusted for declines in value that are other than temporary. Impairments in value deemed to be other than temporary are primarily reported in net income as a component of net realized capital gains (losses), with noncredit impairment losses for certain fixed maturities, available-for-sale reported in other comprehensive income (“OCI”). For loan-backed and structured securities, we recognize income using a constant effective yield based on currently anticipated cash flows.
The amortized cost, gross unrealized gains and losses, other-than-temporary impairments in accumulated other comprehensive income (“AOCI”) and fair value of fixed maturities and equity securities available-for-sale were as follows:
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|
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|
|
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Other-than- |
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|
|
|
|
Gross |
|
Gross |
|
|
|
temporary |
|||||
|
|
Amortized |
|
unrealized |
|
unrealized |
|
|
|
impairments in |
|||||
|
|
cost |
|
gains |
|
losses |
|
Fair value |
|
AOCI (1) |
|||||
|
|
(in millions) |
|||||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,479.2 |
|
$ |
91.2 |
|
$ |
— |
|
$ |
1,570.4 |
|
$ |
— |
Non-U.S. governments |
|
738.4 |
|
164.4 |
|
1.0 |
|
901.8 |
|
— |
|||||
States and political subdivisions |
|
5,000.4 |
|
472.2 |
|
0.4 |
|
5,472.2 |
|
— |
|||||
Corporate |
|
32,179.8 |
|
2,552.9 |
|
320.4 |
|
34,412.3 |
|
16.0 | |||||
Residential mortgage-backed pass-through securities |
|
2,689.4 |
|
130.6 |
|
0.3 |
|
2,819.7 |
|
— |
|||||
Commercial mortgage-backed securities |
|
4,302.5 |
|
93.4 |
|
65.3 |
|
4,330.6 |
|
76.5 | |||||
Collateralized debt obligations |
|
898.8 |
|
0.9 |
|
27.9 |
|
871.8 |
|
1.0 | |||||
Other debt obligations |
|
4,838.8 |
|
88.4 |
|
24.7 |
|
4,902.5 |
|
53.5 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
$ |
52,127.3 |
|
$ |
3,594.0 |
|
$ |
440.0 |
|
$ |
55,281.3 |
|
$ |
147.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
109.9 |
|
$ |
9.1 |
|
$ |
13.8 |
|
$ |
105.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,488.4 |
|
$ |
23.4 |
|
$ |
8.3 |
|
$ |
1,503.5 |
|
$ |
— |
Non-U.S. governments |
|
669.8 |
|
128.5 |
|
5.0 |
|
793.3 |
|
— |
|||||
States and political subdivisions |
|
4,501.8 |
|
234.7 |
|
19.4 |
|
4,717.1 |
|
— |
|||||
Corporate |
|
30,245.5 |
|
1,532.9 |
|
638.2 |
|
31,140.2 |
|
5.9 | |||||
Residential mortgage-backed pass-through securities |
|
2,549.4 |
|
90.0 |
|
11.9 |
|
2,627.5 |
|
— |
|||||
Commercial mortgage-backed securities |
|
3,932.5 |
|
65.3 |
|
78.0 |
|
3,919.8 |
|
80.7 | |||||
Collateralized debt obligations |
|
692.7 |
|
1.4 |
|
26.6 |
|
667.5 |
|
1.3 | |||||
Other debt obligations |
|
4,594.2 |
|
39.2 |
|
35.8 |
|
4,597.6 |
|
58.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
$ |
48,674.3 |
|
$ |
2,115.4 |
|
$ |
823.2 |
|
$ |
49,966.5 |
|
$ |
146.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
111.2 |
|
$ |
7.5 |
|
$ |
14.2 |
|
$ |
104.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes $122.3 million and $131.5 million as of June 30, 2016 and December 31, 2015, respectively, of net unrealized gains on impaired fixed maturities, available-for-sale related to changes in fair value subsequent to the impairment date, which are included in gross unrealized gains and gross unrealized losses. |
The amortized cost and fair value of fixed maturities available-for-sale as of June 30, 2016, by expected maturity, were as follows:
|
|
Amortized cost |
|
Fair value |
||
|
|
(in millions) |
||||
Due in one year or less |
|
$ |
2,792.5 |
|
$ |
2,815.4 |
Due after one year through five years |
|
13,079.7 |
|
13,632.2 | ||
Due after five years through ten years |
|
8,901.7 |
|
9,443.1 | ||
Due after ten years |
|
14,623.9 |
|
16,466.0 | ||
|
|
|
|
|
||
Subtotal |
|
39,397.8 |
|
42,356.7 | ||
Mortgage-backed and other asset-backed securities |
|
12,729.5 |
|
12,924.6 | ||
|
|
|
|
|
||
Total |
|
$ |
52,127.3 |
|
$ |
55,281.3 |
|
|
|
|
|
|
|
Actual maturities may differ because borrowers may have the right to call or prepay obligations. Our portfolio is diversified by industry, issuer and asset class. Credit concentrations are managed to established limits.
Net Realized Capital Gains and Losses
Net realized capital gains and losses on sales of investments are determined on the basis of specific identification. In general, in addition to realized capital gains and losses on investment sales and periodic settlements on derivatives not designated as hedges, we report gains and losses related to the following in net realized capital gains (losses): other-than-temporary impairments of securities and subsequent realized recoveries, mark-to-market adjustments on certain trading securities, mark-to-market adjustments on sponsored investment funds, fair value hedge and cash flow hedge ineffectiveness, mark-to-market adjustments on derivatives not designated as hedges, changes in the mortgage loan valuation allowance provision and impairments of real estate held for investment. Investment gains and losses on sales of certain real estate held for sale due to investment strategy and mark-to-market adjustments on certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reported as net investment income and are excluded from net realized capital gains (losses). The major components of net realized capital gains (losses) on investments were as follows:
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
||||
Gross gains |
|
$ |
46.9 |
|
$ |
3.4 |
|
$ |
50.1 |
|
$ |
13.2 |
Gross losses |
|
(1.0) |
|
(1.8) |
|
(3.5) |
|
(3.3) | ||||
Net impairment losses |
|
(8.6) |
|
(6.3) |
|
(56.7) |
|
(13.8) | ||||
Hedging, net |
|
(1.0) |
|
(25.3) |
|
6.4 |
|
(35.9) | ||||
Fixed maturities, trading |
|
1.2 |
|
(5.0) |
|
10.1 |
|
(4.3) | ||||
Equity securities, available-for-sale: |
|
|
|
|
|
|
|
|
||||
Net impairment recoveries (losses) |
|
(1.4) |
|
0.3 |
|
(1.4) |
|
0.3 | ||||
Equity securities, trading |
|
18.7 |
|
2.4 |
|
(4.2) |
|
3.9 | ||||
Mortgage loans |
|
0.1 |
|
2.3 |
|
2.6 |
|
(0.1) | ||||
Derivatives |
|
(27.9) |
|
(57.6) |
|
157.7 |
|
5.0 | ||||
Other |
|
6.7 |
|
(27.0) |
|
9.2 |
|
(13.4) | ||||
|
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses) |
|
$ |
33.7 |
|
$ |
(114.6) |
|
$ |
170.3 |
|
$ |
(48.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of investments (excluding call and maturity proceeds) in fixed maturities, available-for-sale were $454.6 million and $325.0 million for the three months ended June 30, 2016 and 2015, and $660.4 million and $881.3 million for the six months ended June 30, 2016 and 2015, respectively.
Other-Than-Temporary Impairments
We have a process in place to identify fixed maturity and equity securities that could potentially have an impairment that is other than temporary. This process involves monitoring market events that could impact issuers’ credit ratings, business climate, management changes, litigation and government actions and other similar factors. This process also involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.
Each reporting period, all securities are reviewed to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events; (4) for structured securities, the adequacy of the expected cash flows; (5) for fixed maturities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and (6) for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value. To the extent we determine that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.
Impairment losses on equity securities are recognized in net income and are measured as the difference between amortized cost and fair value. The way in which impairment losses on fixed maturities are recognized in the financial statements is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, we recognize an other-than-temporary impairment in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. We recognize the credit loss portion in net income and the noncredit loss portion in OCI (“bifurcated OTTI”).
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities, were as follows:
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale |
|
$ |
(2.0) |
|
$ |
(0.9) |
|
$ |
(57.6) |
|
$ |
13.1 |
Equity securities, available-for-sale |
|
(1.4) |
|
0.3 |
|
(1.4) |
|
0.3 | ||||
|
|
|
|
|
|
|
|
|
||||
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities |
|
(3.4) |
|
(0.6) |
|
(59.0) |
|
13.4 | ||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) OCI (1) |
|
(6.6) |
|
(5.4) |
|
0.9 |
|
(26.9) | ||||
|
|
|
|
|
|
|
|
|
||||
Net impairment losses on available-for-sale securities |
|
$ |
(10.0) |
|
$ |
(6.0) |
|
$ |
(58.1) |
|
$ |
(13.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents the net impact of (a) gains resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI and (b) losses resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold. |
We estimate the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The ABS cash flow estimates are based on security specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or liquidations using bond specific facts and circumstances including timing, security interests and loss severity.
The following table provides a rollforward of accumulated credit losses for fixed maturities with bifurcated credit losses. The purpose of the table is to provide detail of (1) additions to the bifurcated credit loss amounts recognized in net realized capital gains (losses) during the period and (2) decrements for previously recognized bifurcated credit losses where the loss is no longer bifurcated and/or there has been a positive change in expected cash flows or accretion of the bifurcated credit loss amount.
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Beginning balance |
|
$ |
(160.4) |
|
$ |
(138.6) |
|
$ |
(131.5) |
|
$ |
(144.4) |
Credit losses for which an other-than-temporary impairment was not previously recognized |
|
(0.5) |
|
(0.8) |
|
(27.0) |
|
(1.6) | ||||
Credit losses for which an other-than-temporary impairment was previously recognized |
|
(7.8) |
|
(6.4) |
|
(14.1) |
|
(8.1) | ||||
Reduction for credit losses previously recognized on fixed maturities now sold, paid down or intended to be sold |
|
11.7 |
|
10.0 |
|
16.8 |
|
16.2 | ||||
Net reduction for positive changes in cash flows expected to be collected and amortization (1) |
|
1.2 |
|
1.0 |
|
0.2 |
|
3.0 | ||||
Foreign currency translation adjustment |
|
— |
|
0.1 |
|
(0.2) |
|
0.2 | ||||
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
(155.8) |
|
$ |
(134.7) |
|
$ |
(155.8) |
|
$ |
(134.7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts are recognized in net investment income. |
Gross Unrealized Losses for Fixed Maturities and Equity Securities
For fixed maturities and equity securities available-for-sale with unrealized losses, including other-than-temporary impairment losses reported in OCI, the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:
|
|
June 30, 2016 |
||||||||||||||||
|
|
Less than |
|
Greater than or |
|
|
|
|
||||||||||
|
|
twelve months |
|
equal to twelve months |
|
Total |
||||||||||||
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
||||||
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
||||||
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
||||||
|
|
(in millions) |
||||||||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agencies |
|
$ |
8.8 |
|
$ |
— |
|
$ |
3.6 |
|
$ |
— |
|
$ |
12.4 |
|
$ |
— |
Non-U.S. governments |
|
1.9 |
|
— |
|
10.7 |
|
1.0 |
|
12.6 |
|
1.0 | ||||||
States and political subdivisions |
|
2.2 |
|
— |
|
17.2 |
|
0.4 |
|
19.4 |
|
0.4 | ||||||
Corporate |
|
1,486.0 |
|
40.7 |
|
1,743.7 |
|
279.7 |
|
3,229.7 |
|
320.4 | ||||||
Residential mortgage-backed pass-through securities |
|
0.4 |
|
— |
|
44.0 |
|
0.3 |
|
44.4 |
|
0.3 | ||||||
Commercial mortgage-backed securities |
|
790.5 |
|
13.0 |
|
517.6 |
|
52.3 |
|
1,308.1 |
|
65.3 | ||||||
Collateralized debt obligations |
|
358.5 |
|
1.7 |
|
293.3 |
|
26.2 |
|
651.8 |
|
27.9 | ||||||
Other debt obligations |
|
595.8 |
|
5.7 |
|
475.1 |
|
19.0 |
|
1,070.9 |
|
24.7 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
$ |
3,244.1 |
|
$ |
61.1 |
|
$ |
3,105.2 |
|
$ |
378.9 |
|
$ |
6,349.3 |
|
$ |
440.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
0.4 |
|
$ |
1.5 |
|
$ |
33.5 |
|
$ |
12.3 |
|
$ |
33.9 |
|
$ |
13.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total amounts, Principal Life’s consolidated portfolio represented $6,055.3 million in available-for-sale fixed maturities with gross unrealized losses of $410.7 million. Of those fixed maturity securities in Principal Life’s consolidated portfolio with a gross unrealized loss position, 72% were investment grade (rated AAA through BBB-) with an average price of 94 (carrying value/amortized cost) as of June 30, 2016. Gross unrealized losses in our fixed maturities portfolio decreased during the six months ended June 30, 2016, primarily due to a decrease in interest rates, partially offset by widening of credit spreads.
For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 387 securities with a carrying value of $3,107.1 million and unrealized losses of $53.5 million reflecting an average price of 98 as of June 30, 2016. Of this portfolio, 75% was investment grade (rated AAA through BBB-) as of June 30, 2016, with associated unrealized losses of $35.1 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 506 securities with a carrying value of $2,948.2 million and unrealized losses of $357.2 million. The average rating of this portfolio was A- with an average price of 89 as of June 30, 2016. Of the $357.2 million in unrealized losses, the corporate sector accounts for $259.0 million in unrealized losses with an average price of 86 and an average credit rating of BBB-. The remaining unrealized losses consist primarily of $52.4 million within the commercial mortgage-backed securities sector with an average price of 91 and an average credit rating of A+. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired as of June 30, 2016.
|
|
December 31, 2015 |
||||||||||||||||
|
|
Less than |
|
Greater than or |
|
|
|
|
||||||||||
|
|
twelve months |
|
equal to twelve months |
|
Total |
||||||||||||
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
||||||
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
||||||
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
||||||
|
|
(in millions) |
||||||||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agencies |
|
$ |
590.4 |
|
$ |
7.6 |
|
$ |
40.5 |
|
$ |
0.7 |
|
$ |
630.9 |
|
$ |
8.3 |
Non-U.S. governments |
|
86.3 |
|
3.1 |
|
16.1 |
|
1.9 |
|
102.4 |
|
5.0 | ||||||
States and political subdivisions |
|
692.0 |
|
19.0 |
|
6.5 |
|
0.4 |
|
698.5 |
|
19.4 | ||||||
Corporate |
|
7,975.7 |
|
309.3 |
|
1,375.0 |
|
328.9 |
|
9,350.7 |
|
638.2 | ||||||
Residential mortgage-backed pass-through securities |
|
656.7 |
|
6.7 |
|
147.9 |
|
5.2 |
|
804.6 |
|
11.9 | ||||||
Commercial mortgage-backed securities |
|
1,480.8 |
|
27.3 |
|
299.5 |
|
50.7 |
|
1,780.3 |
|
78.0 | ||||||
Collateralized debt obligations |
|
426.9 |
|
3.8 |
|
164.0 |
|
22.8 |
|
590.9 |
|
26.6 | ||||||
Other debt obligations |
|
2,512.7 |
|
19.1 |
|
403.5 |
|
16.7 |
|
2,916.2 |
|
35.8 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
$ |
14,421.5 |
|
$ |
395.9 |
|
$ |
2,453.0 |
|
$ |
427.3 |
|
$ |
16,874.5 |
|
$ |
823.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
0.8 |
|
$ |
1.0 |
|
$ |
32.7 |
|
$ |
13.2 |
|
$ |
33.5 |
|
$ |
14.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total amounts, Principal Life’s consolidated portfolio represented $15,980.0 million in available-for-sale fixed maturities with gross unrealized losses of $777.0 million. Of those fixed maturity securities in Principal Life’s consolidated portfolio with a gross unrealized loss position, 87% were investment grade (rated AAA through BBB-) with an average price of 95 (carrying value/amortized cost) as of December 31, 2015. Gross unrealized losses in our fixed maturities portfolio increased during the year ended December 31, 2015, primarily due to an increase in interest rates and widening of credit spreads.
For those securities that had been in a continuous unrealized loss position for less than twelve months, Principal Life’s consolidated portfolio held 1,725 securities with a carrying value of $13,673.9 million and unrealized losses of $376.3 million reflecting an average price of 97 as of December 31, 2015. Of this portfolio, 90% was investment grade (rated AAA through BBB-) as of December 31, 2015, with associated unrealized losses of $298.1 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, Principal Life’s consolidated portfolio held 404 securities with a carrying value of $2,306.1 million and unrealized losses of $400.7 million. The average rating of this portfolio was BBB+ with an average price of 85 as of December 31, 2015. Of the $400.7 million in unrealized losses, the corporate sector accounts for $304.2 million in unrealized losses with an average price of 80 and an average credit rating of BBB-. The remaining unrealized losses consist primarily of $50.7 million within the commercial mortgage-backed securities sector with an average price of 86 and an average credit rating of BBB+. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.
Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired as of December 31, 2015.
Net Unrealized Gains and Losses on Available-for-Sale Securities and Derivative Instruments
The net unrealized gains and losses on investments in fixed maturities available-for-sale, equity securities available-for-sale and derivative instruments in cash flow hedge relationships are reported as a separate component of stockholders’ equity. The cumulative amount of net unrealized gains and losses on available-for-sale securities and derivative instruments in cash flow hedge relationships net of adjustments related to DAC and related actuarial balances and applicable income taxes was as follows:
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Net unrealized gains on fixed maturities, available-for-sale (1) |
|
$ |
3,234.6 |
|
$ |
1,376.0 |
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(147.0) |
|
(146.1) | ||
Net unrealized losses on equity securities, available-for-sale |
|
(4.7) |
|
(6.7) | ||
Adjustments for assumed changes in amortization patterns |
|
(239.7) |
|
(127.0) | ||
Adjustments for assumed changes in policyholder liabilities |
|
(994.2) |
|
(309.7) | ||
Net unrealized gains on derivative instruments |
|
197.4 |
|
181.6 | ||
Net unrealized gains on equity method subsidiaries and noncontrolling interest adjustments |
|
123.5 |
|
98.0 | ||
Provision for deferred income taxes |
|
(735.5) |
|
(350.2) | ||
|
|
|
|
|
||
Net unrealized gains on available-for-sale securities and derivative instruments |
|
$ |
1,434.4 |
|
$ |
715.9 |
|
|
|
|
|
|
|
(1) |
Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships. |
Mortgage Loans
Mortgage loans consist of commercial and residential mortgage loans. We evaluate risks inherent in our commercial mortgage loans in two classes: (1) brick and mortar property loans, including mezzanine loans, where we analyze the property’s rent payments as support for the loan, and (2) credit tenant loans (“CTL”), where we rely on the credit analysis of the tenant for the repayment of the loan. We evaluate risks inherent in our residential mortgage loan portfolio in two classes: (1) home equity mortgages and (2) first lien mortgages. The carrying amount of our mortgage loan portfolio was as follows:
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
|
|
|
|
|
||
Commercial mortgage loans |
|
$ |
11,556.0 |
|
$ |
11,265.3 |
Residential mortgage loans |
|
1,178.9 |
|
1,125.7 | ||
|
|
|
|
|
||
|
|
|
|
|
||
Total amortized cost |
|
12,734.9 |
|
12,391.0 | ||
|
|
|
|
|
||
Valuation allowance |
|
(49.1) |
|
(51.6) | ||
|
|
|
|
|
||
|
|
|
|
|
||
Total carrying value |
|
$ |
12,685.8 |
|
$ |
12,339.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We periodically purchase mortgage loans as well as sell mortgage loans we have originated. We purchased $68.1 million and $79.6 million of residential mortgage loans during the three months ended June 30, 2016 and 2015, and $123.9 million and $143.1 million during the six months ended June 30, 2016 and 2015, respectively. We sold $11.4 million and $21.4 million of residential mortgage loans during the three months ended June 30, 2016 and 2015, and $28.9 million and $42.8 million during the six months ended June 30, 2016 and 2015, respectively. We purchased $3.6 million and $39.9 million of commercial mortgage loans during the three months ended June 30, 2016 and 2015, and $97.0 million and $146.9 million during the six months ended June 30, 2016 and 2015, respectively. We sold $0.3 million and $0.0 million of commercial mortgage loans during the three months ended June 30, 2016 and 2015, and $0.3 million and $1.0 million during the six months ended June 30, 2016 and 2015, respectively.
Our commercial mortgage loan portfolio consists primarily of non-recourse, fixed rate mortgages on stabilized properties. Our commercial mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:
|
|
June 30, 2016 |
|
December 31, 2015 |
||||||||
|
|
Amortized |
|
Percent |
|
Amortized |
|
Percent |
||||
|
|
cost |
|
of total |
|
cost |
|
of total |
||||
|
|
($ in millions) |
||||||||||
Geographic distribution |
|
|
|
|
|
|
|
|
||||
New England |
|
$ |
500.3 |
|
4.3 |
% |
|
$ |
509.4 |
|
4.5 |
% |
Middle Atlantic |
|
3,071.6 |
|
26.6 |
|
|
3,075.6 |
|
27.3 |
|
||
East North Central |
|
533.8 |
|
4.6 |
|
|
451.8 |
|
4.0 |
|
||
West North Central |
|
231.8 |
|
2.0 |
|
|
264.3 |
|
2.3 |
|
||
South Atlantic |
|
2,186.3 |
|
18.9 |
|
|
2,072.7 |
|
18.4 |
|
||
East South Central |
|
198.4 |
|
1.7 |
|
|
215.1 |
|
1.9 |
|
||
West South Central |
|
1,166.9 |
|
10.1 |
|
|
1,120.6 |
|
9.9 |
|
||
Mountain |
|
856.0 |
|
7.4 |
|
|
898.8 |
|
8.0 |
|
||
Pacific |
|
2,762.9 |
|
23.9 |
|
|
2,614.1 |
|
23.2 |
|
||
International |
|
48.0 |
|
0.5 |
|
|
42.9 |
|
0.5 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
$ |
11,556.0 |
|
100.0 |
% |
|
$ |
11,265.3 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Property type distribution |
|
|
|
|
|
|
|
|
|
|
||
Office |
|
$ |
4,238.3 |
|
36.7 |
% |
|
$ |
4,010.0 |
|
35.6 |
% |
Retail |
|
2,601.2 |
|
22.5 |
|
|
2,521.6 |
|
22.4 |
|
||
Industrial |
|
1,712.9 |
|
14.8 |
|
|
1,840.9 |
|
16.3 |
|
||
Apartments |
|
2,570.0 |
|
22.2 |
|
|
2,474.2 |
|
22.0 |
|
||
Hotel |
|
309.7 |
|
2.7 |
|
|
320.5 |
|
2.7 |
|
||
Mixed use/other |
|
123.9 |
|
1.1 |
|
|
98.1 |
|
1.0 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
$ |
11,556.0 |
|
100.0 |
% |
|
$ |
11,265.3 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our residential mortgage loan portfolio is composed of home equity mortgages with an amortized cost of $194.6 million and $218.8 million and first lien mortgages with an amortized cost of $984.3 million and $906.9 million as of June 30, 2016 and December 31, 2015, respectively. Our residential home equity mortgages are concentrated in the United States and are generally second lien mortgages comprised of closed-end loans and lines of credit. Our first lien loans are concentrated in Chile and the United States.
Mortgage Loan Credit Monitoring
Commercial Credit Risk Profile Based on Internal Rating
We actively monitor and manage our commercial mortgage loan portfolio. All commercial mortgage loans are analyzed regularly and substantially all are internally rated, based on a proprietary risk rating cash flow model, in order to monitor the financial quality of these assets. The model stresses expected cash flows at various levels and at different points in time depending on the durability of the income stream, which includes our assessment of factors such as location (macro and micro markets), tenant quality and lease expirations. Our internal rating analysis presents expected losses in terms of a Standard & Poor’s (“S&P”) bond equivalent rating. As the credit risk for commercial mortgage loans increases, we adjust our internal ratings downward with loans in the category “B+ and below” having the highest risk for credit loss. Internal ratings on commercial mortgage loans are updated at least annually and potentially more often for certain loans with material changes in collateral value or occupancy and for loans on an internal “watch list”.
Commercial mortgage loans that require more frequent and detailed attention than other loans in our portfolio are identified and placed on an internal “watch list”. Among the criteria that would indicate a potential problem are significant negative changes in ratios of loan to value or contract rents to debt service, major tenant vacancies or bankruptcies, borrower sponsorship problems, late payments, delinquent taxes and loan relief/restructuring requests.
The amortized cost of our commercial mortgage loan portfolio by credit risk, as determined by our internal rating system expressed in terms of an S&P bond equivalent rating, was as follows:
|
|
June 30, 2016 |
|||||||
|
|
Brick and mortar |
|
CTL |
|
Total |
|||
|
|
(in millions) |
|||||||
A- and above |
|
$ |
10,107.5 |
|
$ |
211.3 |
|
$ |
10,318.8 |
BBB+ thru BBB- |
|
926.6 |
|
102.4 |
|
1,029.0 | |||
BB+ thru BB- |
|
196.9 |
|
— |
|
196.9 | |||
B+ and below |
|
10.7 |
|
0.6 |
|
11.3 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
11,241.7 |
|
$ |
314.3 |
|
$ |
11,556.0 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||
|
|
Brick and mortar |
|
CTL |
|
Total |
|||
|
|
(in millions) |
|||||||
A- and above |
|
$ |
9,844.2 |
|
$ |
224.0 |
|
$ |
10,068.2 |
BBB+ thru BBB- |
|
892.4 |
|
119.5 |
|
1,011.9 | |||
BB+ thru BB- |
|
159.6 |
|
0.1 |
|
159.7 | |||
B+ and below |
|
24.8 |
|
0.7 |
|
25.5 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
10,921.0 |
|
$ |
344.3 |
|
$ |
11,265.3 |
|
|
|
|
|
|
|
|
|
|
Residential Credit Risk Profile Based on Performance Status
Our residential mortgage loan portfolio is monitored based on performance of the loans. Monitoring on a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of potential impairment. We define non-performing residential mortgage loans as loans 90 days or greater delinquent or on non-accrual status.
The amortized cost of our performing and non-performing residential mortgage loans was as follows:
|
|
June 30, 2016 |
|||||||
|
|
Home equity |
|
First liens |
|
Total |
|||
|
|
(in millions) |
|||||||
|
|
|
|
|
|
|
|||
Performing |
|
$ |
184.7 |
|
$ |
970.9 |
|
$ |
1,155.6 |
Nonperforming |
|
9.9 |
|
13.4 |
|
23.3 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
194.6 |
|
$ |
984.3 |
|
$ |
1,178.9 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||
|
|
Home equity |
|
First liens |
|
Total |
|||
|
|
(in millions) |
|||||||
|
|
|
|
|
|
|
|||
Performing |
|
$ |
208.0 |
|
$ |
895.6 |
|
$ |
1,103.6 |
Nonperforming |
|
10.8 |
|
11.3 |
|
22.1 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
218.8 |
|
$ |
906.9 |
|
$ |
1,125.7 |
|
|
|
|
|
|
|
|
|
|
Non-Accrual Mortgage Loans
Commercial and residential mortgage loans are placed on non-accrual status if we have concern regarding the collectability of future payments or if a loan has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow for commercial mortgage loans or number of days past due and other circumstances for residential mortgage loans. Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. When a loan is placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income. Accrual of interest resumes after factors resulting in doubts about collectability have improved. Residential first lien mortgages in the Chilean market are carried on accrual for a longer period of delinquency than domestic loans, as assessment of collectability is based on the nature of the loans and collection practices in that market.
The amortized cost of mortgage loans on non-accrual status was as follows:
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Residential: |
|
|
|
|
||
Home equity |
|
$ |
9.9 |
|
$ |
10.8 |
First liens |
|
6.2 |
|
7.9 | ||
|
|
|
|
|
||
Total |
|
$ |
16.1 |
|
$ |
18.7 |
|
|
|
|
|
|
|
The aging of our mortgage loans, based on amortized cost, was as follows:
|
|
June 30, 2016 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
|||||||
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
|||||||
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
|||||||
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
|||||||
|
|
(in millions) |
|||||||||||||||||||
Commercial-brick and mortar |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
11,241.7 |
|
$ |
11,241.7 |
|
$ |
— |
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
314.3 |
|
314.3 |
|
— |
|||||||
Residential-home equity |
|
1.7 |
|
0.7 |
|
1.0 |
|
3.4 |
|
191.2 |
|
194.6 |
|
— |
|||||||
Residential-first liens |
|
31.9 |
|
11.3 |
|
12.5 |
|
55.7 |
|
928.6 |
|
984.3 |
|
7.2 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
33.6 |
|
$ |
12.0 |
|
$ |
13.5 |
|
$ |
59.1 |
|
$ |
12,675.8 |
|
$ |
12,734.9 |
|
$ |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
|||||||
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
|||||||
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
|||||||
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
|||||||
|
|
(in millions) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial-brick and mortar |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
10,921.0 |
|
$ |
10,921.0 |
|
$ |
— |
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
344.3 |
|
344.3 |
|
— |
|||||||
Residential-home equity |
|
2.0 |
|
1.0 |
|
0.6 |
|
3.6 |
|
215.2 |
|
218.8 |
|
— |
|||||||
Residential-first liens |
|
20.5 |
|
5.5 |
|
10.0 |
|
36.0 |
|
870.9 |
|
906.9 |
|
3.4 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
22.5 |
|
$ |
6.5 |
|
$ |
10.6 |
|
$ |
39.6 |
|
$ |
12,351.4 |
|
$ |
12,391.0 |
|
$ |
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loan Valuation Allowance
We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio. The valuation allowance includes loan specific reserves for loans that are deemed to be impaired as well as reserves for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss may occur. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to contractual terms of the loan agreement. When we determine that a loan is impaired, a valuation allowance is established equal to the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is based on either the present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or fair value of the collateral. Subsequent changes in the estimated value are reflected in the valuation allowance. Amounts on loans deemed to be uncollectible are charged off and removed from the valuation allowance. The change in the valuation allowance provision is included in net realized capital gains (losses) on our consolidated statements of operations.
The valuation allowance is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management’s periodic evaluation and assessment of the valuation allowance adequacy is based on known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, portfolio delinquency information, underwriting standards, peer group information, current economic conditions, loss experience and other relevant factors. The evaluation of our impaired loan component is subjective, as it requires the estimation of timing and amount of future cash flows expected to be received on impaired loans.
We review our commercial mortgage loan portfolio and analyze the need for a valuation allowance for any loan that is delinquent for 60 days or more, in process of foreclosure, restructured, on the internal “watch list” or that currently has a valuation allowance. In addition to establishing allowance levels for specifically identified impaired commercial mortgage loans, management determines an allowance for all other loans in the portfolio for which historical experience and current economic conditions indicate certain losses exist. These loans are segregated by risk rating level with an estimated loss ratio applied against each risk rating level. The loss ratio is generally based upon historical loss experience for each risk rating level as adjusted for certain current environmental factors management believes to be relevant.
For our residential mortgage loan portfolio, we separate the loans into several homogeneous pools, each of which consist of loans of a similar nature including but not limited to loans similar in collateral, term and structure and loan purpose or type. We evaluate loan pools based on aggregated risk ratings, estimated specific loss potential in the different classes of credits, and historical loss experience by pool type. We adjust these quantitative factors for qualitative factors of present conditions. Qualitative factors include items such as economic and business conditions, changes in the portfolio, value of underlying collateral and concentrations. Residential mortgage loan pools exclude loans that have been restructured or impaired, as those loans are evaluated individually.
A rollforward of our valuation allowance and ending balances of the allowance and loan balance by basis of impairment method was as follows:
|
|
For the three months ended June 30, 2016 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.1 |
|
$ |
22.2 |
|
$ |
49.3 |
Provision |
|
1.1 |
|
(1.3) |
|
(0.2) | |||
Charge-offs |
|
— |
|
(0.8) |
|
(0.8) | |||
Recoveries |
|
— |
|
0.8 |
|
0.8 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2016 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.5 |
|
$ |
24.1 |
|
$ |
51.6 |
Provision |
|
0.7 |
|
(3.2) |
|
(2.5) | |||
Charge-offs |
|
— |
|
(1.6) |
|
(1.6) | |||
Recoveries |
|
— |
|
1.6 |
|
1.6 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
— |
|
$ |
6.8 |
|
$ |
6.8 |
Collectively evaluated for impairment |
|
28.2 |
|
14.1 |
|
42.3 | |||
|
|
|
|
|
|
|
|||
Allowance ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loan balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
— |
|
$ |
20.2 |
|
$ |
20.2 |
Collectively evaluated for impairment |
|
11,556.0 |
|
1,158.7 |
|
12,714.7 | |||
|
|
|
|
|
|
|
|||
Loan ending balance |
|
$ |
11,556.0 |
|
$ |
1,178.9 |
|
$ |
12,734.9 |
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2015 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.8 |
|
$ |
29.1 |
|
$ |
56.9 |
Provision |
|
0.6 |
|
0.6 |
|
1.2 | |||
Charge-offs |
|
— |
|
(3.5) |
|
(3.5) | |||
Recoveries |
|
0.1 |
|
1.2 |
|
1.3 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2015 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
26.9 |
|
$ |
29.6 |
|
$ |
56.5 |
Provision |
|
1.5 |
|
2.5 |
|
4.0 | |||
Charge-offs |
|
— |
|
(6.5) |
|
(6.5) | |||
Recoveries |
|
0.1 |
|
1.8 |
|
1.9 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
2.4 |
|
$ |
8.4 |
|
$ |
10.8 |
Collectively evaluated for impairment |
|
26.1 |
|
19.0 |
|
45.1 | |||
|
|
|
|
|
|
|
|||
Allowance ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loan balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
4.4 |
|
$ |
25.9 |
|
$ |
30.3 |
Collectively evaluated for impairment |
|
10,987.3 |
|
1,109.0 |
|
12,096.3 | |||
|
|
|
|
|
|
|
|||
Loan ending balance |
|
$ |
10,991.7 |
|
$ |
1,134.9 |
|
$ |
12,126.6 |
|
|
|
|
|
|
|
|
|
|
Impaired Mortgage Loans
Impaired mortgage loans are loans with a related specific valuation allowance, loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary or a loan modification has been classified as a troubled debt restructuring (“TDR”). Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. Our recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:
|
|
June 30, 2016 |
|||||||
|
|
|
|
Unpaid |
|
|
|||
|
|
Recorded |
|
principal |
|
Related |
|||
|
|
investment |
|
balance |
|
allowance |
|||
|
|
(in millions) |
|||||||
With no related allowance recorded: |
|
|
|
|
|
|
|||
Residential-first liens |
|
$ |
2.3 |
|
$ |
2.3 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|||
Residential-home equity |
|
13.0 |
|
14.1 |
|
6.4 | |||
Residential-first liens |
|
4.9 |
|
4.8 |
|
0.4 | |||
Total: |
|
|
|
|
|
|
|||
Residential |
|
$ |
20.2 |
|
$ |
21.2 |
|
$ |
6.8 |
|
|
December 31, 2015 |
|||||||
|
|
|
|
Unpaid |
|
|
|||
|
|
Recorded |
|
principal |
|
Related |
|||
|
|
investment |
|
balance |
|
allowance |
|||
|
|
(in millions) |
|||||||
With no related allowance recorded: |
|
|
|
|
|
|
|||
Residential-first liens |
|
$ |
3.6 |
|
$ |
3.6 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|||
Residential-home equity |
|
13.7 |
|
14.8 |
|
7.0 | |||
Residential-first liens |
|
5.9 |
|
5.8 |
|
0.5 | |||
Total: |
|
|
|
|
|
|
|||
Residential |
|
$ |
23.2 |
|
$ |
24.2 |
|
$ |
7.5 |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, 2016 |
|
June 30, 2016 |
||||||||
|
|
Average |
|
|
|
Average |
|
|
||||
|
|
recorded |
|
Interest income |
|
recorded |
|
Interest income |
||||
|
|
investment |
|
recognized |
|
investment |
|
recognized |
||||
|
|
(in millions) |
||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
||||
Residential-first liens |
|
$ |
2.7 |
|
$ |
— |
|
$ |
3.0 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|
|
||||
Residential-home equity |
|
13.0 |
|
— |
|
13.4 |
|
0.1 | ||||
Residential-first liens |
|
5.2 |
|
0.1 |
|
5.4 |
|
0.1 | ||||
Total: |
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
20.9 |
|
$ |
0.1 |
|
$ |
21.8 |
|
$ |
0.2 |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, 2015 |
|
June 30, 2015 |
||||||||
|
|
Average |
|
|
|
Average |
|
|
||||
|
|
recorded |
|
Interest income |
|
recorded |
|
Interest income |
||||
|
|
investment |
|
recognized |
|
investment |
|
recognized |
||||
|
|
(in millions) |
||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
||||
Commercial-brick and mortar |
|
$ |
2.3 |
|
$ |
— |
|
$ |
2.6 |
|
$ |
— |
Residential-first liens |
|
3.7 |
|
— |
|
3.7 |
|
— |
||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
||||
Commercial-brick and mortar |
|
4.4 |
|
0.1 |
|
4.4 |
|
0.2 | ||||
Residential-home equity |
|
15.6 |
|
0.1 |
|
16.0 |
|
0.2 | ||||
Residential-first liens |
|
6.7 |
|
0.1 |
|
6.9 |
|
0.1 | ||||
Total: |
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
6.7 |
|
$ |
0.1 |
|
$ |
7.0 |
|
$ |
0.2 |
Residential |
|
$ |
26.0 |
|
$ |
0.2 |
|
$ |
26.6 |
|
$ |
0.3 |
Mortgage Loan Modifications
Our commercial and residential mortgage loan portfolios include loans that have been modified. We assess loan modifications on a case-by-case basis to evaluate whether a TDR has occurred. The commercial mortgage loan TDRs were modified to delay or reduce principal payments and to reduce or delay interest payments. For these TDR assessments, we have determined the loan rates are now considered below market based on current circumstances. The commercial mortgage loan modifications resulted in delayed cash receipts and a decrease in interest income. The residential mortgage loan TDRs include modifications of interest-only payment periods, delays in principal balloon payments, and interest rate reductions. Residential mortgage loan modifications resulted in delayed or decreased cash receipts and a decrease in interest income.
The following table includes information about outstanding loans that were modified and met the criteria of a TDR during the periods indicated. In addition, the table includes information for loans that were modified and met the criteria of a TDR within the past twelve months that were in payment default during the periods indicated:
|
|
For the three months ended June 30, 2016 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
1 |
|
$ |
— |
|
— |
|
$ |
— |
Residential-first liens |
|
1 |
|
0.2 |
|
— |
|
— |
||
|
|
|
|
|
|
|
|
|
||
Total |
|
2 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2015 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
4 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
4 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2016 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
3 |
|
$ |
0.2 |
|
— |
|
$ |
— |
Residential-first liens |
|
1 |
|
0.2 |
|
— |
|
— |
||
|
|
|
|
|
|
|
|
|
||
Total |
|
4 |
|
$ |
0.4 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2015 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
12 |
|
$ |
0.7 |
|
1 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
12 |
|
$ |
0.7 |
|
1 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage loans that have been designated as a TDR have been previously reserved for in the mortgage loan valuation allowance at the estimated fair value of the underlying collateral reduced by the cost to sell.
Residential mortgage loans that have been designated as a TDR are specifically reserved for in the mortgage loan valuation allowance if losses result from the modification. Residential mortgage loans that have defaulted or have been discharged through bankruptcy are reduced to the expected collectible amount.
Securities Posted as Collateral
We posted $1,969.3 million in fixed maturities, available-for-sale securities as of June 30, 2016, to satisfy collateral requirements primarily associated with a reinsurance arrangement, our derivative credit support annex (collateral) agreements, Futures Commission Merchant (“FCM”) agreements, a lending arrangement and our obligation under funding agreements with Federal Home Loan Bank of Des Moines (“FHLB Des Moines”). In addition, we posted $2,650.4 million in commercial mortgage loans and home equity mortgages as of June 30, 2016, to satisfy collateral requirements associated with our obligation under funding agreements with FHLB Des Moines. Since we did not relinquish ownership rights on these instruments, they are reported as fixed maturities, available-for-sale and mortgage loans, respectively, on our consolidated statements of financial position. Of the securities posted as collateral, $172.6 million can be sold or repledged by the secured party.
Balance Sheet Offsetting
Financial assets subject to master netting agreements or similar agreements were as follows:
|
|
|
|
Gross amounts not offset in the |
|
|
||||||
|
|
|
|
consolidated statements |
|
|
||||||
|
|
|
|
of financial position |
|
|
||||||
|
|
Gross amount |
|
|
|
|
|
|
||||
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
||||
|
|
assets (1) |
|
instruments (2) |
|
received |
|
Net amount |
||||
|
|
(in millions) |
||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
||||
Derivative assets |
|
$ |
1,286.4 |
|
$ |
(733.1) |
|
$ |
(542.4) |
|
$ |
10.9 |
Reverse repurchase agreements |
|
56.8 |
|
— |
|
(56.8) |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
1,343.2 |
|
$ |
(733.1) |
|
$ |
(599.2) |
|
$ |
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
||||
Derivative assets |
|
$ |
665.4 |
|
$ |
(409.7) |
|
$ |
(233.6) |
|
$ |
22.1 |
Reverse repurchase agreements |
|
79.7 |
|
— |
|
(79.7) |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
745.1 |
|
$ |
(409.7) |
|
$ |
(313.3) |
|
$ |
22.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gross amount of recognized derivative and reverse repurchase agreement assets are reported with other investments and cash and cash equivalents on the consolidated statements of financial position. The above excludes $5.2 million and $1.2 million of derivative assets as of June 30, 2016 and December 31, 2015, that are not subject to master netting agreements or similar agreements. The gross amounts of derivative and reverse repurchase agreement assets are not netted against offsetting liabilities for presentation on the consolidated statements of financial position. |
(2) |
Represents amount of offsetting derivative liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets for presentation on the consolidated statements of financial position. |
Financial liabilities subject to master netting agreements or similar agreements were as follows:
|
|
|
|
Gross amounts not offset in the |
|
|
||||||
|
|
|
|
consolidated statements |
|
|
||||||
|
|
|
|
of financial position |
|
|
||||||
|
|
Gross amount |
|
|
|
|
|
|
||||
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
||||
|
|
liabilities (1) |
|
instruments (2) |
|
pledged |
|
Net amount |
||||
|
|
(in millions) |
||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
$ |
977.9 |
|
$ |
(733.1) |
|
$ |
(174.8) |
|
$ |
70.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
$ |
758.6 |
|
$ |
(409.7) |
|
$ |
(253.9) |
|
$ |
95.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gross amount of recognized derivative liabilities are reported with other liabilities on the consolidated statements of financial position. The above excludes $558.7 million and $421.5 million of derivative liabilities as of June 30, 2016 and December 31, 2015, respectively, which are primarily embedded derivatives that are not subject to master netting agreements or similar agreements. The gross amounts of derivative liabilities are not netted against offsetting assets for presentation on the consolidated statements of financial position. |
(2) |
Represents amount of offsetting derivative assets that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative liabilities for presentation on the consolidated statements of financial position. |
The financial instruments that are subject to master netting agreements or similar agreements include right of setoff provisions. Derivative instruments include provisions to setoff positions covered under the agreements with the same counterparties and provisions to setoff positions outside of the agreements with the same counterparties in the event of default by one of the parties. Derivative instruments also include collateral provisions. Collateral received and pledged is generally settled daily with each counterparty. See Note 4, Derivative Financial Instruments, for further details.
Repurchase and reverse repurchase agreements include provisions to setoff other repurchase and reverse repurchase balances with the same counterparty. Repurchase and reverse repurchase agreements also include collateral provisions with the counterparties. For reverse repurchase agreements we require the counterparties to pledge collateral with a value greater than the amount of cash transferred. We have the right but do not sell or repledge collateral received in reverse repurchase agreements. Repurchase agreements are structured as secured borrowings for all counterparties. We pledge fixed maturities available-for-sale, which the counterparties have the right to sell or repledge. Interest incurred on repurchase agreements is reported as part of operating expense on the consolidated statements of operations. Net proceeds related to repurchase agreements are reported as a component of financing activities on the consolidated statements of cash flows. We did not have any outstanding repurchase agreements as of June 30, 2016 and December 31, 2015.
|
4. Derivative Financial Instruments
Derivatives are generally used to hedge or reduce exposure to market risks associated with assets held or expected to be purchased or sold and liabilities incurred or expected to be incurred. Derivatives are used to change the characteristics of our asset/liability mix consistent with our risk management activities. Derivatives are also used in asset replication strategies.
Types of Derivative Instruments
Interest Rate Contracts
Interest rate risk is the risk we will incur economic losses due to adverse changes in interest rates. Sources of interest rate risk include the difference between the maturity and interest rate changes of assets with the liabilities they support, timing differences between the pricing of liabilities and the purchase or procurement of assets and changing cash flow profiles from original projections due to prepayment options embedded within asset and liability contracts. We use various derivatives to manage our exposure to fluctuations in interest rates.
Interest rate swaps are contracts in which we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts based upon designated market rates or rate indices and an agreed upon notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by any party. Cash is paid or received based on the terms of the swap. We use interest rate swaps primarily to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities (including duration mismatches). We also use interest rate swaps to hedge against changes in the value of assets we anticipate acquiring and other anticipated transactions and commitments. Interest rate swaps are used to hedge against changes in the value of the guaranteed minimum withdrawal benefit (“GMWB”) liability. The GMWB rider on our variable annuity products provides for guaranteed minimum withdrawal benefits regardless of the actual performance of various equity and/or fixed income funds available with the product.
Interest rate options, including interest rate caps and interest rate floors, which can be combined to form interest rate collars, are contracts that entitle the purchaser to pay or receive the amounts, if any, by which a specified market rate exceeds a cap strike interest rate, or falls below a floor strike interest rate, respectively, at specified dates. We use interest rate collars to manage interest rate risk related to guaranteed minimum interest rate liabilities in our individual annuities contracts and lapse risk associated with higher interest rates.
A swaption is an option to enter into an interest rate swap at a future date. We purchase swaptions to offset or modify existing exposures. Swaptions provide us the benefit of the agreed-upon strike rate if the market rates for liabilities are higher, with the flexibility to enter into the current market rate swap if the market rates for liabilities are lower. Swaptions not only hedge against the downside risk, but also allow us to take advantage of any upside benefits.
In exchange-traded futures transactions, we agree to purchase or sell a specified number of contracts, the values of which are determined by the values of designated classes of securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. We enter into exchange-traded futures with regulated futures commissions merchants who are members of a trading exchange. We have used exchange-traded futures to reduce market risks from changes in interest rates and to alter mismatches between the assets in a portfolio and the liabilities supported by those assets.
Foreign Exchange Contracts
Foreign currency risk is the risk we will incur economic losses due to adverse fluctuations in foreign currency exchange rates. This risk arises from foreign currency-denominated funding agreements we issue, foreign currency-denominated fixed maturities we invest in, capital transactions with our international operations and the financial results of our international operations. We use various derivatives to manage our exposure to fluctuations in foreign currency exchange rates.
Currency swaps are contracts in which we agree with other parties to exchange, at specified intervals, a series of principal and interest payments in one currency for that of another currency. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party. The interest payments are primarily fixed-to-fixed rate; however, they may also be fixed-to-floating rate or floating-to-fixed rate. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty for payments made in the same currency at each due date. We use currency swaps to reduce market risks from changes in currency exchange rates with respect to investments or liabilities denominated in foreign currencies that we either hold or intend to acquire or sell.
Currency forwards are contracts in which we agree with other parties to deliver or receive a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. We use currency forwards to reduce market risks from changes in currency exchange rates with respect to investments or liabilities denominated in foreign currencies that we either hold or intend to acquire or sell. We sometimes use currency forwards to hedge the currency risk associated with a business combination or to hedge certain net equity investments in or expected cash flows from our foreign operations.
Equity Contracts
Equity risk is the risk that we will incur economic losses due to adverse fluctuations in common stock. We use various derivatives to manage our exposure to equity risk, which arises from products in which the interest we credit is tied to an external equity index as well as products subject to minimum contractual guarantees.
We purchase equity call spreads to hedge the equity participation rates promised to contractholders in conjunction with our fixed deferred annuity and universal life products that credit interest based on changes in an external equity index. We use exchange-traded futures and equity put options to hedge against changes in the value of the GMWB liability related to the GMWB rider on our variable annuity product, as previously explained. The premium associated with certain options is paid quarterly over the life of the option contract.
Credit Contracts
Credit risk relates to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest. We use credit default swaps to enhance the return on our investment portfolio by providing comparable exposure to fixed income securities that might not be available in the primary market. They are also used to hedge credit exposures in our investment portfolio. Credit derivatives are used to sell or buy credit protection on an identified name or names on an unfunded or synthetic basis in return for receiving or paying a quarterly premium. The premium generally corresponds to a referenced name’s credit spread at the time the agreement is executed. In cases where we sell protection, we also buy a quality cash bond to match against the credit default swap, thereby entering into a synthetic transaction replicating a cash security. When selling protection, if there is an event of default by the referenced name, as defined by the agreement, we are obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced security in a principal amount equal to the notional value of the credit default swap.
Total return swaps are contracts in which we agree with other parties to exchange, at specified intervals, an amount determined by the difference between the previous price and the current price of a reference asset based upon an agreed upon notional principal amount plus an additional amount determined by the financing spread. We currently use futures traded on an exchange (“exchange-traded”) and total return swaps referencing equity indices to hedge our portfolio from potential credit losses related to systemic events.
Other Contracts
Embedded Derivatives. We purchase or issue certain financial instruments or products that contain a derivative instrument that is embedded in the financial instrument or product. When it is determined that the embedded derivative possesses economic characteristics that are not clearly or closely related to the economic characteristics of the host contract and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host instrument for measurement purposes. The embedded derivative, which is reported with the host instrument in the consolidated statements of financial position, is carried at fair value.
We have investment contracts in which the return is tied to a leveraged inflation index. We economically hedge the risk associated with these investment contracts.
We offer group annuity contracts that have guaranteed separate accounts as an investment option. We also offer funds with embedded fixed-rate guarantees as investment options in our defined contribution plans in Hong Kong.
We have structured investment relationships with trusts we have determined to be VIEs, which are consolidated in our financial statements. The notes issued by these trusts include obligations to deliver an underlying security to residual interest holders and the obligations contain an embedded derivative of the forecasted transaction to deliver the underlying security.
We have fixed deferred annuities and universal life contracts that credit interest based on changes in an external equity index. We also have certain variable annuity products with a GMWB rider, which allows the customer to make withdrawals of a specified annual amount, either for a fixed number of years or for the lifetime of the customer, even if the account value is fully exhausted. Declines in the equity markets may increase our exposure to benefits under contracts with the GMWB. We economically hedge the exposure in these contracts, as previously explained.
Exposure
Our risk of loss is typically limited to the fair value of our derivative instruments and not to the notional or contractual amounts of these derivatives. We are also exposed to credit losses in the event of nonperformance of the counterparties. Our current credit exposure is limited to the value of derivatives that have become favorable to us. This credit risk is minimized by purchasing such agreements from financial institutions with high credit ratings and by establishing and monitoring exposure limits. We also utilize various credit enhancements, including collateral and credit triggers to reduce the credit exposure to our derivative instruments.
Derivatives may be exchange-traded or they may be privately negotiated contracts, which are usually referred to as over-the-counter (“OTC”) derivatives. Certain of our OTC derivatives are cleared and settled through central clearing counterparties (“OTC cleared”), while others are bilateral contracts between two counterparties (“bilateral OTC”). Our derivative transactions are generally documented under International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements. Management believes that such agreements provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Under such agreements, in connection with an early termination of a transaction, we are permitted to set off our receivable from a counterparty against our payables to the same counterparty arising out of all included transactions. For reporting purposes, we do not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparties under master netting agreements.
We posted $209.8 million and $342.7 million in cash and securities under collateral arrangements as of June 30, 2016 and December 31, 2015, respectively, to satisfy collateral requirements associated with our derivative credit support agreements and FCM agreements. These amounts include initial margin requirements.
Certain of our derivative instruments contain provisions that require us to maintain an investment grade rating from each of the major credit rating agencies on our debt. If the ratings on our debt were to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value, inclusive of accrued interest, of all derivative instruments with credit-risk-related contingent features that were in a liability position without regard to netting under derivative credit support annex agreements as of June 30, 2016 and December 31, 2015, was $588.2 million and $606.5 million, respectively. Cleared derivatives have contingent features that require us to post excess margin as required by the FCM. The terms surrounding excess margin vary by FCM agreement. With respect to derivatives containing collateral triggers, we posted collateral and initial margin of $209.8 million and $342.7 million as of June 30, 2016 and December 31, 2015, respectively, in the normal course of business, which reflects netting under derivative agreements. If the credit-risk-related contingent features underlying these agreements were triggered on June 30, 2016, we would be required to post an additional $68.7 million of collateral to our counterparties.
As of June 30, 2016 and December 31, 2015, we had received $537.2 million and $217.5 million, respectively, of cash collateral associated with our derivative credit support annex agreements and FCM agreements, for which we recorded a corresponding liability reflecting our obligation to return the collateral.
Notional amounts are used to express the extent of our involvement in derivative transactions and represent a standard measurement of the volume of our derivative activity. Notional amounts represent those amounts used to calculate contractual flows to be exchanged and are not paid or received, except for contracts such as currency swaps. Credit exposure represents the gross amount owed to us under derivative contracts as of the valuation date. The notional amounts and credit exposure of our derivative financial instruments by type were as follows:
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Notional amounts of derivative instruments |
|
|
|
|
||
Interest rate contracts: |
|
|
|
|
||
Interest rate swaps |
|
$ |
24,000.2 |
|
$ |
21,704.2 |
Interest rate options |
|
4,900.0 |
|
4,900.0 | ||
Interest rate futures |
|
343.0 |
|
162.0 | ||
Swaptions |
|
77.0 |
|
259.0 | ||
Foreign exchange contracts: |
|
|
|
|
||
Currency swaps |
|
1,683.0 |
|
1,751.0 | ||
Currency forwards |
|
1,153.8 |
|
1,040.6 | ||
Equity contracts: |
|
|
|
|
||
Equity options |
|
3,887.3 |
|
3,604.8 | ||
Equity futures |
|
635.1 |
|
514.2 | ||
Credit contracts: |
|
|
|
|
||
Credit default swaps |
|
1,013.9 |
|
1,084.5 | ||
Total return swaps |
|
90.0 |
|
90.0 | ||
Futures |
|
13.8 |
|
13.1 | ||
Other contracts: |
|
|
|
|
||
Embedded derivatives |
|
10,141.8 |
|
9,905.0 | ||
|
|
|
|
|
||
Total notional amounts at end of period |
|
$ |
47,938.9 |
|
$ |
45,028.4 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit exposure of derivative instruments |
|
|
|
|
||
Interest rate contracts: |
|
|
|
|
||
Interest rate swaps |
|
$ |
1,089.3 |
|
$ |
505.5 |
Interest rate options |
|
52.9 |
|
34.1 | ||
Foreign exchange contracts: |
|
|
|
|
||
Currency swaps |
|
94.1 |
|
105.6 | ||
Currency forwards |
|
14.3 |
|
4.4 | ||
Equity contracts: |
|
|
|
|
||
Equity options |
|
83.4 |
|
39.9 | ||
Credit contracts: |
|
|
|
|
||
Credit default swaps |
|
8.6 |
|
13.4 | ||
Total return swaps |
|
— |
|
0.5 | ||
|
|
|
|
|
||
Total gross credit exposure |
|
1,342.6 |
|
703.4 | ||
Less: collateral received |
|
574.0 |
|
234.2 | ||
|
|
|
|
|
||
Net credit exposure |
|
$ |
768.6 |
|
$ |
469.2 |
|
|
|
|
|
|
|
The fair value of our derivative instruments classified as assets and liabilities was as follows:
|
|
Derivative assets (1) |
|
Derivative liabilities (2) |
||||||||
|
|
June 30, 2016 |
|
December 31, 2015 |
|
June 30, 2016 |
|
December 31, 2015 |
||||
|
|
(in millions) |
||||||||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
$ |
18.5 |
|
$ |
9.4 |
|
$ |
136.8 |
|
$ |
132.2 |
Foreign exchange contracts |
|
78.5 |
|
94.1 |
|
136.1 |
|
164.2 | ||||
|
|
|
|
|
|
|
|
|
||||
Total derivatives designated as hedging instruments |
|
$ |
97.0 |
|
$ |
103.5 |
|
$ |
272.9 |
|
$ |
296.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
$ |
1,071.8 |
|
$ |
493.0 |
|
$ |
536.6 |
|
$ |
255.8 |
Foreign exchange contracts |
|
30.8 |
|
16.4 |
|
61.6 |
|
68.1 | ||||
Equity contracts |
|
83.4 |
|
39.8 |
|
91.0 |
|
112.3 | ||||
Credit contracts |
|
8.6 |
|
13.9 |
|
22.8 |
|
39.7 | ||||
Other contracts |
|
— |
|
— |
|
551.7 |
|
407.8 | ||||
|
|
|
|
|
|
|
|
|
||||
Total derivatives not designated as hedging instruments |
|
1,194.6 |
|
563.1 |
|
1,263.7 |
|
883.7 | ||||
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
Total derivative instruments |
|
$ |
1,291.6 |
|
$ |
666.6 |
|
$ |
1,536.6 |
|
$ |
1,180.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The fair value of derivative assets is reported with other investments on the consolidated statements of financial position. |
(2) |
The fair value of derivative liabilities is reported with other liabilities on the consolidated statements of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative liabilities with a fair value of $324.3 million and $177.4 million as of June 30, 2016 and December 31, 2015, respectively, are reported with contractholder funds on the consolidated statements of financial position. |
Credit Derivatives Sold
When we sell credit protection, we are exposed to the underlying credit risk similar to purchasing a fixed maturity security instrument. The majority of our credit derivative contracts sold reference a single name or reference security (referred to as “single name credit default swaps”). The remainder of our credit derivatives reference either a basket or index of securities. These instruments are either referenced in an over-the-counter credit derivative transaction, or embedded within an investment structure that has been fully consolidated into our financial statements.
These credit derivative transactions are subject to events of default defined within the terms of the contract, which normally consist of bankruptcy, failure to pay, or modified restructuring of the reference entity and/or issue. If a default event occurs for a reference name or security, we are obligated to pay the counterparty an amount equal to the notional amount of the credit derivative transaction. As a result, our maximum future payment is equal to the notional amount of the credit derivative. In certain cases, we also have purchased credit protection with identical underlyings to certain of our sold protection transactions. As of June 30, 2016 and December 31, 2015, we did not purchase credit protection relating to our sold protection transactions. In certain circumstances, our potential loss could also be reduced by any amount recovered in the default proceedings of the underlying credit name.
We purchased an investment structure with embedded credit features that is fully consolidated into our financial statements. This consolidation results in recognition of the underlying credit derivatives and collateral within the structure, typically high quality fixed maturities that are owned by a special purpose vehicle. These credit derivatives reference several names in a basket structure. In the event of default, the collateral within the structure would typically be liquidated to pay the claims of the credit derivative counterparty.
The following tables show our credit default swap protection sold by types of contract, types of referenced/underlying asset class and external agency rating for the underlying reference security. The maximum future payments are undiscounted and have not been reduced by the effect of any offsetting transactions, collateral or recourse features described above.
|
|
June 30, 2016 |
|||||||||
|
|
|
|
|
|
|
|
Weighted |
|||
|
|
|
|
|
|
Maximum |
|
average |
|||
|
|
Notional |
|
Fair |
|
future |
|
expected life |
|||
|
|
amount |
|
value |
|
payments |
|
(in years) |
|||
|
|
(in millions) |
|||||||||
Single name credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
AAA |
|
$ |
30.0 |
|
$ |
0.7 |
|
$ |
30.0 |
|
2.7 |
AA |
|
94.0 |
|
1.0 |
|
94.0 |
|
1.7 | |||
A |
|
175.0 |
|
1.6 |
|
175.0 |
|
1.7 | |||
BBB |
|
300.0 |
|
(1.0) |
|
300.0 |
|
2.5 | |||
BB |
|
20.0 |
|
(2.7) |
|
20.0 |
|
3.3 | |||
Near default |
|
10.0 |
|
(2.5) |
|
10.0 |
|
3.5 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
0.5 |
|
30.0 |
|
2.8 | |||
Sovereign |
|
|
|
|
|
|
|
|
|||
AA |
|
10.0 |
|
0.2 |
|
10.0 |
|
3.2 | |||
BBB |
|
40.0 |
|
(0.1) |
|
40.0 |
|
3.2 | |||
|
|
|
|
|
|
|
|
|
|||
Total single name credit default swaps |
|
709.0 |
|
(2.3) |
|
709.0 |
|
2.3 | |||
|
|
|
|
|
|
|
|
|
|||
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
Near default (1) |
|
82.3 |
|
(6.6) |
|
82.3 |
|
0.7 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
(0.8) |
|
30.0 |
|
1.2 | |||
Structured finance |
|
|
|
|
|
|
|
|
|||
AAA |
|
4.3 |
|
— |
|
4.3 |
|
0.2 | |||
|
|
|
|
|
|
|
|
|
|||
Total basket and index credit default swaps |
|
116.6 |
|
(7.4) |
|
116.6 |
|
0.8 | |||
|
|
|
|
|
|
|
|
|
|||
Total credit default swap protection sold |
|
$ |
825.6 |
|
$ |
(9.7) |
|
$ |
825.6 |
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||||
|
|
|
|
|
|
|
|
Weighted |
|||
|
|
|
|
|
|
Maximum |
|
average |
|||
|
|
Notional |
|
Fair |
|
future |
|
expected life |
|||
|
|
amount |
|
value |
|
payments |
|
(in years) |
|||
|
|
(in millions) |
|||||||||
Single name credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
AAA |
|
$ |
30.0 |
|
$ |
0.8 |
|
$ |
30.0 |
|
3.2 |
AA |
|
74.0 |
|
1.1 |
|
74.0 |
|
2.3 | |||
A |
|
195.0 |
|
2.2 |
|
195.0 |
|
2.2 | |||
BBB |
|
310.0 |
|
(0.9) |
|
310.0 |
|
2.9 | |||
BB |
|
30.0 |
|
(4.6) |
|
30.0 |
|
3.1 | |||
CCC |
|
10.0 |
|
(6.8) |
|
10.0 |
|
4.0 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
0.6 |
|
30.0 |
|
3.3 | |||
Sovereign |
|
|
|
|
|
|
|
|
|||
AA |
|
10.0 |
|
— |
|
10.0 |
|
3.7 | |||
BBB |
|
40.0 |
|
(0.9) |
|
40.0 |
|
3.7 | |||
|
|
|
|
|
|
|
|
|
|||
Total single name credit default swaps |
|
729.0 |
|
(8.5) |
|
729.0 |
|
2.8 | |||
|
|
|
|
|
|
|
|
|
|||
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
Near default (1) |
|
100.4 |
|
(17.7) |
|
100.4 |
|
1.2 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
(1.1) |
|
30.0 |
|
1.7 | |||
Structured finance |
|
|
|
|
|
|
|
|
|||
AAA |
|
11.9 |
|
— |
|
11.9 |
|
0.6 | |||
|
|
|
|
|
|
|
|
|
|||
Total basket and index credit default swaps |
|
142.3 |
|
(18.8) |
|
142.3 |
|
1.3 | |||
|
|
|
|
|
|
|
|
|
|||
Total credit default swap protection sold |
|
$ |
871.3 |
|
$ |
(27.3) |
|
$ |
871.3 |
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes $60.0 million and $78.0 million as of June 30, 2016 and December 31, 2015, respectively, notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third party investors. |
We also have invested in fixed maturities classified as trading that contain credit default swaps. These securities are subject to the credit risk of the issuer, normally a special purpose vehicle, which consists of the underlying credit default swaps and high quality fixed maturities that serve as collateral. A default event occurs if the cumulative losses exceed a specified attachment point, which is typically not the first loss of the portfolio. If a default event occurs that exceeds the specified attachment point, our investment may not be fully returned. We would have no future potential payments under these investments. The following tables show, by the types of referenced/underlying asset class and external rating, our fixed maturities with embedded credit derivatives.
|
|
June 30, 2016 |
||||||
|
|
|
|
|
|
Weighted |
||
|
|
|
|
|
|
average |
||
|
|
Amortized |
|
Carrying |
|
expected life |
||
|
|
cost |
|
value |
|
(in years) |
||
|
|
(in millions) |
||||||
Corporate debt |
|
|
|
|
|
|
||
A |
|
$ |
24.9 |
|
$ |
24.9 |
|
0.5 |
|
|
|
|
|
|
|
|
|
Total corporate debt |
|
24.9 |
|
24.9 |
|
0.5 | ||
|
|
|
|
|
|
|
||
Structured finance |
|
|
|
|
|
|
||
A |
|
32.5 |
|
32.5 |
|
0.5 | ||
BBB |
|
3.5 |
|
3.5 |
|
1.2 | ||
BB |
|
2.3 |
|
2.3 |
|
1.2 | ||
CCC |
|
4.7 |
|
4.7 |
|
2.3 | ||
|
|
|
|
|
|
|
||
Total structured finance |
|
43.0 |
|
43.0 |
|
0.8 | ||
|
|
|
|
|
|
|
||
Total fixed maturities with credit derivatives |
|
$ |
67.9 |
|
$ |
67.9 |
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
||||||
|
|
|
|
|
|
Weighted |
||
|
|
|
|
|
|
average |
||
|
|
Amortized |
|
Carrying |
|
expected life |
||
|
|
cost |
|
value |
|
(in years) |
||
|
|
(in millions) |
||||||
Corporate debt |
|
|
|
|
|
|
||
A |
|
$ |
24.6 |
|
$ |
24.6 |
|
1.0 |
|
|
|
|
|
|
|
|
|
Total corporate debt |
|
24.6 |
|
24.6 |
|
1.0 | ||
|
|
|
|
|
|
|
||
Structured finance |
|
|
|
|
|
|
||
A |
|
52.2 |
|
52.2 |
|
1.1 | ||
BBB |
|
3.4 |
|
3.4 |
|
1.6 | ||
BB |
|
2.3 |
|
2.3 |
|
1.6 | ||
CCC |
|
4.8 |
|
4.8 |
|
1.9 | ||
|
|
|
|
|
|
|
||
Total structured finance |
|
62.7 |
|
62.7 |
|
1.2 | ||
|
|
|
|
|
|
|
||
Total fixed maturities with credit derivatives |
|
$ |
87.3 |
|
$ |
87.3 |
|
1.1 |
|
|
|
|
|
|
|
|
|
Fair Value Hedges
We use fixed-to-floating rate interest rate swaps to more closely align the interest rate characteristics of certain assets and liabilities. In general, these swaps are used in asset and liability management to modify duration, which is a measure of sensitivity to interest rate changes.
We enter into currency exchange swap agreements to convert certain foreign denominated assets and liabilities into U.S. dollar floating-rate denominated instruments to eliminate the exposure to future currency volatility on those items.
The net interest effect of interest rate swap and currency swap transactions for derivatives in fair value hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.
Hedge effectiveness testing for fair value relationships is performed utilizing a regression analysis approach for both prospective and retrospective evaluations. This regression analysis will consider multiple data points for the assessment that the hedge continues to be highly effective in achieving offsetting changes in fair value. In certain periods, the comparison of the change in value of the derivative and the change in the value of the hedged item may not be offsetting at a specific period in time due to small movements in value. However, any amounts recorded as fair value hedges have shown to be highly effective in achieving offsetting changes in fair value both for present and future periods.
The following table shows the effect of derivatives in fair value hedging relationships and the related hedged items on the consolidated statements of operations. All gains or losses on derivatives were included in the assessment of hedge effectiveness.
|
|
|
|
|
|
|
|
Amount of gain (loss) |
||||||
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
||||||||
|
|
recognized in net income on |
|
|
|
related hedged item for the |
||||||||
|
|
derivatives for the three months |
|
|
|
three months ended |
||||||||
Derivatives in fair value hedging |
|
ended June 30, (1) |
|
Hedged items in fair value |
|
June 30, (1) |
||||||||
relationships |
|
2016 |
|
2015 |
|
hedging relationships |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
|
|
|
(in millions) |
||||||||
Interest rate contracts |
|
$ |
0.3 |
|
$ |
20.2 |
|
Fixed maturities, available-for-sale |
|
$ |
(0.3) |
|
$ |
(19.3) |
Interest rate contracts |
|
0.4 |
|
(1.0) |
|
Investment contracts |
|
(0.5) |
|
1.0 | ||||
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
0.7 |
|
$ |
19.2 |
|
Total |
|
$ |
(0.8) |
|
$ |
(18.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) |
||||||
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
||||||||
|
|
recognized in net income on |
|
|
|
related hedged item for the |
||||||||
|
|
derivatives for the six months |
|
|
|
for the six months |
||||||||
Derivatives in fair value hedging |
|
ended June 30, (1) |
|
Hedged items in fair value |
|
ended June 30, (1) |
||||||||
relationships |
|
2016 |
|
2015 |
|
hedging relationships |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
|
|
|
(in millions) |
||||||||
Interest rate contracts |
|
$ |
(7.6) |
|
$ |
18.1 |
|
Fixed maturities, available-for-sale |
|
$ |
7.6 |
|
$ |
(17.7) |
Interest rate contracts |
|
3.3 |
|
1.5 |
|
Investment contracts |
|
(3.3) |
|
(1.4) | ||||
Foreign exchange contracts |
|
— |
|
3.8 |
|
Fixed maturities, available-for-sale |
|
— |
|
(3.8) | ||||
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
(4.3) |
|
$ |
23.4 |
|
Total |
|
$ |
4.3 |
|
$ |
(22.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges. |
The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in fair value hedging relationships.
|
|
Amount of gain (loss) for the three |
|
Amount of gain (loss) for the |
||||||||
|
|
months ended June 30, |
|
six months ended June 30, |
||||||||
Hedged item |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale (1) |
|
$ |
(11.9) |
|
$ |
(19.2) |
|
$ |
(25.0) |
|
$ |
(39.3) |
Investment contracts (2) |
|
0.7 |
|
1.0 |
|
1.4 |
|
1.9 |
(1) |
Reported in net investment income on the consolidated statements of operations. |
(2) |
Reported in benefits, claims and settlement expenses on the consolidated statements of operations. |
Cash Flow Hedges
We utilize floating-to-fixed rate interest rate swaps to eliminate the variability in cash flows of recognized financial assets and liabilities and forecasted transactions.
We enter into currency exchange swap agreements to convert both principal and interest payments of certain foreign denominated assets and liabilities into U.S. dollar denominated fixed-rate instruments to eliminate the exposure to future currency volatility on those items.
The net interest effect of interest rate swap and currency swap transactions for derivatives in cash flow hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.
The maximum length of time we are hedging our exposure to the variability in future cash flows for forecasted transactions, excluding those related to the payments of variable interest on existing financial assets and liabilities, is 4.0 years. As of June 30, 2016, we had $34.6 million of net gains reported in AOCI on the consolidated statements of financial position related to active hedges of forecasted transactions. If a hedged forecasted transaction is no longer probable of occurring, cash flow hedge accounting is discontinued. If it is probable that the hedged forecasted transaction will not occur, the deferred gain or loss is immediately reclassified from AOCI into net income. During 2016 and 2015, there were no reclassifications from AOCI into net realized capital gains (losses) as a result of the determination that hedged cash flows were probable of not occurring.
The following table shows the effect of derivatives in cash flow hedging relationships on the consolidated statements of operations and consolidated statements of financial position. All gains or losses on derivatives were included in the assessment of hedge effectiveness.
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
|
||||||||
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
|
||||||||
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
|
||||||||
Derivatives in cash |
|
|
|
for the three months ended |
|
reclassified from AOCI |
|
for the three months ended |
|
||||||||
flow hedging |
|
|
|
June 30, |
|
into net income |
|
June 30, |
|
||||||||
relationships |
|
Related hedged item |
|
2016 |
|
2015 |
|
(effective portion) |
|
2016 |
|
2015 |
|
||||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
|
||||||||
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
(6.9) |
|
$ |
(5.6) |
|
Net investment income |
|
$ |
4.8 |
|
$ |
4.1 |
|
Interest rate contracts |
|
Investment contracts |
|
0.5 |
|
1.4 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(2.3) |
|
(2.0) |
|
||||
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
10.9 |
|
(26.7) |
|
Net realized capital gains |
|
0.6 |
|
5.6 |
|
||||
Foreign exchange contracts |
|
Investment contracts |
|
1.3 |
|
2.6 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
$ |
5.8 |
|
$ |
(28.3) |
|
Total |
|
$ |
3.1 |
|
$ |
7.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
|
||||||||
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
|
||||||||
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
|
||||||||
Derivatives in cash |
|
|
|
for the six months ended |
|
reclassified from AOCI |
|
for the six months ended |
|
||||||||
flow hedging |
|
|
|
June 30, |
|
into net income |
|
June 30, |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
relationships |
|
Related hedged item |
|
2016 |
|
2015 |
|
(effective portion) |
|
2016 |
|
2015 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
|
||||||||
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
21.7 |
|
$ |
11.1 |
|
Net investment income |
|
$ |
9.4 |
|
$ |
7.9 |
|
Interest rate contracts |
|
Investment contracts |
|
1.6 |
|
2.3 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(4.5) |
|
(4.0) |
|
||||
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
5.5 |
|
13.5 |
|
Net realized capital gains |
|
1.2 |
|
13.9 |
|
||||
Foreign exchange contracts |
|
Investment contracts |
|
3.9 |
|
(1.2) |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
$ |
32.7 |
|
$ |
25.7 |
|
Total |
|
$ |
6.1 |
|
$ |
17.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in cash flow hedging relationships.
|
|
Amount of gain (loss) for the |
|
Amount of gain (loss) for the |
|
||||||||
|
|
three months ended June 30, |
|
six months ended June 30, |
|
||||||||
Hedged item |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Fixed maturities, available-for-sale (1) |
|
$ |
1.4 |
|
$ |
1.6 |
|
$ |
2.9 |
|
$ |
3.1 |
|
Investment contracts (2) |
|
(4.3) |
|
(4.8) |
|
(9.3) |
|
(8.7) |
|
(1) |
Reported in net investment income on the consolidated statements of operations. |
(2) |
Reported in benefits, claims and settlement expenses on the consolidated statements of operations. |
The ineffective portion of our cash flow hedges is reported in net realized capital gains (losses) on the consolidated statements of operations. The net gain (loss) resulting from the ineffective portion of foreign currency contracts in cash flow hedging relationships was $(0.1) million and $0.0 million for the three months ended June 30, 2016 and 2015, respectively. The net gain (loss) resulting from the ineffective portion of foreign currency contracts in cash flow hedging relationships was $(0.1) million and $0.1 million for the six months ended June 30, 2016 and 2015, respectively.
We expect to reclassify net losses of $3.3 million from AOCI into net income in the next 12 months, which includes net losses on periodic settlements of active hedges and net deferred gains on discontinued hedges. Actual amounts may vary from this amount as a result of market conditions.
Derivatives Not Designated as Hedging Instruments
Our use of futures, certain swaptions and swaps, collars, options and forwards are effective from an economic standpoint, but they have not been designated as hedges for financial reporting purposes. As such, periodic changes in the market value of these instruments, which includes mark-to-market gains and losses as well as periodic and final settlements, primarily flow directly into net realized capital gains (losses) on the consolidated statements of operations.
The following table shows the effect of derivatives not designated as hedging instruments, including fair value changes of embedded derivatives that have been bifurcated from the host contract, on the consolidated statements of operations.
|
|
Amount of gain (loss) recognized in |
|
Amount of gain (loss) recognized in |
|
||||||||
|
|
net income on derivatives for the |
|
net income on derivatives for the |
|
||||||||
|
|
three months ended June 30, |
|
six months ended June 30, |
|
||||||||
Derivatives not designated as hedging instruments |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Interest rate contracts |
|
$ |
73.0 |
|
$ |
(151.0) |
|
$ |
260.7 |
|
$ |
(66.1) |
|
Foreign exchange contracts |
|
(4.5) |
|
4.3 |
|
23.1 |
|
(12.2) |
|
||||
Equity contracts |
|
6.5 |
|
(44.3) |
|
15.0 |
|
(32.2) |
|
||||
Credit contracts |
|
5.7 |
|
8.8 |
|
24.5 |
|
13.4 |
|
||||
Other contracts |
|
(112.6) |
|
109.3 |
|
(150.3) |
|
58.9 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
(31.9) |
|
$ |
(72.9) |
|
$ |
173.0 |
|
$ |
(38.2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Long-Term Debt
As part of the retrospective adoption of authoritative guidance effective January 1, 2016, debt issuance costs are presented as a direct deduction from the carrying amount of the debt liability. Previously, debt issuance costs were classified as other assets on the consolidated statements of financial position.
The components of long-term debt were as follows:
|
|
June 30, 2016 |
|
|||||||
|
|
|
|
Net unamortized |
|
|
|
|||
|
|
|
|
discount, |
|
|
|
|||
|
|
|
|
premium and |
|
|
|
|||
|
|
|
|
debt issuance |
|
Carrying |
|
|||
|
|
Principal |
|
costs |
|
amount |
|
|||
|
|
(in millions) |
|
|||||||
1.85% notes payable, due 2017 |
|
$ |
300.0 |
|
$ |
(0.7) |
|
$ |
299.3 |
|
8.875% notes payable, due 2019 |
|
350.0 |
|
(1.0) |
|
349.0 |
|
|||
3.3% notes payable, due 2022 |
|
300.0 |
|
(2.3) |
|
297.7 |
|
|||
3.125% notes payable, due 2023 |
|
300.0 |
|
(1.9) |
|
298.1 |
|
|||
3.4% notes payable, due 2025 |
|
400.0 |
|
(4.0) |
|
396.0 |
|
|||
6.05% notes payable, due 2036 |
|
600.0 |
|
(3.3) |
|
596.7 |
|
|||
4.625% notes payable, due 2042 |
|
300.0 |
|
(3.4) |
|
296.6 |
|
|||
4.35% notes payable, due 2043 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.7% notes payable, due 2055 |
|
400.0 |
|
(5.0) |
|
395.0 |
|
|||
Non-recourse mortgages and notes payable |
|
46.5 |
|
(1.2) |
|
45.3 |
|
|||
|
|
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
3,296.5 |
|
$ |
(26.3) |
|
$ |
3,270.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2015 |
|
|||||||
|
|
|
|
|||||||
|
|
|
|
Net unamortized |
|
|
|
|||
|
|
|
|
discount, |
|
|
|
|||
|
|
|
|
premium and |
|
|
|
|||
|
|
|
|
debt issuance |
|
Carrying |
|
|||
|
|
Principal |
|
costs |
|
amount |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
(in millions) |
|
|||||||
1.85% notes payable, due 2017 |
|
$ |
300.0 |
|
$ |
(0.9) |
|
$ |
299.1 |
|
8.875% notes payable, due 2019 |
|
350.0 |
|
(1.2) |
|
348.8 |
|
|||
3.3% notes payable, due 2022 |
|
300.0 |
|
(2.5) |
|
297.5 |
|
|||
3.125% notes payable, due 2023 |
|
300.0 |
|
(2.0) |
|
298.0 |
|
|||
3.4% notes payable, due 2025 |
|
400.0 |
|
(4.3) |
|
395.7 |
|
|||
6.05% notes payable, due 2036 |
|
600.0 |
|
(3.3) |
|
596.7 |
|
|||
4.625% notes payable, due 2042 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.35% notes payable, due 2043 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.7% notes payable, due 2055 |
|
400.0 |
|
(5.0) |
|
395.0 |
|
|||
Non-recourse mortgages and notes payable |
|
42.8 |
|
(1.4) |
|
41.4 |
|
|||
|
|
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
3,292.8 |
|
$ |
(27.6) |
|
$ |
3,265.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Net discount, premium and issuance costs associated with issuing these notes are amortized to expense over the respective terms using the interest method.
|
6. Income Taxes
The effective income tax rates for the three months ended June 30, 2016 and 2015, were lower than the U.S. corporate income tax rate of 35% (“U.S. statutory rate”) primarily due to income tax deductions allowed for corporate dividends received, the presentation of taxes on our share of earnings generated from equity method investments reflected in net investment income and tax credits.
The effective income tax rate for the six months ended June 30, 2016, was lower than the U.S. statutory rate primarily due to income tax deductions allowed for corporate dividends received, the presentation of taxes on our share of earnings generated from equity method investments reflected in net investment income and tax credits.
The effective income tax rate for the six months ended June 30, 2015, was lower than the U.S. statutory rate primarily due to a change in deferred tax balances related to the merger of two of our Chilean legal entities, income tax deductions allowed for corporate dividends received and the presentation of taxes on our share of earnings generated from equity method investments reflected in net investment income, partially offset by the negative impact of a court ruling on some uncertain tax positions.
|
7. Employee and Agent Benefits
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
Other postretirement |
|
||||||
|
|
Pension benefits |
|
benefits |
|
||||||||
|
|
For the three months ended |
|
For the three months ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Service cost |
|
$ |
16.3 |
|
$ |
15.8 |
|
$ |
0.6 |
|
$ |
0.5 |
|
Interest cost |
|
33.7 |
|
30.1 |
|
1.6 |
|
1.7 |
|
||||
Expected return on plan assets |
|
(38.8) |
|
(40.1) |
|
(8.2) |
|
(8.5) |
|
||||
Amortization of prior service benefit |
|
(0.5) |
|
(0.4) |
|
(5.0) |
|
(4.6) |
|
||||
Recognized net actuarial (gain) loss |
|
19.2 |
|
25.5 |
|
— |
|
(0.2) |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost (income) |
|
$ |
29.9 |
|
$ |
30.9 |
|
$ |
(11.0) |
|
$ |
(11.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
Other postretirement |
|
||||||
|
|
Pension benefits |
|
benefits |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
For the six months ended |
|
For the six months ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
(in millions) |
|
||||||||||
Service cost |
|
$ |
32.5 |
|
$ |
31.6 |
|
$ |
1.2 |
|
$ |
1.0 |
|
Interest cost |
|
67.4 |
|
60.2 |
|
3.3 |
|
3.3 |
|
||||
Expected return on plan assets |
|
(77.5) |
|
(80.3) |
|
(16.3) |
|
(17.0) |
|
||||
Amortization of prior service benefit |
|
(1.1) |
|
(0.9) |
|
(10.1) |
|
(9.2) |
|
||||
Recognized net actuarial (gain) loss |
|
38.5 |
|
51.1 |
|
0.1 |
|
(0.4) |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost (income) |
|
$ |
59.8 |
|
$ |
61.7 |
|
$ |
(21.8) |
|
$ |
(22.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
Our funding policy for our qualified pension plan is to fund the plan annually in an amount at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act (“ERISA”) and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. The minimum annual contribution for 2016 will be zero so we will not be required to fund our qualified pension plan during 2016. However, it is possible that we may fund the qualified and nonqualified pension plans in 2016 for a combined total of up to $125.0 million. During the three and six months ended June 30, 2016, we contributed $34.9 million and $59.7 million to these plans, respectively.
|
8. Contingencies, Guarantees and Indemnifications
Litigation and Regulatory Contingencies
We are regularly involved in litigation, both as a defendant and as a plaintiff, but primarily as a defendant. Litigation naming us as a defendant ordinarily arises out of our business operations as a provider of asset management and accumulation products and services; individual life insurance, specialty benefits insurance and our investment activities. Some of the lawsuits may be class actions, or purport to be, and some may include claims for unspecified or substantial punitive and treble damages.
We may discuss such litigation in one of three ways. We accrue a charge to income and disclose legal matters for which the chance of loss is probable and for which the amount of loss can be reasonably estimated. We may disclose contingencies for which the chance of loss is reasonably possible and provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. Finally, we may voluntarily disclose loss contingencies for which the chance of loss is remote in order to provide information concerning matters that potentially expose us to possible losses.
In addition, regulatory bodies such as state insurance departments, the SEC, the Financial Industry Regulatory Authority, the Department of Labor (“DOL”) and other regulatory agencies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, ERISA and laws governing the activities of broker-dealers. We receive requests from regulators and other governmental authorities relating to industry issues and may receive additional requests, including subpoenas and interrogatories, in the future.
On December 30, 2015, Mary Ventura, William Littlejohn and Ryan Kadota filed a lawsuit in the United States District Court for the Southern District of Iowa against Principal Management Corporation (“PMC”). The lawsuit alleges PMC breached its fiduciary duty under Section 36(b) of the Investment Company Act by charging excessive fees on the LargeCap Growth I Fund, SmallCap Growth I Fund, SmallCap Fund, High Yield Fund, MidCap Fund and the MidCap Value III Fund. PMC is aggressively defending the lawsuit.
On March 18, 2014, McCaffree Financial Corp. Employee Retirement Program (“McCaffree”) filed a putative class action lawsuit in the United States District Court for the Southern District of Iowa against Principal Life. The complaint alleged, among other things, breach of duty of loyalty, breach of duty of prudence and prohibited transactions under ERISA. Principal Life filed a motion to dismiss the case and the court granted the motion. On January 8, 2016, the Eighth Circuit Court of Appeals affirmed the district court’s decision dismissing the complaint against Principal Life. The Plaintiff did not file a writ of certiorari to the United States Supreme Court before the deadline, and thus, the case is concluded.
On August 29, 2013, American Chemicals & Equipment, Inc. 401(k) Retirement Plan (“ACE”) filed a lawsuit in the United States District Court for the Northern District of Alabama against PMC and Principal Global Investors, LLC (the “ACE Defendants”). The lawsuit alleges the ACE Defendants breached their fiduciary duty under Section 36(b) of the Investment Company Act by charging excessive fees on certain of the LifeTime series target date funds. On January 24, 2014, the court granted the motion filed by the ACE Defendants to transfer the case to the Southern District of Iowa. The ACE Defendants were granted summary judgment and the case was dismissed. ACE has appealed that grant of summary judgment and subsequent dismissal to the Eighth Circuit Court of Appeals. The ACE Defendants continue to aggressively defend the lawsuit.
In 2008, Principal Life received approximately $440.0 million in connection with the termination of certain structured transactions and the resulting prepayment of Principal Life’s investment in those transactions. The transactions involved Lehman Brothers Special Financing Inc. and Lehman Brothers Holdings Inc. (collectively, “Lehman”) in various capacities. Subsequent to Lehman’s 2008 bankruptcy filing, its bankruptcy estate initiated several lawsuits seeking to recover from numerous sources significant amounts to which it claims entitlement under various theories. We are one of a large group of defendants to this action. The estate’s claim against Principal Life, including interest, was approximately $600.0 million. On June 28, 2016, the bankruptcy court granted the Defendants’ motion to dismiss directed at common issues and dismissed with prejudice all claims against Principal Life.
While the outcome of any pending or future litigation or regulatory matter cannot be predicted, management does not believe that any such matter will have a material adverse effect on our business or financial position. As of June 30, 2016, we had no estimated losses accrued related to the legal matters discussed above because we believe the loss from these matters is not probable and cannot be reasonably estimated.
We believe all of the litigation contingencies discussed above involve a chance of loss that is either remote or reasonably possible. Unless otherwise noted, all of these matters involve unspecified claim amounts, in which the respective plaintiffs seek an indeterminate amount of damages. To the extent such matters present a reasonably possible chance of loss, we are generally not able to estimate the possible loss or range of loss associated therewith.
The outcome of such matters is always uncertain, and unforeseen results can occur. It is possible that such outcomes could require us to pay damages or make other expenditures or establish accruals in amounts that we could not estimate as of June 30, 2016.
Guarantees and Indemnifications
In the normal course of business, we have provided guarantees to third parties primarily related to former subsidiaries and joint ventures. The terms of these agreements range in duration and often are not explicitly defined. The maximum exposure under these agreements as of June 30, 2016, was approximately $170.0 million. At inception, the fair value of such guarantees was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. Should we be required to perform under these guarantees, we generally could recover a portion of the loss from third parties through recourse provisions included in agreements with such parties, the sale of assets held as collateral that can be liquidated in the event that performance is required under the guarantees or other recourse generally available to us; therefore, such guarantees would not result in a material adverse effect on our business or financial position. While the likelihood is remote, such outcomes could materially affect net income in a particular quarter or annual period.
We manage mandatory privatized social security funds in Chile. By regulation, we have a required minimum guarantee on the funds’ relative return. Because the guarantee has no limitation with respect to duration or amount, the maximum exposure of the guarantee in the future is indeterminable.
We are also subject to various other indemnification obligations issued in conjunction with divestitures, acquisitions and financing transactions whose terms range in duration and often are not explicitly defined. Certain portions of these indemnifications may be capped, while other portions are not subject to such limitations; therefore, the overall maximum amount of the obligation under the indemnifications cannot be reasonably estimated. At inception, the fair value of such indemnifications was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. While we are unable to estimate with certainty the ultimate legal and financial liability with respect to these indemnifications, we believe that performance under these indemnifications would not result in a material adverse effect on our business or financial position. While the likelihood is remote, performance under these indemnifications could materially affect net income in a particular quarter or annual period.
|
9. Stockholders’ Equity
Reconciliation of Outstanding Shares
|
|
Series A |
|
Series B |
|
Common |
|
|
|
preferred stock |
|
preferred stock |
|
stock |
|
|
|
(in millions) |
|
||||
Outstanding shares as of January 1, 2015 |
|
3.0 |
|
10.0 |
|
293.9 |
|
Shares issued |
|
— |
|
— |
|
2.3 |
|
Treasury stock acquired |
|
— |
|
— |
|
(1.5) |
|
Preferred stock redemption |
|
(3.0) |
|
(10.0) |
|
— |
|
|
|
|
|
|
|
|
|
Outstanding shares as of June 30, 2015 |
|
— |
|
— |
|
294.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares as of January 1, 2016 |
|
— |
|
— |
|
291.4 |
|
Shares issued |
|
— |
|
— |
|
1.9 |
|
Treasury stock acquired |
|
— |
|
— |
|
(5.3) |
|
|
|
|
|
|
|
|
|
Outstanding shares as of June 30, 2016 |
|
— |
|
— |
|
288.0 |
|
|
|
|
|
|
|
|
|
On June 30, 2015, we redeemed our 3.0 million shares of series A preferred stock for $300.0 million and our 10.0 million shares of series B preferred stock for $250.0 million. At redemption, we recognized $8.2 million excess redemption value over carrying value of the preferred shares redeemed as an adjustment to determine net income available to common stockholders.
In February 2014, our Board of Directors authorized a share repurchase program of up to $200.0 million of our outstanding common stock, which was completed in March 2015. In February 2015, our Board of Directors authorized a share repurchase program of up to $150.0 million of our outstanding common stock, which was completed in October 2015. In October 2015, our Board of Directors authorized a share repurchase program of up to $150.0 million of our outstanding common stock, which was completed in March 2016. In February 2016, our Board of Directors authorized a share repurchase program of up to $400.0 million of our outstanding common stock. Shares repurchased under these programs are accounted for as treasury stock, carried at cost and reflected as a reduction to stockholders’ equity.
Other Comprehensive Income (Loss)
|
|
For the three months ended |
|
For the six months ended |
|
||||||||||||||
|
|
June 30, 2016 |
|
June 30, 2016 |
|
||||||||||||||
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Net unrealized gains on available-for-sale securities during the period |
|
$ |
954.2 |
|
$ |
(330.6) |
|
$ |
623.6 |
|
$ |
1,866.1 |
|
$ |
(643.5) |
|
$ |
1,222.6 |
|
Reclassification adjustment for (gains) losses included in net income (1) |
|
(35.3) |
|
12.4 |
|
(22.9) |
|
20.0 |
|
(7.0) |
|
13.0 |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
(56.0) |
|
19.7 |
|
(36.3) |
|
(112.1) |
|
39.3 |
|
(72.8) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
(394.1) |
|
132.9 |
|
(261.2) |
|
(687.2) |
|
232.0 |
|
(455.2) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on available-for-sale securities |
|
468.8 |
|
(165.6) |
|
303.2 |
|
1,086.8 |
|
(379.2) |
|
707.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
6.6 |
|
(2.3) |
|
4.3 |
|
(0.9) |
|
0.3 |
|
(0.6) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
(2.4) |
|
0.8 |
|
(1.6) |
|
(1.6) |
|
0.6 |
|
(1.0) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
(0.1) |
|
— |
|
(0.1) |
|
— |
|
— |
|
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
4.1 |
|
(1.5) |
|
2.6 |
|
(2.5) |
|
0.9 |
|
(1.6) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on derivative instruments during the period |
|
16.2 |
|
(5.6) |
|
10.6 |
|
21.9 |
|
(7.6) |
|
14.3 |
|
||||||
Reclassification adjustment for gains included in net income (3) |
|
(3.1) |
|
0.9 |
|
(2.2) |
|
(6.1) |
|
1.8 |
|
(4.3) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
2.4 |
|
(0.8) |
|
1.6 |
|
1.0 |
|
(0.3) |
|
0.7 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
1.7 |
|
(0.5) |
|
1.2 |
|
2.7 |
|
(0.9) |
|
1.8 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on derivative instruments |
|
17.2 |
|
(6.0) |
|
11.2 |
|
19.5 |
|
(7.0) |
|
12.5 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment |
|
25.1 |
|
(11.0) |
|
14.1 |
|
164.0 |
|
(20.2) |
|
143.8 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
13.7 |
|
(5.7) |
|
8.0 |
|
27.4 |
|
(11.4) |
|
16.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrecognized postretirement benefit obligation |
|
13.7 |
|
(5.7) |
|
8.0 |
|
27.4 |
|
(11.4) |
|
16.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
$ |
528.9 |
|
$ |
(189.8) |
|
$ |
339.1 |
|
$ |
1,295.2 |
|
$ |
(416.9) |
|
$ |
878.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
||||||||||||||
|
|
June 30, 2015 |
|
June 30, 2015 |
|
||||||||||||||
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Net unrealized losses on available-for-sale securities during the period |
|
$ |
(1,090.4) |
|
$ |
372.6 |
|
$ |
(717.8) |
|
$ |
(807.1) |
|
$ |
274.3 |
|
$ |
(532.8) |
|
Reclassification adjustment for (gains) losses included in net income (1) |
|
5.1 |
|
(1.7) |
|
3.4 |
|
(8.5) |
|
3.0 |
|
(5.5) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
95.7 |
|
(33.5) |
|
62.2 |
|
82.4 |
|
(28.8) |
|
53.6 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
526.1 |
|
(180.3) |
|
345.8 |
|
357.3 |
|
(121.9) |
|
235.4 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized losses on available-for-sale securities |
|
(463.5) |
|
157.1 |
|
(306.4) |
|
(375.9) |
|
126.6 |
|
(249.3) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
5.4 |
|
(2.0) |
|
3.4 |
|
26.9 |
|
(9.4) |
|
17.5 |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
— |
|
— |
|
— |
|
(1.3) |
|
0.5 |
|
(0.8) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
— |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
5.4 |
|
(2.0) |
|
3.4 |
|
25.8 |
|
(8.9) |
|
16.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on derivative instruments during the period |
|
(23.9) |
|
8.5 |
|
(15.4) |
|
28.4 |
|
(9.9) |
|
18.5 |
|
||||||
Reclassification adjustment for gains included in net income (3) |
|
(7.7) |
|
2.6 |
|
(5.1) |
|
(17.8) |
|
6.0 |
|
(11.8) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
2.4 |
|
(0.8) |
|
1.6 |
|
12.5 |
|
(4.4) |
|
8.1 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
4.4 |
|
(1.6) |
|
2.8 |
|
(4.8) |
|
1.7 |
|
(3.1) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on derivative instruments |
|
(24.8) |
|
8.7 |
|
(16.1) |
|
18.3 |
|
(6.6) |
|
11.7 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment |
|
(38.1) |
|
(4.4) |
|
(42.5) |
|
(206.1) |
|
31.0 |
|
(175.1) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
20.3 |
|
(8.3) |
|
12.0 |
|
40.6 |
|
(16.6) |
|
24.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrecognized postretirement benefit obligation |
|
20.3 |
|
(8.3) |
|
12.0 |
|
40.6 |
|
(16.6) |
|
24.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
$ |
(500.7) |
|
$ |
151.1 |
|
$ |
(349.6) |
|
$ |
(497.3) |
|
$ |
125.5 |
|
$ |
(371.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations. |
(2) |
Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI. |
(3) |
See Note 4, Derivative Financial Instruments – Cash Flow Hedges, for further details. |
(4) |
Pre-tax amortization of prior service cost and actuarial loss included in net periodic benefit cost, which is comprised of amortization of prior service cost (benefit) and recognized net actuarial (gain) loss, is reported in operating expenses on the consolidated statements of operations. See Note 7, Employee and Agent Benefits – Components of Net Periodic Benefit Cost, for further details. |
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
Noncredit |
|
|
|
|
|
|
|
|
|
||||||
|
|
Net unrealized |
|
component of |
|
Net unrealized |
|
Foreign |
|
Unrecognized |
|
Accumulated |
|
||||||
|
|
gains on |
|
impairment losses |
|
gains on |
|
currency |
|
postretirement |
|
other |
|
||||||
|
|
available-for-sale |
|
on fixed maturities |
|
derivative |
|
translation |
|
benefit |
|
comprehensive |
|
||||||
|
|
securities |
|
available-for-sale |
|
instruments |
|
adjustment |
|
obligation |
|
income (loss) |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Balances as of January 1, 2015 |
|
$ |
1,202.8 |
|
$ |
(105.1) |
|
$ |
50.6 |
|
$ |
(686.8) |
|
$ |
(411.1) |
|
$ |
50.4 |
|
Other comprehensive loss during the period, net of adjustments |
|
(243.8) |
|
— |
|
23.5 |
|
(170.4) |
|
— |
|
(390.7) |
|
||||||
Amounts reclassified from AOCI |
|
(5.5) |
|
16.9 |
|
(11.8) |
|
— |
|
24.0 |
|
23.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
(249.3) |
|
16.9 |
|
11.7 |
|
(170.4) |
|
24.0 |
|
(367.1) |
|
||||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
— |
|
(9.9) |
|
— |
|
(9.9) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of June 30, 2015 |
|
$ |
953.5 |
|
$ |
(88.2) |
|
$ |
62.3 |
|
$ |
(867.1) |
|
$ |
(387.1) |
|
$ |
(326.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of January 1, 2016 |
|
$ |
732.1 |
|
$ |
(86.0) |
|
$ |
69.8 |
|
$ |
(1,148.2) |
|
$ |
(450.2) |
|
$ |
(882.5) |
|
Other comprehensive income during the period, net of adjustments |
|
694.6 |
|
(1.6) |
|
16.8 |
|
138.0 |
|
— |
|
847.8 |
|
||||||
Amounts reclassified from AOCI |
|
13.0 |
|
— |
|
(4.3) |
|
— |
|
16.0 |
|
24.7 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
707.6 |
|
(1.6) |
|
12.5 |
|
138.0 |
|
16.0 |
|
872.5 |
|
||||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
— |
|
(9.3) |
|
— |
|
(9.3) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of June 30, 2016 |
|
$ |
1,439.7 |
|
$ |
(87.6) |
|
$ |
82.3 |
|
$ |
(1,019.5) |
|
$ |
(434.2) |
|
$ |
(19.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
Interests held by unaffiliated parties in consolidated entities are reflected in noncontrolling interest, which represents the noncontrolling partners’ share of the underlying net assets of our consolidated subsidiaries. Noncontrolling interest that is not redeemable is reported in the equity section of the consolidated statements of financial position.
The noncontrolling interest holders in certain of our consolidated entities maintain an equity interest that is redeemable at the option of the holder, which may be exercised on varying dates. Since redemption of the noncontrolling interest is outside of our control, this interest is presented on the consolidated statements of financial position line item titled “Redeemable noncontrolling interest.” Our redeemable noncontrolling interest primarily relates to consolidated sponsored investment funds for which interests are redeemed at fair value from the net assets of the funds.
For our redeemable noncontrolling interest related to other consolidated subsidiaries, redemptions are required to be purchased at fair value or a value based on a formula that management intended to reasonably approximate fair value based on a fixed multiple of earnings over a measurement period. The carrying value of the redeemable noncontrolling interest is compared to the redemption value at each reporting period. Any adjustments to the carrying amount of the redeemable noncontrolling interest for changes in redemption value prior to exercise of the redemption option are determined after the attribution of net income or loss of the subsidiary and are recognized in the redemption value as they occur. Adjustments to the carrying value of redeemable noncontrolling interest result in adjustments to additional paid-in capital and/or retained earnings. Adjustments are recorded in retained earnings to the extent the redemption value of the redeemable noncontrolling interest exceeds its fair value and will impact the numerator in our earnings per share calculations. All other adjustments to the redeemable noncontrolling interest are recorded in additional paid-in capital.
Following is a reconciliation of the changes in the redeemable noncontrolling interest (in millions):
Balance as of January 1, 2015 |
|
$ |
58.0 |
|
Net income attributable to redeemable noncontrolling interest |
|
2.1 |
|
|
Contributions from redeemable noncontrolling interest |
|
24.7 |
|
|
Distributions to redeemable noncontrolling interest |
|
(4.4) |
|
|
Purchase of subsidiary shares from redeemable noncontrolling interest |
|
(6.5) |
|
|
Change in redemption value of redeemable noncontrolling interest |
|
3.3 |
|
|
Foreign currency translation adjustment |
|
(5.6) |
|
|
|
|
|
|
|
Balance as of June 30, 2015 |
|
$ |
71.6 |
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016 |
|
$ |
85.7 |
|
Net income attributable to redeemable noncontrolling interest |
|
3.2 |
|
|
Redeemable noncontrolling interest of newly consolidated entities (1) |
|
179.5 |
|
|
Redeemable noncontrolling interest of deconsolidated entities (2) |
|
(18.7) |
|
|
Contributions from redeemable noncontrolling interest |
|
121.3 |
|
|
Distributions to redeemable noncontrolling interest |
|
(29.6) |
|
|
Purchase of subsidiary shares from redeemable noncontrolling interest |
|
(8.1) |
|
|
Change in redemption value of redeemable noncontrolling interest |
|
(0.4) |
|
|
Foreign currency translation adjustment |
|
4.2 |
|
|
|
|
|
|
|
Balance as of June 30, 2016 |
|
$ |
337.1 |
|
|
|
|
|
|
(1) |
Effective January 1, 2016, certain sponsored investment funds were consolidated as a result of the implementation of new accounting guidance. See Note 2, Variable Interest Entities, for further details. |
(2) |
We deconsolidated certain sponsored investment funds as they no longer met the requirements for consolidation. |
|
10. Fair Value Measurements
We use fair value measurements to record fair value of certain assets and liabilities and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value. Certain financial instruments, particularly policyholder liabilities other than investment contracts, are excluded from these fair value disclosure requirements.
Valuation Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety considering factors specific to the asset or liability.
· |
Level 1 – Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities primarily include exchange traded equity securities, mutual funds and U.S. Treasury bonds. |
· |
Level 2 – Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Our Level 2 assets and liabilities primarily include fixed maturities (including public and private bonds), equity securities, cash equivalents, derivatives and other investments. |
· |
Level 3 – Fair values are based on at least one significant unobservable input for the asset or liability. Our Level 3 assets and liabilities primarily include fixed maturities, real estate and commercial mortgage loan investments of our separate accounts, complex derivatives and embedded derivatives. |
Determination of Fair Value
The following discussion describes the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis or disclosed at fair value. The techniques utilized in estimating the fair value of financial instruments are reliant on the assumptions used. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.
Fair value estimates are made based on available market information and judgments about the financial instrument at a specific point in time. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. We validate prices through an investment analyst review process, which includes validation through direct interaction with external sources, review of recent trade activity or use of internal models. In circumstances where broker quotes are used to value an instrument, we generally receive one non-binding quote. Broker quotes are validated through an investment analyst review process, which includes validation through direct interaction with external sources and use of internal models or other relevant information. We did not make any significant changes to our valuation processes during 2016.
Fixed Maturities
Fixed maturities include bonds, ABS, redeemable preferred stock and certain nonredeemable preferred securities. When available, the fair value of fixed maturities is based on quoted prices of identical assets in active markets. These are reflected in Level 1 and primarily include U.S. Treasury bonds and actively traded redeemable corporate preferred securities.
When quoted prices of identical assets in active markets are not available, our first priority is to obtain prices from third party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information. Their methodologies vary by asset class and include inputs such as estimated cash flows, benchmark yields, reported trades, broker quotes, credit quality, industry events and economic events. Fixed maturities with validated prices from pricing services, which includes the majority of our public fixed maturities in all asset classes, are generally reflected in Level 2. Also included in Level 2 are corporate bonds where quoted market prices are not available, for which an internal model using substantially all observable inputs or a matrix pricing valuation approach is used. In the matrix approach, securities are grouped into pricing categories that vary by sector, rating and average life. Each pricing category is assigned a risk spread based on studies of observable public market data from the investment professionals assigned to specific security classes. The expected cash flows of the security are then discounted back at the current Treasury curve plus the appropriate risk spread. Although the matrix valuation approach provides a fair valuation of each pricing category, the valuation of an individual security within each pricing category may actually be impacted by company specific factors.
If we are unable to price a fixed maturity security using prices from third party pricing vendors or other sources specific to the asset class, we may obtain a broker quote or utilize an internal pricing model specific to the asset utilizing relevant market information, to the extent available and where at least one significant unobservable input is utilized, which are reflected in Level 3 and can include fixed maturities across all asset classes. As of June 30, 2016, less than 1% of our Level 3 fixed maturities were valued using internal pricing models.
The primary inputs, by asset class, for valuations of the majority of our Level 2 investments from third party pricing vendors or our internal pricing valuation approach are described below.
U.S. Government and Agencies/Non-U.S. Governments. Inputs include recently executed market transactions, interest rate yield curves, maturity dates, market price quotations and credit spreads relating to similar instruments.
States and Political Subdivisions. Inputs include Municipal Securities Rulemaking Board reported trades, U.S. Treasury and other benchmark curves, material event notices, new issue data and obligor credit ratings.
Corporate. Inputs include recently executed transactions, market price quotations, benchmark yields, issuer spreads and observations of equity and credit default swap curves related to the issuer. For private placement corporate securities valued through the matrix valuation approach inputs include the current Treasury curve and risk spreads based on sector, rating and average life of the issuance.
RMBS, CMBS, Collateralized Debt Obligations and Other Debt Obligations. Inputs include cash flows, priority of the tranche in the capital structure, expected time to maturity for the specific tranche, reinvestment period remaining and performance of the underlying collateral including prepayments, defaults, deferrals, loss severity of defaulted collateral and, for RMBS, prepayment speed assumptions. Other inputs include market indices and recently executed market transactions.
Equity Securities
Equity securities include mutual funds, common stock, nonredeemable preferred stock and required regulatory investments. Fair values of equity securities are determined using quoted prices in active markets for identical assets when available, which are reflected in Level 1. When quoted prices are not available, we may utilize internal valuation methodologies appropriate for the specific asset that use observable inputs such as underlying share prices or the net asset value (“NAV”), which are reflected in Level 2. Fair values might also be determined using broker quotes or through the use of internal models or analysis that incorporate significant assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities, which are reflected in Level 3.
Derivatives
The fair values of exchange-traded derivatives are determined through quoted market prices, which are reflected in Level 1. Exchange-traded derivatives include futures that are settled daily such that their fair value is not reflected in the consolidated statements of financial position. The fair values of derivative instruments cleared through centralized clearinghouses are determined through market prices published by the clearinghouses, which are reflected in Level 2. The clearinghouses may utilize the overnight indexed swap (“OIS”) curve in their valuation. The fair values of bilateral OTC derivative instruments are determined using either pricing valuation models that utilize market observable inputs or broker quotes. The majority of our bilateral OTC derivatives are valued with models that use market observable inputs, which are reflected in Level 2. Significant inputs include contractual terms, interest rates, currency exchange rates, credit spread curves, equity prices and volatilities. These valuation models consider projected discounted cash flows, relevant swap curves and appropriate implied volatilities. Certain bilateral OTC derivatives utilize unobservable market data, primarily independent broker quotes that are nonbinding quotes based on models that do not reflect the result of market transactions, which are reflected in Level 3.
Our non-cleared derivative contracts are generally documented under ISDA Master Agreements, which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Collateral arrangements are bilateral and based on current ratings of each entity. We utilize the LIBOR interest rate curve to value our positions, which includes a credit spread. This credit spread incorporates an appropriate level of nonperformance risk into our valuations given the current ratings of our counterparties, as well as the collateral agreements in place. Counterparty credit risk is routinely monitored to ensure our adjustment for non-performance risk is appropriate. Our centrally cleared derivative contracts are conducted with regulated centralized clearinghouses, which provide for daily exchange of cash collateral equal to the difference in the daily market values of those contracts that eliminates the non-performance risk on these trades.
Interest Rate Contracts. For non-cleared contracts we use discounted cash flow valuation techniques to determine the fair value of interest rate swaps using observable swap curves as the inputs. These are reflected in Level 2. For centrally cleared contracts we use published prices from clearinghouses. These are reflected in Level 2. In addition, we have a limited number of complex inflation-linked interest rate swaps, interest rate collars and swaptions that are valued using broker quotes. These are reflected in Level 3.
Foreign Exchange Contracts. We use discounted cash flow valuation techniques that utilize observable swap curves and exchange rates as the inputs to determine the fair value of foreign currency swaps. These are reflected in Level 2. Currency forwards are valued using observable market inputs, including forward currency exchange rates. These are reflected in Level 2. In addition, we have a limited number of non-standard currency swaps that are valued using broker quotes. These are reflected within Level 3.
Equity Contracts. We use an option pricing model using observable implied volatilities, dividend yields, index prices and swap curves as the inputs to determine the fair value of equity options. These are reflected in Level 2.
Credit Contracts. We use either the ISDA Credit Default Swap Standard discounted cash flow model that utilizes observable default probabilities and recovery rates as inputs or broker prices to determine the fair value of credit default swaps. These are reflected in Level 3. In addition, we have a limited number of total return swaps that are valued based on the observable quoted price of underlying equity indices. These are reflected in Level 2.
Other Investments
Other investments reported at fair value include invested assets of consolidated sponsored investment funds, unconsolidated sponsored investment funds, other investment funds reported at fair value or for which the fair value option was elected, commercial mortgage loans of consolidated VIEs for which the fair value option was elected and equity method real estate investments for which the fair value option was elected.
Invested assets of consolidated sponsored investment funds include equity securities, fixed maturities and other investments, for which fair values are determined as previously described, and are reflected in Level 1 and Level 2.
The fair value of unconsolidated sponsored investment funds and other investment funds is determined using the NAV of the fund. The NAV of the fund represents the price at which we feel we would be able to initiate a transaction. Investments for which the NAV represents a quoted price in an active market for identical assets are reflected in Level 1. Investments that do not have a quoted price in an active market are reflected in Level 2.
Commercial mortgage loans of consolidated VIEs valued using the measurement alternative for CCFEs are reflected in Level 2. These investments are based on the more observable fair value of the liabilities of the consolidated VIEs.
Equity method real estate investments for which the fair value option was elected are reflected in Level 3. The equity method real estate investments consist of underlying real estate and debt. The real estate fair value is estimated using a discounted cash flow valuation model that utilizes public real estate market data inputs such as transaction prices, market rents, vacancy levels, leasing absorption, market cap rates and discount rates. The debt fair value is estimated using a discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements.
Cash Equivalents
Certain cash equivalents are reported at fair value on a recurring basis and include money market instruments and other short-term investments with maturities of three months or less. Fair values of these cash equivalents may be determined using public quotations, when available, which are reflected in Level 1. When public quotations are not available, because of the highly liquid nature of these assets, carrying amounts may be used to approximate fair values, which are reflected in Level 2.
Separate Account Assets
Separate account assets include equity securities, debt securities and derivative instruments, for which fair values are determined as previously described, and are reflected in Level 1, Level 2 and Level 3. Separate account assets also include commercial mortgage loans, for which the fair value is estimated by discounting the expected total cash flows using market rates that are applicable to the yield, credit quality and maturity of the loans. The market clearing spreads vary based on mortgage type, weighted average life, rating and liquidity. These are reflected in Level 3. Finally, separate account assets include real estate, for which the fair value is estimated using discounted cash flow valuation models that utilize various public real estate market data inputs. In addition, each property is appraised annually by an independent appraiser. The real estate included in separate account assets is recorded net of related mortgage encumbrances for which the fair value is estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. The real estate within the separate accounts is reflected in Level 3.
Investment Contracts
Certain annuity contracts and other investment contracts include embedded derivatives that have been bifurcated from the host contract and that are measured at fair value on a recurring basis, which are reflected in Level 3. The key assumptions for calculating the fair value of the embedded derivative liabilities are market assumptions (such as equity market returns, interest rate levels, market volatility and correlations) and policyholder behavior assumptions (such as lapse, mortality, utilization and withdrawal patterns). Risk margins are included in the policyholder behavior assumptions. The assumptions are based on a combination of historical data and actuarial judgment. The embedded derivative liabilities are valued using stochastic models that incorporate a spread reflecting our own creditworthiness.
The assumption for our own non-performance risk for investment contracts and any embedded derivatives bifurcated from certain annuity and investment contracts is based on the current market credit spreads for debt-like instruments that we have issued and are available in the market.
Other Liabilities
Certain obligations reported in other liabilities include embedded derivatives to deliver underlying securities of structured investments to third parties. The fair value of the embedded derivatives is calculated based on the value of the underlying securities that are valued based on prices obtained from third party pricing vendors as utilized and described in our discussion of how fair value is determined for fixed maturities, which are reflected in Level 2.
Additionally, obligations of consolidated VIEs for which the fair value option was elected are included in other liabilities. The VIEs’ obligations are valued utilizing internal pricing models, which are reflected in Level 3.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
June 30, 2016 |
|
|||||||||||||
|
|
Assets/ |
|
Amount |
|
|
|
|
|
|
|
|||||
|
|
(liabilities) |
|
measured at |
|
Fair value hierarchy level |
|
|||||||||
|
|
measured at |
|
net asset |
|
|
|
|
|
|
|
|||||
|
|
fair value |
|
value (5) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,570.4 |
|
$ |
— |
|
$ |
1,032.3 |
|
$ |
538.1 |
|
$ |
— |
|
Non-U.S. governments |
|
901.8 |
|
— |
|
3.1 |
|
831.2 |
|
67.5 |
|
|||||
States and political subdivisions |
|
5,472.2 |
|
— |
|
— |
|
5,472.2 |
|
— |
|
|||||
Corporate |
|
34,412.3 |
|
— |
|
37.8 |
|
34,132.8 |
|
241.7 |
|
|||||
Residential mortgage-backed securities |
|
2,819.7 |
|
— |
|
— |
|
2,819.7 |
|
— |
|
|||||
Commercial mortgage-backed securities |
|
4,330.6 |
|
— |
|
— |
|
4,315.1 |
|
15.5 |
|
|||||
Collateralized debt obligations |
|
871.8 |
|
— |
|
— |
|
809.0 |
|
62.8 |
|
|||||
Other debt obligations |
|
4,902.5 |
|
— |
|
— |
|
4,895.7 |
|
6.8 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
55,281.3 |
|
— |
|
1,073.2 |
|
53,813.8 |
|
394.3 |
|
|||||
Fixed maturities, trading |
|
656.9 |
|
— |
|
172.9 |
|
366.2 |
|
117.8 |
|
|||||
Equity securities, available-for-sale |
|
105.2 |
|
— |
|
63.8 |
|
38.7 |
|
2.7 |
|
|||||
Equity securities, trading |
|
1,331.1 |
|
— |
|
445.9 |
|
885.2 |
|
— |
|
|||||
Derivative assets (1) |
|
1,291.6 |
|
— |
|
— |
|
1,230.5 |
|
61.1 |
|
|||||
Other investments (2) |
|
713.3 |
|
97.6 |
|
408.7 |
|
170.9 |
|
36.1 |
|
|||||
Cash equivalents (3) |
|
1,089.9 |
|
— |
|
38.8 |
|
1,051.1 |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sub-total excluding separate account assets |
|
60,469.3 |
|
97.6 |
|
2,203.3 |
|
57,556.4 |
|
612.0 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Separate account assets |
|
134,736.0 |
|
— |
|
75,579.6 |
|
51,748.1 |
|
7,408.3 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
195,205.3 |
|
$ |
97.6 |
|
$ |
77,782.9 |
|
$ |
109,304.5 |
|
$ |
8,020.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts (4) |
|
$ |
(324.3) |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(324.3) |
|
Derivative liabilities (1) |
|
(984.8) |
|
— |
|
— |
|
(956.3) |
|
(28.5) |
|
|||||
Other liabilities (4) |
|
(286.1) |
|
— |
|
— |
|
(227.5) |
|
(58.6) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
$ |
(1,595.2) |
|
$ |
— |
|
$ |
— |
|
$ |
(1,183.8) |
|
$ |
(411.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets |
|
$ |
193,610.1 |
|
$ |
97.6 |
|
$ |
77,782.9 |
|
$ |
108,120.7 |
|
$ |
7,608.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||||||||
|
|
Assets/ |
|
Amount |
|
|
|
|
|
|
|
|||||
|
|
(liabilities) |
|
measured at |
|
Fair value hierarchy level |
|
|||||||||
|
|
measured at |
|
net asset |
|
|
|
|
|
|
|
|||||
|
|
fair value |
|
value (5) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,503.5 |
|
$ |
— |
|
$ |
931.0 |
|
$ |
572.5 |
|
$ |
— |
|
Non-U.S. governments |
|
793.3 |
|
— |
|
3.0 |
|
711.2 |
|
79.1 |
|
|||||
States and political subdivisions |
|
4,717.1 |
|
— |
|
— |
|
4,717.1 |
|
— |
|
|||||
Corporate |
|
31,140.2 |
|
— |
|
38.2 |
|
30,878.1 |
|
223.9 |
|
|||||
Residential mortgage-backed securities |
|
2,627.5 |
|
— |
|
— |
|
2,627.5 |
|
— |
|
|||||
Commercial mortgage-backed securities |
|
3,919.8 |
|
— |
|
— |
|
3,915.0 |
|
4.8 |
|
|||||
Collateralized debt obligations |
|
667.5 |
|
— |
|
— |
|
604.0 |
|
63.5 |
|
|||||
Other debt obligations |
|
4,597.6 |
|
— |
|
— |
|
4,590.1 |
|
7.5 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
49,966.5 |
|
— |
|
972.2 |
|
48,615.5 |
|
378.8 |
|
|||||
Fixed maturities, trading |
|
686.8 |
|
— |
|
199.2 |
|
352.1 |
|
135.5 |
|
|||||
Equity securities, available-for-sale |
|
104.5 |
|
— |
|
62.2 |
|
38.2 |
|
4.1 |
|
|||||
Equity securities, trading |
|
1,202.7 |
|
— |
|
413.9 |
|
788.8 |
|
— |
|
|||||
Derivative assets (1) |
|
666.6 |
|
— |
|
— |
|
619.4 |
|
47.2 |
|
|||||
Other investments (2) |
|
517.2 |
|
69.6 |
|
208.1 |
|
204.4 |
|
35.1 |
|
|||||
Cash equivalents (3) |
|
1,603.2 |
|
— |
|
26.5 |
|
1,576.7 |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sub-total excluding separate account assets |
|
54,747.5 |
|
69.6 |
|
1,882.1 |
|
52,195.1 |
|
600.7 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Separate account assets |
|
136,978.9 |
|
— |
|
72,303.6 |
|
57,661.4 |
|
7,013.9 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
191,726.4 |
|
$ |
69.6 |
|
$ |
74,185.7 |
|
$ |
109,856.5 |
|
$ |
7,614.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts (4) |
|
$ |
(177.4) |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(177.4) |
|
Derivative liabilities (1) |
|
(772.4) |
|
— |
|
— |
|
(721.9) |
|
(50.5) |
|
|||||
Other liabilities (4) |
|
(298.4) |
|
— |
|
— |
|
(230.3) |
|
(68.1) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
$ |
(1,248.2) |
|
$ |
— |
|
$ |
— |
|
$ |
(952.2) |
|
$ |
(296.0) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets |
|
$ |
190,478.2 |
|
$ |
69.6 |
|
$ |
74,185.7 |
|
$ |
108,904.3 |
|
$ |
7,318.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Within the consolidated statements of financial position, derivative assets are reported with other investments and derivative liabilities are reported with other liabilities. Refer to Note 4, Derivative Financial Instruments, for further information on fair value by class of derivative instruments. Our derivatives are primarily Level 2, with the exception of certain credit default swaps and other swaps that are Level 3. |
(2) |
Primarily includes sponsored investment funds, other investment funds, equity method investments reported at fair value and commercial mortgage loans of consolidated VIEs. |
(3) |
Includes money market instruments and short-term investments with a maturity date of three months or less when purchased. |
(4) |
Includes bifurcated embedded derivatives that are reported at fair value within the same line item in the consolidated statements of financial position in which the host contract is reported. Other liabilities also include obligations of consolidated VIEs reported at fair value. |
(5) |
Certain investments are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy. These consist of certain fund interests that are restricted until maturity with unfunded commitments totaling $35.1 million and $7.3 million as of June 30, 2016 and December 31, 2015, respectively. |
Changes in Level 3 Fair Value Measurements
The reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) was as follows:
|
|
For the three months ended June 30, 2016 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
|
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
Included in |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
March 31, |
|
net income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2016 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2016 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Non-U.S. governments |
|
$ |
97.8 |
|
$ |
— |
|
$ |
— |
|
$ |
2.3 |
|
$ |
— |
|
$ |
(32.6) |
|
$ |
67.5 |
|
$ |
— |
|
Corporate |
|
222.7 |
|
(0.2) |
|
(1.1) |
|
4.6 |
|
15.7 |
|
— |
|
241.7 |
|
(0.2) |
|
||||||||
Commercial mortgage-backed securities |
|
2.4 |
|
— |
|
— |
|
13.1 |
|
— |
|
— |
|
15.5 |
|
— |
|
||||||||
Collateralized debt obligations |
|
62.8 |
|
— |
|
0.2 |
|
(0.2) |
|
— |
|
— |
|
62.8 |
|
— |
|
||||||||
Other debt obligations |
|
7.0 |
|
— |
|
0.1 |
|
(0.3) |
|
— |
|
— |
|
6.8 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
392.7 |
|
(0.2) |
|
(0.8) |
|
19.5 |
|
15.7 |
|
(32.6) |
|
394.3 |
|
(0.2 |
) |
||||||||
Fixed maturities, trading |
|
135.8 |
|
— |
|
— |
|
(18.0) |
|
— |
|
— |
|
117.8 |
|
— |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
(1.3) |
|
(0.1) |
|
— |
|
— |
|
— |
|
2.7 |
|
(1.4) |
|
||||||||
Derivative assets |
|
59.1 |
|
1.7 |
|
— |
|
0.3 |
|
— |
|
— |
|
61.1 |
|
2.4 |
|
||||||||
Other investments |
|
35.9 |
|
0.1 |
|
— |
|
0.1 |
|
— |
|
— |
|
36.1 |
|
0.1 |
|
||||||||
Separate account assets (2) |
|
7,094.5 |
|
140.2 |
|
— |
|
174.2 |
|
0.1 |
|
(0.7) |
|
7,408.3 |
|
95.9 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(213.0) |
|
(113.0) |
|
— |
|
1.7 |
|
— |
|
— |
|
(324.3) |
|
(114.3) |
|
||||||||
Derivative liabilities |
|
(36.1) |
|
6.9 |
|
— |
|
0.7 |
|
— |
|
— |
|
(28.5) |
|
5.1 |
|
||||||||
Other liabilities |
|
(73.1) |
|
(2.9) |
|
— |
|
17.4 |
|
— |
|
— |
|
(58.6) |
|
(2.4) |
|
|
|
For the three months ended June 30, 2015 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||||
|
|
(liability) |
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||||
|
|
balance |
|
Included in |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
March 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2015 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2015 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
40.6 |
|
$ |
(0.1) |
|
$ |
(0.2) |
|
$ |
5.3 |
|
$ |
— |
|
$ |
— |
|
$ |
45.6 |
|
$ |
(0.1) |
|
Corporate |
|
237.0 |
|
— |
|
(4.6) |
|
7.7 |
|
6.7 |
|
(19.8) |
|
227.0 |
|
(0.1) |
|
||||||||
Collateralized debt obligations |
|
63.6 |
|
(0.1) |
|
— |
|
(0.2) |
|
— |
|
— |
|
63.3 |
|
— |
|
||||||||
Other debt obligations |
|
55.3 |
|
— |
|
(0.6) |
|
(3.4) |
|
— |
|
(9.9) |
|
41.4 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
396.5 |
|
(0.2) |
|
(5.4) |
|
9.4 |
|
6.7 |
|
(29.7) |
|
377.3 |
|
(0.2) |
|
||||||||
Fixed maturities, trading |
|
140.2 |
|
(0.5) |
|
— |
|
0.1 |
|
— |
|
— |
|
139.8 |
|
(0.5) |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4.1 |
|
— |
|
||||||||
Derivative assets |
|
60.2 |
|
(15.0) |
|
— |
|
(0.1) |
|
— |
|
— |
|
45.1 |
|
(15.0) |
|
||||||||
Other investments |
|
28.6 |
|
0.2 |
|
— |
|
0.9 |
|
— |
|
— |
|
29.7 |
|
0.2 |
|
||||||||
Separate account assets (2) |
|
6,030.6 |
|
239.2 |
|
— |
|
136.3 |
|
— |
|
(0.1) |
|
6,406.0 |
|
240.8 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(228.7) |
|
108.6 |
|
— |
|
3.1 |
|
— |
|
— |
|
(117.0) |
|
107.0 |
|
||||||||
Derivative liabilities |
|
(50.8) |
|
12.9 |
|
0.9 |
|
— |
|
— |
|
— |
|
(37.0) |
|
12.8 |
|
||||||||
Other liabilities |
|
(65.3) |
|
(2.2) |
|
— |
|
— |
|
— |
|
— |
|
(67.5) |
|
(2.2) |
|
|
|
For the six months ended June 30, 2016 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
Included |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
in net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2015 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2016 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
79.1 |
|
$ |
(0.1) |
|
$ |
2.5 |
|
$ |
18.6 |
|
$ |
— |
|
$ |
(32.6) |
|
$ |
67.5 |
|
$ |
(0.1) |
|
Corporate |
|
223.9 |
|
(0.3) |
|
(3.7) |
|
7.8 |
|
15.7 |
|
(1.7) |
|
241.7 |
|
(0.3) |
|
||||||||
Commercial mortgage-backed securities |
|
4.8 |
|
— |
|
— |
|
13.0 |
|
— |
|
(2.3) |
|
15.5 |
|
— |
|
||||||||
Collateralized debt obligations |
|
63.5 |
|
— |
|
(0.5) |
|
(0.2) |
|
— |
|
— |
|
62.8 |
|
— |
|
||||||||
Other debt obligations |
|
7.5 |
|
— |
|
— |
|
(0.7) |
|
— |
|
— |
|
6.8 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
378.8 |
|
(0.4) |
|
(1.7) |
|
38.5 |
|
15.7 |
|
(36.6) |
|
394.3 |
|
(0.4) |
|
||||||||
Fixed maturities, trading |
|
135.5 |
|
0.3 |
|
— |
|
(18.0) |
|
— |
|
— |
|
117.8 |
|
0.4 |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
(1.3) |
|
(0.1) |
|
— |
|
— |
|
— |
|
2.7 |
|
(1.4) |
|
||||||||
Derivative assets |
|
47.2 |
|
13.2 |
|
— |
|
0.7 |
|
— |
|
— |
|
61.1 |
|
14.4 |
|
||||||||
Other investments |
|
35.1 |
|
0.7 |
|
— |
|
0.3 |
|
— |
|
— |
|
36.1 |
|
0.7 |
|
||||||||
Separate account assets (2) |
|
7,013.9 |
|
293.1 |
|
(0.1) |
|
101.2 |
|
0.9 |
|
(0.7) |
|
7,408.3 |
|
305.7 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(177.4) |
|
(151.3) |
|
— |
|
4.4 |
|
— |
|
— |
|
(324.3) |
|
(153.4) |
|
||||||||
Derivative liabilities |
|
(50.5) |
|
20.5 |
|
0.5 |
|
1.0 |
|
— |
|
— |
|
(28.5) |
|
17.3 |
|
||||||||
Other liabilities |
|
(68.1) |
|
(7.9) |
|
— |
|
17.4 |
|
— |
|
— |
|
(58.6) |
|
(6.2) |
|
|
|
For the six months ended June 30, 2015 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
Included |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
in net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2014 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2015 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
38.7 |
|
$ |
(0.1) |
|
$ |
0.1 |
|
$ |
6.9 |
|
$ |
— |
|
$ |
— |
|
$ |
45.6 |
|
$ |
(0.1) |
|
Corporate |
|
245.6 |
|
(0.1) |
|
(0.9) |
|
23.7 |
|
26.2 |
|
(67.5) |
|
227.0 |
|
(0.2) |
|
||||||||
Collateralized debt obligations |
|
64.2 |
|
— |
|
(0.1) |
|
(0.8) |
|
— |
|
— |
|
63.3 |
|
— |
|
||||||||
Other debt obligations |
|
63.7 |
|
— |
|
(0.1) |
|
2.1 |
|
— |
|
(24.3) |
|
41.4 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
412.2 |
|
(0.2) |
|
(1.0) |
|
31.9 |
|
26.2 |
|
(91.8) |
|
377.3 |
|
(0.3) |
|
||||||||
Fixed maturities, trading |
|
139.7 |
|
0.2 |
|
— |
|
(0.1) |
|
— |
|
— |
|
139.8 |
|
0.1 |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4.1 |
|
— |
|
||||||||
Derivative assets |
|
53.7 |
|
(11.0) |
|
— |
|
2.4 |
|
— |
|
— |
|
45.1 |
|
(10.8) |
|
||||||||
Other investments |
|
127.2 |
|
4.0 |
|
— |
|
(66.5) |
|
— |
|
(35.0) |
|
29.7 |
|
4.0 |
|
||||||||
Separate account assets (2) |
|
5,891.4 |
|
454.9 |
|
— |
|
59.7 |
|
0.1 |
|
(0.1) |
|
6,406.0 |
|
439.6 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(176.4) |
|
57.6 |
|
— |
|
1.8 |
|
— |
|
— |
|
(117.0) |
|
54.9 |
|
||||||||
Derivative liabilities |
|
(35.5) |
|
(2.9) |
|
1.2 |
|
0.2 |
|
— |
|
— |
|
(37.0) |
|
(3.0) |
|
||||||||
Other liabilities |
|
(66.3) |
|
(1.2) |
|
— |
|
— |
|
— |
|
— |
|
(67.5) |
|
(1.3) |
|
(1) |
Both realized gains (losses) and mark-to-market unrealized gains (losses) are generally reported in net realized capital gains (losses) within the consolidated statements of operations. Realized and unrealized gains (losses) on certain fixed maturities, trading and certain derivatives used in relation to certain trading portfolios are reported in net investment income within the consolidated statements of operations. |
(2) |
Gains and losses for separate account assets do not impact net income as the change in value of separate account assets is offset by a change in value of separate account liabilities. Foreign currency translation adjustments related to the Principal International segment separate account assets are recorded in AOCI and are offset by foreign currency translation adjustments of the corresponding separate account liabilities. |
(3) |
Gross purchases, sales, issuances and settlements were: |
|
|
For the three months ended June 30, 2016 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
2.6 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.3) |
|
$ |
2.3 |
|
Corporate |
|
7.9 |
|
— |
|
— |
|
(3.3) |
|
4.6 |
|
|||||
Commercial mortgage-backed securities |
|
13.7 |
|
— |
|
— |
|
(0.6) |
|
13.1 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.3) |
|
(0.3) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
24.2 |
|
— |
|
— |
|
(4.7) |
|
19.5 |
|
|||||
Fixed maturities, trading |
|
— |
|
(18.0) |
|
— |
|
— |
|
(18.0) |
|
|||||
Derivative assets |
|
— |
|
0.3 |
|
— |
|
— |
|
0.3 |
|
|||||
Other investments |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
|
|||||
Separate account assets (4) |
|
233.9 |
|
(5.4) |
|
(47.2) |
|
(7.1) |
|
174.2 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
— |
|
1.7 |
|
1.7 |
|
|||||
Derivative liabilities |
|
— |
|
0.7 |
|
— |
|
— |
|
0.7 |
|
|||||
Other liabilities |
|
— |
|
17.4 |
|
— |
|
— |
|
17.4 |
|
|
|
For the three months ended June 30, 2015 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
5.6 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.3) |
|
$ |
5.3 |
|
Corporate |
|
14.5 |
|
(2.1) |
|
— |
|
(4.7) |
|
7.7 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(3.4) |
|
(3.4) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
20.1 |
|
(2.1) |
|
— |
|
(8.6) |
|
9.4 |
|
|||||
Fixed maturities, trading |
|
— |
|
— |
|
— |
|
0.1 |
|
0.1 |
|
|||||
Derivative assets |
|
— |
|
(0.1) |
|
— |
|
— |
|
(0.1) |
|
|||||
Other investments |
|
0.9 |
|
— |
|
— |
|
— |
|
0.9 |
|
|||||
Separate account assets (4) |
|
221.8 |
|
5.3 |
|
(96.5) |
|
5.7 |
|
136.3 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
0.8 |
|
2.3 |
|
3.1 |
|
|
|
For the six months ended June 30, 2016 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
19.3 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.7) |
|
$ |
18.6 |
|
Corporate |
|
31.8 |
|
(9.3) |
|
— |
|
(14.7) |
|
7.8 |
|
|||||
Commercial mortgage-backed securities |
|
13.7 |
|
— |
|
— |
|
(0.7) |
|
13.0 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.7) |
|
(0.7) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
64.8 |
|
(9.3) |
|
— |
|
(17.0) |
|
38.5 |
|
|||||
Fixed maturities, trading |
|
— |
|
(18.0) |
|
— |
|
— |
|
(18.0) |
|
|||||
Derivative assets |
|
— |
|
0.7 |
|
— |
|
— |
|
0.7 |
|
|||||
Other investments |
|
0.3 |
|
— |
|
— |
|
— |
|
0.3 |
|
|||||
Separate account assets (4) |
|
290.1 |
|
(66.1) |
|
(140.0) |
|
17.2 |
|
101.2 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
1.1 |
|
3.3 |
|
4.4 |
|
|||||
Derivative liabilities |
|
— |
|
1.0 |
|
— |
|
— |
|
1.0 |
|
|||||
Other liabilities |
|
— |
|
17.4 |
|
— |
|
— |
|
17.4 |
|
|
|
For the six months ended June 30, 2015 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
7.5 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.6) |
|
$ |
6.9 |
|
Corporate |
|
41.6 |
|
(5.7) |
|
— |
|
(12.2) |
|
23.7 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.8) |
|
(0.8) |
|
|||||
Other debt obligations |
|
10.1 |
|
— |
|
— |
|
(8.0) |
|
2.1 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
59.2 |
|
(5.7) |
|
— |
|
(21.6) |
|
31.9 |
|
|||||
Fixed maturities, trading |
|
— |
|
(0.2) |
|
— |
|
0.1 |
|
(0.1) |
|
|||||
Derivative assets |
|
2.5 |
|
(0.1) |
|
— |
|
— |
|
2.4 |
|
|||||
Other investments |
|
1.2 |
|
(67.7) |
|
— |
|
— |
|
(66.5) |
|
|||||
Separate account assets (4) |
|
361.0 |
|
(159.4) |
|
(145.8) |
|
3.9 |
|
59.7 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
(2.3) |
|
4.1 |
|
1.8 |
|
|||||
Derivative liabilities |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 |
|
(4) |
Issuances and settlements include amounts related to mortgage encumbrances associated with real estate in our separate accounts. |
Transfers
Transfers of assets and liabilities measured at fair value on a recurring basis between fair value hierarchy levels were as follows:
|
|
For the three months ended June 30, 2016 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
32.6 |
|
Corporate |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
32.6 |
|
||||||
Separate account assets |
|
0.2 |
|
— |
|
0.2 |
|
0.1 |
|
— |
|
0.7 |
|
|
|
For the three months ended June 30, 2015 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
6.7 |
|
$ |
— |
|
$ |
19.8 |
|
Other debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
9.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
6.7 |
|
— |
|
29.7 |
|
||||||
Separate account assets |
|
0.9 |
|
— |
|
6.2 |
|
— |
|
— |
|
0.1 |
|
|
|
For the six months ended June 30, 2016 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
32.6 |
|
Corporate |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
1.7 |
|
||||||
Commercial mortgage-backed securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2.3 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
36.6 |
|
||||||
Separate account assets |
|
26.4 |
|
— |
|
4.7 |
|
0.9 |
|
— |
|
0.7 |
|
|
|
For the six months ended June 30, 2015 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
26.2 |
|
$ |
— |
|
$ |
67.5 |
|
Other debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
24.3 |
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
26.2 |
|
— |
|
91.8 |
|
||||||
Other investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
35.0 |
|
||||||
Separate account assets |
|
2.0 |
|
— |
|
6.8 |
|
0.1 |
|
— |
|
0.1 |
|
Transfers between fair value hierarchy levels are recognized at the beginning of the reporting period.
Separate account assets transferred between Level 1 and Level 2 during the six months ended June 30, 2016, primarily related to foreign equity securities. When these securities are valued at the close price of the local exchange where the assets traded, they are reflected in Level 1. When events materially affecting the value occur between the close of the local exchange and the New York Stock Exchange, we use adjusted prices determined by a third party pricing vendor to update the foreign market closing prices and the fair value is reflected in Level 2.
Assets transferred into Level 3 during the three and six months ended June 30, 2016 and 2015, primarily included those assets for which we are now unable to obtain pricing from a recognized third party pricing vendor as well as assets that were previously priced using a matrix valuation approach that may no longer be relevant when applied to asset-specific situations.
Assets transferred out of Level 3 during the three and six months ended June 30, 2016 and 2015, included those for which we are now able to obtain pricing from a recognized third party pricing vendor or from internal models using substantially all market observable information. In addition, for the six months ended June 30, 2015, assets transferred out of Level 3 included assets valued using the measurement alternative for CCFEs for which the corresponding liabilities have the more observable fair value and are reflected in Level 2.
Quantitative Information about Level 3 Fair Value Measurements
The following table provides quantitative information about the significant unobservable inputs used for recurring fair value measurements categorized within Level 3, excluding assets and liabilities for which significant quantitative unobservable inputs are not developed internally, which primarily consists of those valued using broker quotes or the measurement alternative for CCFEs. Refer to “Assets and liabilities measured at fair value on a recurring basis” for a complete valuation hierarchy summary.
|
|
June 30, 2016 |
|
|||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governments |
|
$ |
8.4 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.5% |
|
1.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
(25)bps |
|
(25)bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Corporate |
|
49.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-7.5% |
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
29bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
0bps-20bps |
|
6bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations |
|
3.0 |
|
Discounted cash flow |
|
Discount rate (1) |
|
8.5% |
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of default |
|
100.0% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential loss severity |
|
55.9% |
|
55.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
6.8 |
|
Discounted cash flow |
|
Discount rate (1) |
|
5.0% |
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
750bps |
|
750bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading |
|
10.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.9%-2.9% |
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-300bps |
|
240bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
36.1 |
|
Discounted cash flow - equity method real estate investments |
|
Discount rate (1) |
|
7.8% |
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
6.8% |
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.0% |
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - equity method real estate investments - debt |
|
Loan to value |
|
52.0% |
|
52.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.1% |
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Separate account assets |
|
7,288.0 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
1.1%-7.4% |
|
3.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
10bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
76bps-699bps |
|
233bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
5.8%-19.1% |
|
7.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.3%-9.3% |
|
6.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
1.9%-4.4% |
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
2.3%-71.1% |
|
46.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.3%-4.2% |
|
3.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment contracts |
|
(324.3 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
1.8% (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
14.9%-44.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.5%-2.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governments |
|
$ |
8.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
2.2% |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 bps |
|
50bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
43.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
0.0%-7.5% |
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
(4)bps-7bps |
|
0bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
33bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Collateralized debt obligations |
|
3.1 |
|
Discounted cash flow |
|
Discount rate (1) |
|
28.0% |
|
28.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of default |
|
100.0% |
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential loss severity |
|
67.0% |
|
67.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
7.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
5.0% |
|
5.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
750bps |
|
750bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading |
|
10.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.1%-2.7% |
|
2.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-300bps |
|
240bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
35.1 |
|
Discounted cash flow - equity method real estate investments |
|
Discount rate (1) |
|
7.8% |
|
7.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
6.8% |
|
6.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.2% |
|
3.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - equity method real estate investments - debt |
|
Loan to value |
|
52.3% |
|
52.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.3% |
|
2.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account assets |
|
6,881.8 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
1.4%-8.2% |
|
3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
7bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
81bps-750bps |
|
241bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
5.3%-16.4% |
|
7.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.3%-9.8% |
|
6.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
2.0%-4.3% |
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
7.8%-63.1% |
|
47.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.4%-4.6% |
|
2.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment contracts |
|
(177.4) |
|
Discounted cash flow |
|
Long duration interest rate |
|
2.5%-2.6% (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
14.9%-44.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.4%-1.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents market comparable interest rate or an index adjusted rate used as the base rate in the discounted cash flow analysis prior to any credit spread, illiquidity or other adjustments, where applicable. |
(2) |
Represents the range of rate curves used in the valuation analysis that we have determined market participants would use when pricing the instrument. Derived from interpolation between various observable swap rates. |
(3) |
This input factor is the number of contractholders taking withdrawals as well as the amount and timing of the withdrawals and a range does not provide a meaningful presentation. |
(4) |
This input is based on an appropriate industry mortality table and a range does not provide a meaningful presentation. |
Market comparable discount rates are used as the base rate in the discounted cash flows used to determine the fair value of certain assets. Increases or decreases in the credit spreads on the comparable assets could cause the fair value of the assets to significantly decrease or increase, respectively. Additionally, we may adjust the base discount rate or the modeled price by applying an illiquidity premium given the highly structured nature of certain assets. Increases or decreases in this illiquidity premium could cause significant decreases or increases, respectively, in the fair value of the asset.
Embedded derivatives can be either assets or liabilities within the investment contracts line item, depending on certain inputs at the reporting date. Increases to an asset or decreases to a liability are described as increases to fair value. Increases or decreases in market volatilities could cause significant decreases or increases, respectively, in the fair value of embedded derivatives in investment contracts. Long duration interest rates are used as the mean return when projecting the growth in the value of associated account value and impact the discount rate used in the discounted future cash flows valuation. The amount of claims will increase if account value is not sufficient to cover guaranteed withdrawals. Increases or decreases in risk free rates could cause the fair value of the embedded derivative to significantly increase or decrease, respectively. Increases or decreases in our own credit risks, which impact the rates used to discount future cash flows, could significantly increase or decrease, respectively, the fair value of the embedded derivative. All of these changes in fair value would impact net income.
Decreases or increases in the mortality rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. Decreases or increases in the overall lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The lapse rate assumption varies dynamically based on the relationship of the guarantee and associated account value. A stronger or weaker dynamic lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The utilization rate assumption includes how many contractholders will take withdrawals, when they will take them and how much of their benefit they will take. Increases or decreases in the assumption of the number of contractholders taking withdrawals could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take withdrawals earlier or later could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take more or less of their benefit could cause the fair value of the embedded derivative to decrease or increase, respectively.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. During the six months ended June 30, 2016, certain mortgage loans had been marked to fair value of $0.7 million. The net impact of write-downs of loans reclassified to held-for-sale, impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $0.0 million and $0.1 million for the three and six months ended June 30, 2016, respectively, that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs.
During the six months ended June 30, 2015, certain mortgage loans had been marked to fair value of $13.8 million. The net impact of write-downs of loans reclassified to held-for-sale, impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $1.9 million and $1.8 million for the three and six months ended June 30, 2015, respectively, that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs.
Fair Value Option
We elected fair value accounting for certain assets and liabilities of consolidated VIEs for which it was not practicable for us to determine the carrying value. The fair value option was elected for commercial mortgage loans reported with other investments and obligations reported with other liabilities in the consolidated statements of financial position. The changes in fair value of these items are reported in net realized capital gains (losses) on the consolidated statements of operations.
The fair value and aggregate contractual principal amounts of commercial mortgage loans for which the fair value option has been elected were $15.0 million and $14.7 million as of June 30, 2016, and $18.3 million and $17.8 million as of December 31, 2015, respectively. The change in fair value of the loans resulted in a $0.1 million and $0.1 million pre-tax loss for the three months ended June 30, 2016 and 2015, respectively, and a $0.3 million and $2.1 million pre-tax loss for the six months ended June 30, 2016 and 2015, respectively, none of which related to instrument-specific credit risk. None of these loans were more than 90 days past due or in nonaccrual status. Interest income on these commercial mortgage loans is included in net investment income on the consolidated statements of operations and is recorded based on the effective interest rates as determined at the closing of the loan. Interest income recorded on these commercial mortgage loans was $0.3 million and $0.9 million for the three months ended June 30, 2016 and 2015, respectively, and $0.6 million and $1.5 million for the six months ended June 30, 2016 and 2015, respectively.
The fair value and aggregate unpaid principal amounts of obligations for which the fair value option has been elected were $58.6 million and $60.0 million as of June 30, 2016, and $68.1 million and $78.0 million as of December 31, 2015, respectively. For the three months ended June 30, 2016 and 2015, the change in fair value of the obligations resulted in a pre-tax loss of $3.5 million and $2.9 million, which includes a pre-tax loss of $3.5 million and $2.2 million related to instrument-specific credit risk that is estimated based on credit spreads and quality ratings, respectively. For the six months ended June 30, 2016 and 2015, the change in fair value of the obligations resulted in a pre-tax loss of $8.5 million and $0.2 million, which includes a pre-tax loss of $8.5 million and $1.3 million related to instrument-specific credit risk that is estimated based on credit spreads and quality ratings, respectively. Interest expense recorded on these obligations is included in operating expenses on the consolidated statements of operations and was $0.2 million and $0.5 million for the three months ended June 30, 2016 and 2015, respectively, and $0.5 million and $0.5 million for the six months ended June 30, 2016 and 2015, respectively.
We invest in real estate ventures for the purpose of earning investment returns and for capital appreciation. We elected the fair value option for certain ventures that are subject to the equity method of accounting because the nature of the investments is to add value to the properties and generate income from the operations of the properties. Other equity method real estate investments are not fair valued because the investments mainly generate income from the operations of the underlying properties. These investments are reported with other investments in the consolidated statements of financial position. The changes in fair value are reported in net investment income on the consolidated statements of operations. The fair value of the equity method investments for which the fair value option has been elected was $36.1 million and $35.1 million as of June 30, 2016 and December 31, 2015, respectively. The change in fair value of the investments resulted in a $0.2 million and $0.2 million pre-tax gain for the three months ended June 30, 2016 and 2015, respectively, and $0.7 million and $4.0 million pre-tax gain for the six months ended June 30, 2016 and 2015, respectively.
We invest in certain investment funds where we do not have enough influence to account for under the equity method and elect the fair value option to reflect the economics of the investment in the financial statements. These investments are reported with other investments in the consolidated statements of financial position. The changes in fair value and dividend income received on the investments are reported in net investment income on the consolidated statements of operations. Absent the fair value election, the change in fair value on the investments would be reported in OCI. We do not elect the fair value option for other similar investments as these investments are generally accounted for under the equity method of accounting. The fair value of the investments for which the fair value option has been elected was $31.0 million as of June 30, 2016. The change in fair value of the investments resulted in a $5.4 million and $5.1 million pre-tax gain for the three and six months ended June 30, 2016, respectively. Dividend income received on the investments was $0.0 million and $0.3 million for the three and six months ended June 30, 2016, respectively. We did not have material investment funds for which we elected the fair value option as of or for the year ended December 31, 2015.
Financial Instruments Not Reported at Fair Value
The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed at fair value were as follows:
|
|
June 30, 2016 |
|||||||||||||
|
|
|
|
|
|
Fair value hierarchy level |
|||||||||
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
|
|
(in millions) |
|||||||||||||
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans |
|
$ |
12,685.8 |
|
$ |
13,398.4 |
|
$ |
— |
|
$ |
— |
|
$ |
13,398.4 |
Policy loans |
|
831.6 |
|
1,102.5 |
|
— |
|
— |
|
1,102.5 | |||||
Other investments |
|
249.9 |
|
260.4 |
|
— |
|
180.2 |
|
80.2 | |||||
Cash and cash equivalents |
|
1,165.5 |
|
1,165.5 |
|
1,108.7 |
|
56.8 |
|
— |
|||||
Investment contracts |
|
(30,866.6) |
|
(30,928.8) |
|
— |
|
(5,460.5) |
|
(25,468.3) | |||||
Short-term debt |
|
(25.9) |
|
(25.9) |
|
— |
|
(25.9) |
|
— |
|||||
Long-term debt |
|
(3,270.2) |
|
(3,551.2) |
|
— |
|
(3,504.7) |
|
(46.5) | |||||
Separate account liabilities |
|
(122,818.2) |
|
(121,664.7) |
|
— |
|
— |
|
(121,664.7) | |||||
Bank deposits |
|
(2,117.9) |
|
(2,121.0) |
|
(1,490.8) |
|
(630.2) |
|
— |
|||||
Cash collateral payable |
|
(556.5) |
|
(556.5) |
|
(556.5) |
|
— |
|
— |
|
|
December 31, 2015 |
|||||||||||||
|
|
|
|
|
|
Fair value hierarchy level |
|||||||||
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
|
|
(in millions) |
|||||||||||||
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans |
|
$ |
12,339.4 |
|
$ |
12,653.5 |
|
$ |
— |
|
$ |
— |
|
$ |
12,653.5 |
Policy loans |
|
817.1 |
|
1,023.1 |
|
— |
|
— |
|
1,023.1 | |||||
Other investments |
|
185.0 |
|
197.8 |
|
— |
|
118.9 |
|
78.9 | |||||
Cash and cash equivalents |
|
961.6 |
|
961.6 |
|
961.6 |
|
— |
|
— |
|||||
Investment contracts |
|
(29,063.6) |
|
(28,703.2) |
|
— |
|
(4,925.0) |
|
(23,778.2) | |||||
Short-term debt |
|
(181.1) |
|
(181.1) |
|
— |
|
(181.1) |
|
— |
|||||
Long-term debt |
|
(3,265.2) |
|
(3,411.9) |
|
— |
|
(3,369.1) |
|
(42.8) | |||||
Separate account liabilities |
|
(125,265.0) |
|
(124,005.9) |
|
— |
|
— |
|
(124,005.9) | |||||
Bank deposits |
|
(2,070.8) |
|
(2,074.4) |
|
(1,457.4) |
|
(617.0) |
|
— |
|||||
Cash collateral payable |
|
(216.3) |
|
(216.3) |
|
(216.3) |
|
— |
|
— |
Mortgage Loans
Fair values of commercial and residential mortgage loans are primarily determined by discounting the expected cash flows at current treasury rates plus an applicable risk spread, which reflects credit quality and maturity of the loans. The risk spread is based on market clearing levels for loans with comparable credit quality, maturities and risk. The fair value of mortgage loans may also be based on the fair value of the underlying real estate collateral less cost to sell, which is estimated using appraised values. These are reflected in Level 3.
Policy Loans
Fair values of policy loans are estimated by discounting expected cash flows using a risk-free rate based on the Treasury curve. The expected cash flows reflect an estimate of timing of the repayment of the loans. These are reflected in Level 3.
Other Investments
The fair value of commercial loans and certain consumer loans included in other investments is calculated by discounting expected cash flows through the estimated maturity date using market interest rates that reflect the credit and interest rate risk inherent in the loans. The estimate of term to maturity is based on historical experience, adjusted as required, for current economic and lending conditions. The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate. These are reflected in Level 3. The fair value of certain tax credit investments are estimated by discounting expected future tax benefits using estimated investment return rates. These are reflected in Level 3. The carrying value of the remaining investments reported in this line item approximate their fair value. These are reflected in Level 2.
Cash and Cash Equivalents
Certain cash equivalents not reported at fair value include short-term investments with maturities of three months or less for which public quotations are not available to use in determining fair value. Because of the highly liquid nature of these assets, carrying amounts are used to approximate fair value, which are reflected in Level 2. The carrying amount of the remaining cash approximates its fair value, which is reflected in Level 1 given the nature of cash.
Investment Contracts
The fair values of our reserves and liabilities for investment contracts are determined via a third party pricing vendor or using discounted cash flow analyses when we are unable to find a price from third party pricing vendors. Third party pricing on various outstanding medium-term notes and funding agreements is based on observable inputs such as benchmark yields and spreads based on reported trades for our medium-term notes and funding agreement issuances. These are reflected in Level 2. The discounted cash flow analyses for the remaining contracts is based on current interest rates, including non-performance risk, being offered for similar contracts with maturities consistent with those remaining for the investment contracts being valued. These are reflected in Level 3. Investment contracts include insurance, annuity and other policy contracts that do not involve significant mortality or morbidity risk and are only a portion of the policyholder liabilities appearing in the consolidated statements of financial position. Insurance contracts include insurance, annuity and other policy contracts that do involve significant mortality or morbidity risk. The fair values for our insurance contracts, other than investment contracts, are not required to be disclosed.
Short-Term Debt
The carrying amount of short-term debt approximates its fair value because of the relatively short time between origination of the debt instrument and its maturity, which is reflected in Level 2.
Long-Term Debt
Long-term debt primarily includes senior note issuances for which the fair values are determined using inputs that are observable in the market or that can be derived from or corroborated with observable market data. These are reflected in Level 2. Additionally, our long-term debt includes non-recourse mortgages and notes payable that are primarily financings for real estate developments for which the fair values are estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. These are reflected in Level 3.
Separate Account Liabilities
Fair values of separate account liabilities, excluding insurance-related elements, are estimated based on market assumptions around what a potential acquirer would pay for the associated block of business, including both the separate account assets and liabilities. As the applicable separate account assets are already reflected at fair value, any adjustment to the fair value of the block is an assumed adjustment to the separate account liabilities. To compute fair value, the separate account liabilities are originally set to equal separate account assets because these are pass-through contracts. The separate account liabilities are reduced by the amount of future fees expected to be collected that are intended to offset upfront acquisition costs already incurred that a potential acquirer would not have to pay. The estimated future fees are adjusted by an adverse deviation discount and the amount is then discounted at a risk-free rate as measured by the yield on Treasury securities at maturities aligned with the estimated timing of fee collection. These are reflected in Level 3.
Bank Deposits
The fair value of deposits of our Principal Bank subsidiary with no stated maturity is equal to the amount payable on demand (i.e., their carrying amounts). These are reflected in Level 1. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount is estimated using the rates currently offered for deposits of similar remaining maturities. These are reflected in Level 2.
Cash Collateral Payable
The carrying amount of the payable associated with our obligation to return the cash collateral received under derivative credit support annex (collateral) agreements approximates its fair value, which is reflected in Level 1.
|
11. Segment Information
We provide financial products and services through the following segments: Retirement and Income Solutions, Principal Global Investors, Principal International and U.S. Insurance Solutions. In addition, we have a Corporate segment. The segments are managed and reported separately because they provide different products and services, have different strategies or have different markets and distribution channels.
The Retirement and Income Solutions segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals.
The Principal Global Investors segment provides asset management services to our asset accumulation business, our insurance operations, the Corporate segment and third party clients. This segment also includes our mutual fund business.
The Principal International segment has operations in Brazil, Chile, China, Hong Kong Special Administrative Region, India, Mexico and Southeast Asia. We focus on countries with large middle classes, favorable demographics and growing long-term savings, ideally with voluntary or mandatory pension markets. We entered these countries through acquisitions, start-up operations and joint ventures.
The U.S. Insurance Solutions segment provides specialty benefits insurance, which consists of group dental and vision insurance, individual and group disability insurance, group life insurance and non-medical fee-for-service claims administration, and individual life insurance throughout the United States.
The Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect our financing activities (including interest expense and preferred stock dividends), income on capital not allocated to other segments, inter-segment eliminations, income tax risks and certain income, expenses and other adjustments not allocated to the segments based on the nature of such items. Results of Principal Securities, Inc. (formerly known as Princor Financial Services Corporation), our retail broker-dealer and registered investment advisor, and our exited group medical insurance business are reported in this segment.
Management uses segment pre-tax operating earnings in evaluating performance, which is consistent with the financial results provided to and discussed with securities analysts. We determine segment pre-tax operating earnings by adjusting U.S. GAAP income before income taxes for pre-tax net realized capital gains (losses), as adjusted, pre-tax other adjustments that management believes are not indicative of overall operating trends and certain adjustments related to equity method investments and noncontrolling interest. Pre-tax net realized capital gains (losses), as adjusted, are net of related changes in the amortization pattern of DAC and related actuarial balances, recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services, amortization of hedge accounting book value adjustments for certain discontinued hedges, net realized capital gains and losses distributed, certain adjustments related to equity method investments, certain adjustments related to sponsored investment funds and certain market value adjustments to fee revenues. Pre-tax net realized capital gains (losses), as adjusted, exclude periodic settlements and accruals on derivative instruments not designated as hedging instruments and exclude certain market value adjustments of embedded derivatives and realized capital gains (losses) associated with our exited group medical insurance business. Segment operating revenues exclude net realized capital gains (losses) (except periodic settlements and accruals on derivatives not designated as hedging instruments), including their impact on recognition of front-end fee revenues, certain market value adjustments to fee revenues, certain adjustments related to equity method investments, certain adjustments related to sponsored investment funds and amortization of hedge accounting book value adjustments for certain discontinued hedges; certain adjustments related to equity method investments, pre-tax other adjustments management believes are not indicative of overall operating trends and revenue from our exited group medical insurance business. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of segment pre-tax operating earnings enhances the understanding of our results of operations by highlighting pre-tax earnings attributable to the normal, ongoing operations of the business.
The accounting policies of the segments are consistent with the accounting policies for the consolidated financial statements, with the exception of: (1) pension and other postretirement employee benefit cost allocations and (2) income tax allocations. For purposes of determining operating earnings, the segments are allocated the service component of pension and other postretirement benefit costs. The Corporate segment reflects the non-service components of pension and other postretirement benefit costs as assumptions are established and funding decisions are managed from a company-wide perspective. The Corporate segment functions to absorb the risk inherent in interpreting and applying tax law. For purposes of determining operating earnings, the segments are allocated tax adjustments consistent with the positions we took on tax returns. The Corporate segment results reflect any differences between the tax returns and the estimated resolution of any disputes.
The following tables summarize select financial information by segment, including operating revenues for our products and services, and reconcile segment totals to those reported in the consolidated financial statements:
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Assets: |
|
|
|
|
||
Retirement and Income Solutions |
|
$ |
148,097.3 |
|
$ |
139,678.5 |
Principal Global Investors |
|
1,853.4 |
|
1,880.4 | ||
Principal International |
|
45,249.2 |
|
50,588.6 | ||
U.S. Insurance Solutions |
|
23,101.3 |
|
22,156.9 | ||
Corporate |
|
4,773.0 |
|
4,355.9 | ||
|
|
|
|
|
||
Total consolidated assets |
|
$ |
223,074.2 |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Operating revenues by segment: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions – Fee |
|
$ |
428.8 |
|
$ |
454.3 |
|
$ |
842.1 |
|
$ |
892.0 |
Retirement and Income Solutions – Spread |
|
1,045.8 |
|
1,450.9 |
|
2,096.5 |
|
2,137.7 | ||||
|
|
|
|
|
|
|
|
|
||||
Total Retirement and Income Solutions (1) |
|
1,474.6 |
|
1,905.2 |
|
2,938.6 |
|
3,029.7 | ||||
Principal Global Investors (2) |
|
351.3 |
|
337.8 |
|
660.8 |
|
666.7 | ||||
Principal International |
|
318.7 |
|
328.3 |
|
605.3 |
|
579.1 | ||||
U.S. Insurance Solutions: |
|
|
|
|
|
|
|
|
||||
Specialty benefits insurance |
|
498.2 |
|
464.7 |
|
981.1 |
|
931.0 | ||||
Individual life insurance |
|
409.9 |
|
393.2 |
|
817.9 |
|
788.6 | ||||
Eliminations |
|
(0.1) |
|
(0.1) |
|
(0.1) |
|
(0.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Total U.S. Insurance Solutions |
|
908.0 |
|
857.8 |
|
1,798.9 |
|
1,719.5 | ||||
Corporate |
|
(17.5) |
|
(9.0) |
|
(30.6) |
|
(15.7) | ||||
|
|
|
|
|
|
|
|
|
||||
Total segment operating revenues |
|
3,035.1 |
|
3,420.1 |
|
5,973.0 |
|
5,979.3 | ||||
Net realized capital gains (losses), net of related revenue adjustments |
|
7.5 |
|
(141.3) |
|
121.1 |
|
(95.7) | ||||
Certain adjustments related to equity method investments |
|
(16.9) |
|
(13.3) |
|
(31.8) |
|
(27.9) | ||||
Other income on a tax indemnification |
|
— |
|
(6.7) |
|
— |
|
60.2 | ||||
Exited group medical insurance business |
|
— |
|
0.4 |
|
— |
|
0.6 | ||||
|
|
|
|
|
|
|
|
|
||||
Total revenues per consolidated statements of operations |
|
$ |
3,025.7 |
|
$ |
3,259.2 |
|
$ |
6,062.3 |
|
$ |
5,916.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pre-tax operating earnings (losses) by segment: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions |
|
$ |
194.7 |
|
$ |
216.9 |
|
$ |
376.1 |
|
$ |
419.8 |
Principal Global Investors |
|
117.5 |
|
98.5 |
|
197.2 |
|
191.1 | ||||
Principal International |
|
69.9 |
|
72.2 |
|
137.9 |
|
153.0 | ||||
U.S. Insurance Solutions |
|
103.6 |
|
88.1 |
|
184.1 |
|
170.0 | ||||
Corporate |
|
(54.5) |
|
(46.2) |
|
(107.8) |
|
(83.5) | ||||
|
|
|
|
|
|
|
|
|
||||
Total segment pre-tax operating earnings |
|
431.2 |
|
429.5 |
|
787.5 |
|
850.4 | ||||
Pre-tax net realized capital gains (losses), as adjusted (3) |
|
(16.0) |
|
(128.0) |
|
80.8 |
|
(94.5) | ||||
Pre-tax other adjustments (4) |
|
— |
|
(1.8) |
|
— |
|
14.8 | ||||
Certain adjustments related to equity method investments and noncontrolling interest |
|
(15.3) |
|
(5.2) |
|
(28.6) |
|
(18.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Income before income taxes per consolidated statements of operations |
|
$ |
399.9 |
|
$ |
294.5 |
|
$ |
839.7 |
|
$ |
752.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects inter-segment revenues of $92.6 million and $112.8 million for the three months ended June 30, 2016 and 2015, respectively, $181.8 million and $218.0 million for the six months December 31, 2016 and 2015, respectively. |
(2) |
Reflects inter-segment revenues of $57.0 million and $53.5 million for the three months ended June 30, 2016 and 2015, respectively, $111.3 million and $113.9 million for the six months December 31, 2016 and 2015, respectively. |
(3) |
Pre-tax net realized capital gains (losses), as adjusted, is derived as follows: |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Net realized capital gains (losses): |
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses) |
|
$ |
33.7 |
|
$ |
(114.6) |
|
$ |
170.3 |
|
$ |
(48.4) |
Certain derivative and hedging-related adjustments |
|
(26.0) |
|
(26.4) |
|
(50.3) |
|
(46.1) | ||||
Certain adjustments related to equity method investments |
|
(0.5) |
|
— |
|
(0.2) |
|
— |
||||
Certain market value adjustments to fee revenues |
|
(1.6) |
|
— |
|
(2.3) |
|
(1.1) | ||||
Certain adjustments related to sponsored investment funds |
|
1.9 |
|
— |
|
3.3 |
|
— |
||||
Recognition of front-end fee (revenue) expense |
|
— |
|
(0.3) |
|
0.3 |
|
(0.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses), net of related revenue adjustments |
|
7.5 |
|
(141.3) |
|
121.1 |
|
(95.7) | ||||
Amortization of deferred acquisition costs and other actuarial balances |
|
(7.2) |
|
16.2 |
|
(53.5) |
|
0.2 | ||||
Capital (gains) losses distributed |
|
(17.1) |
|
(2.9) |
|
10.0 |
|
1.9 | ||||
Certain market value adjustments of embedded derivatives |
|
0.8 |
|
— |
|
3.2 |
|
(0.9) | ||||
|
|
|
|
|
|
|
|
|
||||
Pre-tax net realized capital gains (losses), as adjusted (a) |
|
$ |
(16.0) |
|
$ |
(128.0) |
|
$ |
80.8 |
|
$ |
(94.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As adjusted before noncontrolling interest capital gains (losses) and net realized capital gains (losses) associated with exited group medical insurance business. |
(4) |
For the three months ended June 30, 2015, pre-tax other adjustments included the negative effect of the impact of a court ruling on some uncertain tax positions. |
For the six months ended June 30, 2015, pre-tax other adjustments included the positive effect of the impact of a court ruling on some uncertain tax positions ($15.1 million) and the negative effect of losses associated with our exited group medical insurance business that did not qualify for discontinued operations accounting treatment under U.S. GAAP ($0.3 million).
|
12. Stock-Based Compensation Plans
As of June 30, 2016, we had the 2014 Stock Incentive Plan, the Employee Stock Purchase Plan, the 2014 Directors Stock Plan, the Long-Term Performance Plan, the Amended and Restated 2010 Stock Incentive Plan, the 2005 Directors Stock Plan, the Stock Incentive Plan and the Directors Stock Plan (“Stock Based Compensation Plans”). As of May 20, 2014, no new grants will be made under the Amended and Restated 2010 Stock Incentive Plan or the 2005 Directors Stock Plan. No grants have been made under the Stock Incentive Plan, the Directors Stock Plan or the Long-Term Performance Plan since at least 2005. Under the terms of the 2014 Stock Incentive Plan, grants may be nonqualified stock options, incentive stock options qualifying under Section 422 of the Internal Revenue Code, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units or other stock-based awards. The 2014 Directors Stock Plan provides for the grant of nonqualified stock options, restricted stock, restricted stock units or other stock-based awards to our nonemployee directors. To date, we have not granted any incentive stock options, restricted stock or performance units under any plans.
As of June 30, 2016, the maximum number of new shares of common stock that were available for grant under the 2014 Stock Incentive Plan and the 2014 Directors Stock Plan was 9.9 million.
For awards with graded vesting, we use an accelerated expense attribution method. The compensation cost that was charged against income for stock-based awards granted under the Stock-Based Compensation Plans was as follows:
|
|
For the six months ended June 30, |
||||
|
|
2016 |
|
2015 |
||
|
|
(in millions) |
||||
Compensation cost |
|
$ |
34.5 |
|
$ |
36.1 |
Related income tax benefit |
|
10.7 |
|
11.5 | ||
Capitalized as part of an asset |
|
1.3 |
|
1.3 |
Nonqualified Stock Options
Nonqualified stock options were granted to certain employees under the 2014 Stock Incentive Plan. Total options granted were 1.1 million for the six months ended June 30, 2016. The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for the stock options granted during the period:
|
|
For the six months ended |
|
|
|
June 30, 2016 |
|
Expected volatility |
|
31.7% | |
Expected term (in years) |
|
6.5 | |
Risk-free interest rate |
|
1.5% | |
Expected dividend yield |
|
4.07% | |
Weighted average estimated fair value per common share |
|
$ |
8.91 |
As of June 30, 2016, we had $7.7 million of total unrecognized compensation cost related to nonvested stock options. The cost is expected to be recognized over a weighted-average service period of approximately 1.6 years.
Performance Share Awards
Performance share awards were granted to certain employees under the 2014 Stock Incentive Plan. Total performance share awards granted were 0.3 million for the six months ended June 30, 2016. The performance share awards granted represent initial target awards and do not reflect potential increases or decreases resulting from the final performance results to be determined at the end of the performance period. The actual number of common shares to be awarded at the end of each performance period will range between 0% and 150% of the initial target awards. The fair value of performance share awards is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant date fair value of these performance share awards granted was $37.38 per common share.
As of June 30, 2016, we had $8.9 million of total unrecognized compensation cost related to nonvested performance share awards granted. The cost is expected to be recognized over a weighted-average service period of approximately 1.6 years.
Restricted Stock Units
Restricted stock units were issued to certain employees and agents pursuant to the 2014 Stock Incentive Plan and non-employee directors pursuant to the 2015 Directors Stock Plan. Total restricted stock units granted were 1.3 million for the six months ended June 30, 2016. The fair value of restricted stock units is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant date fair value of these restricted stock units granted was $37.50 per common share.
As of June 30, 2016, we had $66.8 million of total unrecognized compensation cost related to nonvested restricted stock unit awards granted. The cost is expected to be recognized over a weighted-average period of approximately 1.9 years.
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, employees purchased 0.4 million shares for the six months ended June 30, 2016. The weighted average fair value of the discount on the stock purchased was $6.17 per share.
As of June 30, 2016, a total of 3.8 million of new shares were available to be made issuable by us for this plan.
|
14. Condensed Consolidating Financial Information
Principal Life has established special purpose entities to issue secured medium-term notes. Under the program, the payment obligations of principal and interest on the notes are secured by funding agreements issued by Principal Life. Principal Life’s payment obligations on the funding agreements are fully and unconditionally guaranteed by PFG. All of the outstanding stock of Principal Life is indirectly owned by PFG and PFG is the only guarantor of the payment obligations of the funding agreements.
The following tables set forth condensed consolidating financial information of (i) PFG, (ii) Principal Life, (iii) Principal Financial Services, Inc. (“PFS”) and all other direct and indirect subsidiaries of PFG on a combined basis and (iv) the eliminations necessary to arrive at the information for PFG on a consolidated basis as of June 30, 2016 and December 31, 2015, and for the six months ended June 30, 2016 and 2015.
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in all direct subsidiaries of PFG, (ii) Principal Life’s interest in all direct subsidiaries of Principal Life and (iii) PFS’s interest in Principal Life even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, Principal Life and PFS and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities.
Condensed Consolidating Statements of Financial Position
June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
48,954.3 |
|
$ |
6,699.5 |
|
$ |
(372.5) |
|
$ |
55,281.3 |
Fixed maturities, trading |
|
— |
|
378.3 |
|
278.6 |
|
— |
|
656.9 | |||||
Equity securities, available-for-sale |
|
— |
|
102.7 |
|
2.5 |
|
— |
|
105.2 | |||||
Equity securities, trading |
|
— |
|
0.3 |
|
1,330.8 |
|
— |
|
1,331.1 | |||||
Mortgage loans |
|
— |
|
12,040.0 |
|
1,205.8 |
|
(560.0) |
|
12,685.8 | |||||
Real estate |
|
— |
|
5.4 |
|
1,468.6 |
|
— |
|
1,474.0 | |||||
Policy loans |
|
— |
|
797.1 |
|
34.5 |
|
— |
|
831.6 | |||||
Investment in unconsolidated entities |
|
13,275.3 |
|
1,709.8 |
|
7,405.7 |
|
(21,618.8) |
|
772.0 | |||||
Other investments |
|
9.7 |
|
5,590.1 |
|
1,896.5 |
|
(3,946.8) |
|
3,549.5 | |||||
Cash and cash equivalents |
|
692.3 |
|
482.0 |
|
1,561.8 |
|
(480.7) |
|
2,255.4 | |||||
Accrued investment income |
|
— |
|
494.4 |
|
76.1 |
|
(7.5) |
|
563.0 | |||||
Premiums due and other receivables |
|
— |
|
1,562.3 |
|
2,675.6 |
|
(2,733.1) |
|
1,504.8 | |||||
Deferred acquisition costs |
|
— |
|
2,959.5 |
|
214.2 |
|
— |
|
3,173.7 | |||||
Property and equipment |
|
— |
|
583.7 |
|
84.2 |
|
— |
|
667.9 | |||||
Goodwill |
|
— |
|
54.3 |
|
982.9 |
|
— |
|
1,037.2 | |||||
Other intangibles |
|
— |
|
24.2 |
|
1,334.3 |
|
— |
|
1,358.5 | |||||
Separate account assets |
|
— |
|
98,596.6 |
|
36,139.4 |
|
— |
|
134,736.0 | |||||
Other assets |
|
444.3 |
|
904.5 |
|
3,249.6 |
|
(3,508.1) |
|
1,090.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
14,421.6 |
|
$ |
175,239.5 |
|
$ |
66,640.6 |
|
$ |
(33,227.5) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
35,073.2 |
|
$ |
3,034.4 |
|
$ |
(326.6) |
|
$ |
37,781.0 |
Future policy benefits and claims |
|
— |
|
23,534.5 |
|
5,051.0 |
|
(589.4) |
|
27,996.1 | |||||
Other policyholder funds |
|
— |
|
790.1 |
|
99.8 |
|
(1.5) |
|
888.4 | |||||
Short-term debt |
|
— |
|
— |
|
25.9 |
|
— |
|
25.9 | |||||
Long-term debt |
|
3,224.8 |
|
— |
|
583.8 |
|
(538.4) |
|
3,270.2 | |||||
Income taxes currently payable |
|
— |
|
— |
|
104.3 |
|
(94.1) |
|
10.2 | |||||
Deferred income taxes |
|
— |
|
964.9 |
|
862.7 |
|
(592.9) |
|
1,234.7 | |||||
Separate account liabilities |
|
— |
|
98,596.6 |
|
36,139.4 |
|
— |
|
134,736.0 | |||||
Other liabilities |
|
697.1 |
|
7,322.7 |
|
7,142.3 |
|
(8,935.2) |
|
6,226.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,921.9 |
|
166,282.0 |
|
53,043.6 |
|
(11,078.1) |
|
212,169.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
337.1 |
|
— |
|
337.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
2.5 |
|
— |
|
(2.5) |
|
4.7 | |||||
Additional paid-in capital |
|
9,615.7 |
|
5,349.7 |
|
9,044.3 |
|
(14,394.0) |
|
9,615.7 | |||||
Retained earnings |
|
7,339.6 |
|
2,274.9 |
|
3,697.8 |
|
(5,972.7) |
|
7,339.6 | |||||
Accumulated other comprehensive income (loss) |
|
(19.3) |
|
1,330.4 |
|
445.2 |
|
(1,775.6) |
|
(19.3) | |||||
Treasury stock, at cost |
|
(6,441.0) |
|
— |
|
— |
|
— |
|
(6,441.0) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
10,499.7 |
|
8,957.5 |
|
13,187.3 |
|
(22,144.8) |
|
10,499.7 | |||||
Noncontrolling interest |
|
— |
|
— |
|
72.6 |
|
(4.6) |
|
68.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
10,499.7 |
|
8,957.5 |
|
13,259.9 |
|
(22,149.4) |
|
10,567.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
14,421.6 |
|
$ |
175,239.5 |
|
$ |
66,640.6 |
|
$ |
(33,227.5) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Financial Position
December 31, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
43,862.7 |
|
$ |
6,482.5 |
|
$ |
(378.7) |
|
$ |
49,966.5 |
Fixed maturities, trading |
|
— |
|
436.2 |
|
250.6 |
|
— |
|
686.8 | |||||
Equity securities, available-for-sale |
|
— |
|
101.7 |
|
2.8 |
|
— |
|
104.5 | |||||
Equity securities, trading |
|
— |
|
0.3 |
|
1,202.4 |
|
— |
|
1,202.7 | |||||
Mortgage loans |
|
— |
|
11,696.9 |
|
1,155.3 |
|
(512.8) |
|
12,339.4 | |||||
Real estate |
|
— |
|
6.3 |
|
1,445.5 |
|
— |
|
1,451.8 | |||||
Policy loans |
|
— |
|
786.3 |
|
30.8 |
|
— |
|
817.1 | |||||
Investment in unconsolidated entities |
|
12,223.4 |
|
2,220.5 |
|
6,229.8 |
|
(20,041.0) |
|
632.7 | |||||
Other investments |
|
9.7 |
|
3,944.3 |
|
1,636.5 |
|
(2,971.5) |
|
2,619.0 | |||||
Cash and cash equivalents |
|
578.7 |
|
1,127.9 |
|
1,253.7 |
|
(395.5) |
|
2,564.8 | |||||
Accrued investment income |
|
— |
|
477.9 |
|
76.7 |
|
(9.0) |
|
545.6 | |||||
Premiums due and other receivables |
|
— |
|
1,512.7 |
|
2,465.9 |
|
(2,549.3) |
|
1,429.3 | |||||
Deferred acquisition costs |
|
— |
|
3,057.3 |
|
218.8 |
|
— |
|
3,276.1 | |||||
Property and equipment |
|
— |
|
552.0 |
|
81.8 |
|
— |
|
633.8 | |||||
Goodwill |
|
— |
|
54.3 |
|
954.7 |
|
— |
|
1,009.0 | |||||
Other intangibles |
|
— |
|
24.6 |
|
1,334.6 |
|
— |
|
1,359.2 | |||||
Separate account assets |
|
— |
|
94,762.8 |
|
42,216.1 |
|
— |
|
136,978.9 | |||||
Other assets |
|
458.0 |
|
878.0 |
|
2,995.6 |
|
(3,288.5) |
|
1,043.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
13,269.8 |
|
$ |
165,502.7 |
|
$ |
70,034.1 |
|
$ |
(30,146.3) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
33,151.7 |
|
$ |
2,885.1 |
|
$ |
(320.7) |
|
$ |
35,716.1 |
Future policy benefits and claims |
|
— |
|
21,914.0 |
|
4,479.3 |
|
(536.8) |
|
25,856.5 | |||||
Other policyholder funds |
|
— |
|
718.1 |
|
88.2 |
|
(0.9) |
|
805.4 | |||||
Short-term debt |
|
— |
|
— |
|
181.1 |
|
— |
|
181.1 | |||||
Long-term debt |
|
3,223.8 |
|
— |
|
535.2 |
|
(493.8) |
|
3,265.2 | |||||
Income taxes currently payable |
|
— |
|
— |
|
101.9 |
|
(83.5) |
|
18.4 | |||||
Deferred income taxes |
|
— |
|
415.2 |
|
928.9 |
|
(646.9) |
|
697.2 | |||||
Separate account liabilities |
|
— |
|
94,762.8 |
|
42,216.1 |
|
— |
|
136,978.9 | |||||
Other liabilities |
|
734.4 |
|
6,330.1 |
|
6,323.6 |
|
(7,709.7) |
|
5,678.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,958.2 |
|
157,291.9 |
|
57,739.4 |
|
(9,792.3) |
|
209,197.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
85.7 |
|
— |
|
85.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
2.5 |
|
— |
|
(2.5) |
|
4.7 | |||||
Additional paid-in capital |
|
9,544.8 |
|
5,334.4 |
|
9,000.0 |
|
(14,334.4) |
|
9,544.8 | |||||
Retained earnings |
|
6,875.9 |
|
2,232.6 |
|
3,522.3 |
|
(5,754.9) |
|
6,875.9 | |||||
Accumulated other comprehensive income (loss) |
|
(882.5) |
|
641.3 |
|
(383.6) |
|
(257.7) |
|
(882.5) | |||||
Treasury stock, at cost |
|
(6,231.3) |
|
— |
|
— |
|
— |
|
(6,231.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
9,311.6 |
|
8,210.8 |
|
12,138.7 |
|
(20,349.5) |
|
9,311.6 | |||||
Noncontrolling interest |
|
— |
|
— |
|
70.3 |
|
(4.5) |
|
65.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
9,311.6 |
|
8,210.8 |
|
12,209.0 |
|
(20,354.0) |
|
9,377.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
13,269.8 |
|
$ |
165,502.7 |
|
$ |
70,034.1 |
|
$ |
(30,146.3) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
2,382.0 |
|
$ |
176.4 |
|
$ |
— |
|
$ |
2,558.4 |
Fees and other revenues |
|
— |
|
962.8 |
|
1,000.4 |
|
(190.5) |
|
1,772.7 | |||||
Net investment income |
|
1.4 |
|
1,139.9 |
|
969.2 |
|
(549.6) |
|
1,560.9 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
701.7 |
|
(473.3) |
|
— |
|
228.4 | |||||
Net other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(58.0) |
|
(1.0) |
|
— |
|
(59.0) | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income |
|
— |
|
1.0 |
|
(0.1) |
|
— |
|
0.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
(57.0) |
|
(1.1) |
|
— |
|
(58.1) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital gains (losses) |
|
— |
|
644.7 |
|
(474.4) |
|
— |
|
170.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
1.4 |
|
5,129.4 |
|
1,671.6 |
|
(740.1) |
|
6,062.3 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
2,990.2 |
|
333.7 |
|
(5.5) |
|
3,318.4 | |||||
Dividends to policyholders |
|
— |
|
76.8 |
|
— |
|
— |
|
76.8 | |||||
Operating expenses |
|
113.7 |
|
1,089.8 |
|
785.5 |
|
(161.6) |
|
1,827.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
113.7 |
|
4,156.8 |
|
1,119.2 |
|
(167.1) |
|
5,222.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(112.3) |
|
972.6 |
|
552.4 |
|
(573.0) |
|
839.7 | |||||
Income taxes (benefits) |
|
(45.7) |
|
251.2 |
|
(61.2) |
|
(0.8) |
|
143.5 | |||||
Equity in the net income (loss) of subsidiaries |
|
756.9 |
|
(149.8) |
|
145.9 |
|
(753.0) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
690.3 |
|
571.6 |
|
759.5 |
|
(1,325.2) |
|
696.2 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
5.9 |
|
— |
|
5.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
$ |
690.3 |
|
$ |
571.6 |
|
$ |
753.6 |
|
$ |
(1,325.2) |
|
$ |
690.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
690.3 |
|
$ |
571.6 |
|
$ |
759.5 |
|
$ |
(1,325.2) |
|
$ |
696.2 |
Other comprehensive income |
|
866.9 |
|
699.3 |
|
862.4 |
|
(1,550.3) |
|
878.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
1,557.2 |
|
$ |
1,270.9 |
|
$ |
1,621.9 |
|
$ |
(2,875.5) |
|
$ |
1,574.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
2,431.1 |
|
$ |
167.7 |
|
$ |
— |
|
$ |
2,598.8 |
Fees and other revenues |
|
— |
|
1,035.5 |
|
1,022.5 |
|
(205.7) |
|
1,852.3 | |||||
Net investment income |
|
0.8 |
|
1,074.2 |
|
707.4 |
|
(268.6) |
|
1,513.8 | |||||
Net realized capital losses, excluding impairment losses on available-for-sale securities |
|
— |
|
(4.9) |
|
(30.0) |
|
— |
|
(34.9) | |||||
Net other-than-temporary impairment (losses) recoveries on available-for-sale securities |
|
— |
|
13.5 |
|
(0.1) |
|
— |
|
13.4 | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income |
|
— |
|
(26.9) |
|
— |
|
— |
|
(26.9) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
(13.4) |
|
(0.1) |
|
— |
|
(13.5) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital losses |
|
— |
|
(18.3) |
|
(30.1) |
|
— |
|
(48.4) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
0.8 |
|
4,522.5 |
|
1,867.5 |
|
(474.3) |
|
5,916.5 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
2,983.9 |
|
312.8 |
|
(5.8) |
|
3,290.9 | |||||
Dividends to policyholders |
|
— |
|
82.8 |
|
— |
|
— |
|
82.8 | |||||
Operating expenses |
|
82.4 |
|
1,078.3 |
|
799.4 |
|
(169.9) |
|
1,790.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
82.4 |
|
4,145.0 |
|
1,112.2 |
|
(175.7) |
|
5,163.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(81.6) |
|
377.5 |
|
755.3 |
|
(298.6) |
|
752.6 | |||||
Income taxes (benefits) |
|
(33.9) |
|
83.8 |
|
9.5 |
|
(0.8) |
|
58.6 | |||||
Equity in the net income (loss) of subsidiaries |
|
727.7 |
|
147.8 |
|
(7.6) |
|
(867.9) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
680.0 |
|
441.5 |
|
738.2 |
|
(1,165.7) |
|
694.0 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
14.0 |
|
— |
|
14.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
680.0 |
|
441.5 |
|
724.2 |
|
(1,165.7) |
|
680.0 | |||||
Preferred stock dividends |
|
16.5 |
|
— |
|
— |
|
— |
|
16.5 | |||||
Excess of redemption value over carrying value of preferred shares redeemed |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income available to common stockholders |
|
$ |
655.3 |
|
$ |
441.5 |
|
$ |
724.2 |
|
$ |
(1,165.7) |
|
$ |
655.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
680.0 |
|
$ |
441.5 |
|
$ |
738.2 |
|
$ |
(1,165.7) |
|
$ |
694.0 |
Other comprehensive loss |
|
(436.8) |
|
(203.0) |
|
(369.5) |
|
637.5 |
|
(371.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
243.2 |
|
$ |
238.5 |
|
$ |
368.7 |
|
$ |
(528.2) |
|
$ |
322.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(54.6) |
|
$ |
1,872.7 |
|
$ |
882.8 |
|
$ |
(575.3) |
|
$ |
2,125.6 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
(7,072.5) |
|
(409.7) |
|
5.3 |
|
(7,476.9) | |||||
Sales |
|
— |
|
295.3 |
|
262.1 |
|
— |
|
557.4 | |||||
Maturities |
|
— |
|
3,383.2 |
|
284.7 |
|
— |
|
3,667.9 | |||||
Mortgage loans acquired or originated |
|
— |
|
(1,123.0) |
|
(126.8) |
|
51.8 |
|
(1,198.0) | |||||
Mortgage loans sold or repaid |
|
— |
|
776.1 |
|
137.6 |
|
(3.3) |
|
910.4 | |||||
Real estate acquired |
|
— |
|
— |
|
(66.4) |
|
— |
|
(66.4) | |||||
Net purchases of property and equipment |
|
— |
|
(54.8) |
|
(19.9) |
|
— |
|
(74.7) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
594.8 |
|
1.5 |
|
544.8 |
|
(1,141.1) |
|
— |
|||||
Net change in other investments |
|
(5.1) |
|
186.9 |
|
(656.3) |
|
480.8 |
|
6.3 | |||||
Net cash provided by (used in) investing activities |
|
589.7 |
|
(3,607.3) |
|
(49.9) |
|
(606.5) |
|
(3,674.0) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
11.2 |
|
— |
|
— |
|
— |
|
11.2 | |||||
Acquisition of treasury stock |
|
(209.7) |
|
— |
|
— |
|
— |
|
(209.7) | |||||
Proceeds from financing element derivatives |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
(43.0) |
|
— |
|
— |
|
(43.0) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.2 |
|
2.0 |
|
3.3 |
|
— |
|
5.5 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(2.3) |
|
— |
|
(2.3) | |||||
Dividends to common stockholders |
|
(223.2) |
|
— |
|
— |
|
— |
|
(223.2) | |||||
Issuance of long-term debt |
|
— |
|
— |
|
51.4 |
|
(47.7) |
|
3.7 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(3.2) |
|
3.2 |
|
— |
|||||
Net repayments of short-term borrowings |
|
— |
|
— |
|
(156.9) |
|
— |
|
(156.9) | |||||
Dividends and capital paid to parent |
|
— |
|
(544.8) |
|
(596.3) |
|
1,141.1 |
|
— |
|||||
Investment contract deposits |
|
— |
|
6,735.4 |
|
142.3 |
|
— |
|
6,877.7 | |||||
Investment contract withdrawals |
|
— |
|
(5,060.6) |
|
(10.4) |
|
— |
|
(5,071.0) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
47.1 |
|
— |
|
47.1 | |||||
Other |
|
— |
|
(0.5) |
|
0.2 |
|
— |
|
(0.3) | |||||
Net cash provided by (used in) financing activities |
|
(421.5) |
|
1,088.7 |
|
(524.8) |
|
1,096.6 |
|
1,239.0 | |||||
Net increase (decrease) in cash and cash equivalents |
|
113.6 |
|
(645.9) |
|
308.1 |
|
(85.2) |
|
(309.4) | |||||
Cash and cash equivalents at beginning of period |
|
578.7 |
|
1,127.9 |
|
1,253.7 |
|
(395.5) |
|
2,564.8 | |||||
Cash and cash equivalents at end of period |
|
$ |
692.3 |
|
$ |
482.0 |
|
$ |
1,561.8 |
|
$ |
(480.7) |
|
$ |
2,255.4 |
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(37.5) |
|
$ |
1,901.3 |
|
$ |
209.1 |
|
$ |
44.5 |
|
$ |
2,117.4 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
(4,332.1) |
|
(496.4) |
|
— |
|
(4,828.5) | |||||
Sales |
|
— |
|
759.7 |
|
224.1 |
|
(0.7) |
|
983.1 | |||||
Maturities |
|
— |
|
3,226.9 |
|
409.2 |
|
— |
|
3,636.1 | |||||
Mortgage loans acquired or originated |
|
— |
|
(1,013.3) |
|
(147.9) |
|
104.1 |
|
(1,057.1) | |||||
Mortgage loans sold or repaid |
|
— |
|
663.8 |
|
139.6 |
|
(28.1) |
|
775.3 | |||||
Real estate acquired |
|
— |
|
(0.3) |
|
(203.8) |
|
— |
|
(204.1) | |||||
Net purchases of property and equipment |
|
— |
|
(55.4) |
|
(11.9) |
|
— |
|
(67.3) | |||||
Dividends and returns of capital received from (contributed to) unconsolidated entities |
|
425.5 |
|
(2.8) |
|
225.6 |
|
(648.3) |
|
— |
|||||
Net change in other investments |
|
0.9 |
|
111.0 |
|
(188.9) |
|
(97.6) |
|
(174.6) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
426.4 |
|
(642.5) |
|
(50.4) |
|
(670.6) |
|
(937.1) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
29.6 |
|
— |
|
0.1 |
|
(0.1) |
|
29.6 | |||||
Acquisition of treasury stock |
|
(75.6) |
|
— |
|
— |
|
— |
|
(75.6) | |||||
Proceeds from financing element derivatives |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
(39.5) |
|
— |
|
— |
|
(39.5) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.6 |
|
5.1 |
|
8.4 |
|
— |
|
14.1 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(11.6) |
|
0.6 |
|
(11.0) | |||||
Sale of subsidiary shares to noncontrolling interest |
|
— |
|
— |
|
0.6 |
|
(0.6) |
|
— |
|||||
Dividends to common stockholders |
|
(218.3) |
|
— |
|
— |
|
— |
|
(218.3) | |||||
Dividends to preferred stockholders |
|
(16.5) |
|
— |
|
— |
|
— |
|
(16.5) | |||||
Preferred stock redemption |
|
(550.0) |
|
— |
|
— |
|
— |
|
(550.0) | |||||
Issuance of long-term debt |
|
791.8 |
|
— |
|
107.1 |
|
(101.5) |
|
797.4 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(49.3) |
|
29.5 |
|
(19.8) | |||||
Dividends and capital paid to parent |
|
— |
|
(225.6) |
|
(422.7) |
|
648.3 |
|
— |
|||||
Investment contract deposits |
|
— |
|
2,586.1 |
|
136.8 |
|
— |
|
2,722.9 | |||||
Investment contract withdrawals |
|
— |
|
(3,410.3) |
|
(4.4) |
|
— |
|
(3,414.7) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
8.2 |
|
— |
|
8.2 | |||||
Other |
|
— |
|
(6.8) |
|
— |
|
— |
|
(6.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash used in financing activities |
|
(38.4) |
|
(1,090.8) |
|
(226.8) |
|
576.2 |
|
(779.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
350.5 |
|
168.0 |
|
(68.1) |
|
(49.9) |
|
400.5 | |||||
Cash and cash equivalents at beginning of period |
|
412.4 |
|
602.7 |
|
1,253.6 |
|
(404.8) |
|
1,863.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
762.9 |
|
$ |
770.7 |
|
$ |
1,185.5 |
|
$ |
(454.7) |
|
$ |
2,264.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On May 7, 2014, our shelf registration statement was filed with the SEC and became effective replacing the shelf registration that had been in effect since May 2011. Under our current shelf registration, we have the ability to issue in unlimited amounts, unsecured senior debt securities or subordinated debt securities, junior subordinated debt, preferred stock, common stock, warrants, depository shares, stock purchase contracts and stock purchase units of PFG, trust preferred securities of three subsidiary trusts and guarantees by PFG of these trust preferred securities. Our wholly owned subsidiary, PFS, may guarantee, fully and unconditionally or otherwise, our obligations with respect to any non-convertible securities, other than common stock, described in the shelf registration.
The following tables set forth condensed consolidating financial information of (i) PFG, (ii) PFS, (iii) Principal Life and all other direct and indirect subsidiaries of PFG on a combined basis and (iv) the eliminations necessary to arrive at the information for PFG on a consolidated basis as of June 30, 2016 and December 31, 2015, and for the six months ended June 30, 2016 and 2015.
In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in all direct subsidiaries of PFG and (ii) PFS’s interest in Principal Life and all other subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, PFS and Principal Life and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities.
Condensed Consolidating Statements of Financial Position
June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
55,281.3 |
|
$ |
— |
|
$ |
55,281.3 |
Fixed maturities, trading |
|
— |
|
— |
|
656.9 |
|
— |
|
656.9 | |||||
Equity securities, available-for-sale |
|
— |
|
— |
|
105.2 |
|
— |
|
105.2 | |||||
Equity securities, trading |
|
— |
|
— |
|
1,331.1 |
|
— |
|
1,331.1 | |||||
Mortgage loans |
|
— |
|
— |
|
12,685.8 |
|
— |
|
12,685.8 | |||||
Real estate |
|
— |
|
— |
|
1,474.0 |
|
— |
|
1,474.0 | |||||
Policy loans |
|
— |
|
— |
|
831.6 |
|
— |
|
831.6 | |||||
Investment in unconsolidated entities |
|
13,275.3 |
|
13,308.2 |
|
710.7 |
|
(26,522.2) |
|
772.0 | |||||
Other investments |
|
9.7 |
|
103.6 |
|
3,436.2 |
|
— |
|
3,549.5 | |||||
Cash and cash equivalents |
|
692.3 |
|
807.9 |
|
1,989.1 |
|
(1,233.9) |
|
2,255.4 | |||||
Accrued investment income |
|
— |
|
2.3 |
|
560.7 |
|
— |
|
563.0 | |||||
Premiums due and other receivables |
|
— |
|
90.6 |
|
1,630.9 |
|
(216.7) |
|
1,504.8 | |||||
Deferred acquisition costs |
|
— |
|
— |
|
3,173.7 |
|
— |
|
3,173.7 | |||||
Property and equipment |
|
— |
|
— |
|
667.9 |
|
— |
|
667.9 | |||||
Goodwill |
|
— |
|
— |
|
1,037.2 |
|
— |
|
1,037.2 | |||||
Other intangibles |
|
— |
|
— |
|
1,358.5 |
|
— |
|
1,358.5 | |||||
Separate account assets |
|
— |
|
— |
|
134,736.0 |
|
— |
|
134,736.0 | |||||
Other assets |
|
444.3 |
|
193.1 |
|
1,096.2 |
|
(643.3) |
|
1,090.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
14,421.6 |
|
$ |
14,505.7 |
|
$ |
222,763.0 |
|
$ |
(28,616.1) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
37,781.0 |
|
$ |
— |
|
$ |
37,781.0 |
Future policy benefits and claims |
|
— |
|
— |
|
27,996.1 |
|
— |
|
27,996.1 | |||||
Other policyholder funds |
|
— |
|
— |
|
888.4 |
|
— |
|
888.4 | |||||
Short-term debt |
|
— |
|
— |
|
109.5 |
|
(83.6) |
|
25.9 | |||||
Long-term debt |
|
3,224.8 |
|
150.0 |
|
112.4 |
|
(217.0) |
|
3,270.2 | |||||
Income taxes currently payable |
|
— |
|
2.4 |
|
74.3 |
|
(66.5) |
|
10.2 | |||||
Deferred income taxes |
|
— |
|
— |
|
1,813.3 |
|
(578.6) |
|
1,234.7 | |||||
Separate account liabilities |
|
— |
|
— |
|
134,736.0 |
|
— |
|
134,736.0 | |||||
Other liabilities |
|
697.1 |
|
1,166.0 |
|
5,162.1 |
|
(798.3) |
|
6,226.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,921.9 |
|
1,318.4 |
|
208,673.1 |
|
(1,744.0) |
|
212,169.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
337.1 |
|
— |
|
337.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
— |
|
17.8 |
|
(17.8) |
|
4.7 | |||||
Additional paid-in capital |
|
9,615.7 |
|
9,044.3 |
|
10,311.3 |
|
(19,355.6) |
|
9,615.7 | |||||
Retained earnings |
|
7,339.6 |
|
3,697.8 |
|
3,024.5 |
|
(6,722.3) |
|
7,339.6 | |||||
Accumulated other comprehensive income (loss) |
|
(19.3) |
|
445.2 |
|
333.2 |
|
(778.4) |
|
(19.3) | |||||
Treasury stock, at cost |
|
(6,441.0) |
|
— |
|
(2.0) |
|
2.0 |
|
(6,441.0) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
10,499.7 |
|
13,187.3 |
|
13,684.8 |
|
(26,872.1) |
|
10,499.7 | |||||
Noncontrolling interest |
|
— |
|
— |
|
68.0 |
|
— |
|
68.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
10,499.7 |
|
13,187.3 |
|
13,752.8 |
|
(26,872.1) |
|
10,567.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
14,421.6 |
|
$ |
14,505.7 |
|
$ |
222,763.0 |
|
$ |
(28,616.1) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Financial Position
December 31, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
49,966.5 |
|
$ |
— |
|
$ |
49,966.5 |
Fixed maturities, trading |
|
— |
|
— |
|
686.8 |
|
— |
|
686.8 | |||||
Equity securities, available-for-sale |
|
— |
|
— |
|
104.5 |
|
— |
|
104.5 | |||||
Equity securities, trading |
|
— |
|
— |
|
1,202.7 |
|
— |
|
1,202.7 | |||||
Mortgage loans |
|
— |
|
— |
|
12,339.4 |
|
— |
|
12,339.4 | |||||
Real estate |
|
— |
|
— |
|
1,451.8 |
|
— |
|
1,451.8 | |||||
Policy loans |
|
— |
|
— |
|
817.1 |
|
— |
|
817.1 | |||||
Investment in unconsolidated entities |
|
12,223.4 |
|
12,209.1 |
|
583.2 |
|
(24,383.0) |
|
632.7 | |||||
Other investments |
|
9.7 |
|
185.9 |
|
2,423.4 |
|
— |
|
2,619.0 | |||||
Cash and cash equivalents |
|
578.7 |
|
730.5 |
|
2,413.3 |
|
(1,157.7) |
|
2,564.8 | |||||
Accrued investment income |
|
— |
|
— |
|
545.6 |
|
— |
|
545.6 | |||||
Premiums due and other receivables |
|
— |
|
0.1 |
|
1,584.6 |
|
(155.4) |
|
1,429.3 | |||||
Deferred acquisition costs |
|
— |
|
— |
|
3,276.1 |
|
— |
|
3,276.1 | |||||
Property and equipment |
|
— |
|
— |
|
633.8 |
|
— |
|
633.8 | |||||
Goodwill |
|
— |
|
— |
|
1,009.0 |
|
— |
|
1,009.0 | |||||
Other intangibles |
|
— |
|
— |
|
1,359.2 |
|
— |
|
1,359.2 | |||||
Separate account assets |
|
— |
|
— |
|
136,978.9 |
|
— |
|
136,978.9 | |||||
Other assets |
|
458.0 |
|
205.2 |
|
1,065.4 |
|
(685.5) |
|
1,043.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
13,269.8 |
|
$ |
13,330.8 |
|
$ |
218,441.3 |
|
$ |
(26,381.6) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
35,716.1 |
|
$ |
— |
|
$ |
35,716.1 |
Future policy benefits and claims |
|
— |
|
— |
|
25,856.5 |
|
— |
|
25,856.5 | |||||
Other policyholder funds |
|
— |
|
— |
|
805.4 |
|
— |
|
805.4 | |||||
Short-term debt |
|
— |
|
— |
|
290.0 |
|
(108.9) |
|
181.1 | |||||
Long-term debt |
|
3,223.8 |
|
156.0 |
|
41.4 |
|
(156.0) |
|
3,265.2 | |||||
Income taxes currently payable |
|
— |
|
3.2 |
|
69.6 |
|
(54.4) |
|
18.4 | |||||
Deferred income taxes |
|
— |
|
— |
|
1,325.2 |
|
(628.0) |
|
697.2 | |||||
Separate account liabilities |
|
— |
|
— |
|
136,978.9 |
|
— |
|
136,978.9 | |||||
Other liabilities |
|
734.4 |
|
1,032.9 |
|
4,912.9 |
|
(1,001.8) |
|
5,678.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,958.2 |
|
1,192.1 |
|
205,996.0 |
|
(1,949.1) |
|
209,197.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
85.7 |
|
— |
|
85.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
— |
|
17.8 |
|
(17.8) |
|
4.7 | |||||
Additional paid-in capital |
|
9,544.8 |
|
9,000.0 |
|
9,888.7 |
|
(18,888.7) |
|
9,544.8 | |||||
Retained earnings |
|
6,875.9 |
|
3,522.3 |
|
2,905.9 |
|
(6,428.2) |
|
6,875.9 | |||||
Accumulated other comprehensive loss |
|
(882.5) |
|
(383.6) |
|
(516.6) |
|
900.2 |
|
(882.5) | |||||
Treasury stock, at cost |
|
(6,231.3) |
|
— |
|
(2.0) |
|
2.0 |
|
(6,231.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
9,311.6 |
|
12,138.7 |
|
12,293.8 |
|
(24,432.5) |
|
9,311.6 | |||||
Noncontrolling interest |
|
— |
|
— |
|
65.8 |
|
— |
|
65.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
9,311.6 |
|
12,138.7 |
|
12,359.6 |
|
(24,432.5) |
|
9,377.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
13,269.8 |
|
$ |
13,330.8 |
|
$ |
218,441.3 |
|
$ |
(26,381.6) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
2,558.4 |
|
$ |
— |
|
$ |
2,558.4 |
Fees and other revenues |
|
— |
|
0.2 |
|
1,776.9 |
|
(4.4) |
|
1,772.7 | |||||
Net investment income |
|
1.4 |
|
10.8 |
|
1,545.0 |
|
3.7 |
|
1,560.9 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
(6.9) |
|
235.4 |
|
(0.1) |
|
228.4 | |||||
Net other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(59.0) |
|
— |
|
(59.0) | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
0.9 |
|
— |
|
0.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(58.1) |
|
— |
|
(58.1) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital gains (losses) |
|
— |
|
(6.9) |
|
177.3 |
|
(0.1) |
|
170.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
1.4 |
|
4.1 |
|
6,057.6 |
|
(0.8) |
|
6,062.3 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
— |
|
3,318.4 |
|
— |
|
3,318.4 | |||||
Dividends to policyholders |
|
— |
|
— |
|
76.8 |
|
— |
|
76.8 | |||||
Operating expenses |
|
113.7 |
|
5.7 |
|
1,712.1 |
|
(4.1) |
|
1,827.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
113.7 |
|
5.7 |
|
5,107.3 |
|
(4.1) |
|
5,222.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(112.3) |
|
(1.6) |
|
950.3 |
|
3.3 |
|
839.7 | |||||
Income taxes (benefits) |
|
(45.7) |
|
(24.0) |
|
213.2 |
|
— |
|
143.5 | |||||
Equity in the net income of subsidiaries |
|
756.9 |
|
731.2 |
|
— |
|
(1,488.1) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
690.3 |
|
753.6 |
|
737.1 |
|
(1,484.8) |
|
696.2 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
5.9 |
|
— |
|
5.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
$ |
690.3 |
|
$ |
753.6 |
|
$ |
731.2 |
|
$ |
(1,484.8) |
|
$ |
690.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
690.3 |
|
$ |
753.6 |
|
$ |
737.1 |
|
$ |
(1,484.8) |
|
$ |
696.2 |
Other comprehensive income |
|
866.9 |
|
842.6 |
|
875.1 |
|
(1,706.3) |
|
878.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
1,557.2 |
|
$ |
1,596.2 |
|
$ |
1,612.2 |
|
$ |
(3,191.1) |
|
$ |
1,574.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
2,598.8 |
|
$ |
— |
|
$ |
2,598.8 |
Fees and other revenues |
|
— |
|
0.1 |
|
1,852.5 |
|
(0.3) |
|
1,852.3 | |||||
Net investment income |
|
0.8 |
|
— |
|
1,507.6 |
|
5.4 |
|
1,513.8 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
4.5 |
|
(37.7) |
|
(1.7) |
|
(34.9) | |||||
Net other-than-temporary impairment recoveries on available-for-sale securities |
|
— |
|
— |
|
13.4 |
|
— |
|
13.4 | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income |
|
— |
|
— |
|
(26.9) |
|
— |
|
(26.9) | |||||
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(13.5) |
|
— |
|
(13.5) | |||||
Net realized capital gains (losses) |
|
— |
|
4.5 |
|
(51.2) |
|
(1.7) |
|
(48.4) | |||||
Total revenues |
|
0.8 |
|
4.6 |
|
5,907.7 |
|
3.4 |
|
5,916.5 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
— |
|
3,290.9 |
|
— |
|
3,290.9 | |||||
Dividends to policyholders |
|
— |
|
— |
|
82.8 |
|
— |
|
82.8 | |||||
Operating expenses |
|
82.4 |
|
2.4 |
|
1,705.5 |
|
(0.1) |
|
1,790.2 | |||||
Total expenses |
|
82.4 |
|
2.4 |
|
5,079.2 |
|
(0.1) |
|
5,163.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(81.6) |
|
2.2 |
|
828.5 |
|
3.5 |
|
752.6 | |||||
Income taxes (benefits) |
|
(33.9) |
|
2.0 |
|
90.5 |
|
— |
|
58.6 | |||||
Equity in the net income of subsidiaries |
|
727.7 |
|
724.0 |
|
— |
|
(1,451.7) |
|
— |
|||||
Net income |
|
680.0 |
|
724.2 |
|
738.0 |
|
(1,448.2) |
|
694.0 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
14.0 |
|
— |
|
14.0 | |||||
Net income attributable to PFG |
|
680.0 |
|
724.2 |
|
724.0 |
|
(1,448.2) |
|
680.0 | |||||
Preferred stock dividends |
|
16.5 |
|
— |
|
— |
|
— |
|
16.5 | |||||
Excess of redemption value over carrying value of preferred shares redeemed |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 | |||||
Net income available to common stockholders |
|
$ |
655.3 |
|
$ |
724.2 |
|
$ |
724.0 |
|
$ |
(1,448.2) |
|
$ |
655.3 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
680.0 |
|
$ |
724.2 |
|
$ |
738.0 |
|
$ |
(1,448.2) |
|
$ |
694.0 |
Other comprehensive loss |
|
(436.8) |
|
(408.4) |
|
(433.0) |
|
906.4 |
|
(371.8) | |||||
Comprehensive income |
|
$ |
243.2 |
|
$ |
315.8 |
|
$ |
305.0 |
|
$ |
(541.8) |
|
$ |
322.2 |
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(54.6) |
|
$ |
(40.0) |
|
$ |
2,066.1 |
|
$ |
154.1 |
|
$ |
2,125.6 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
— |
|
(7,476.9) |
|
— |
|
(7,476.9) | |||||
Sales |
|
— |
|
— |
|
557.4 |
|
— |
|
557.4 | |||||
Maturities |
|
— |
|
— |
|
3,667.9 |
|
— |
|
3,667.9 | |||||
Mortgage loans acquired or originated |
|
— |
|
— |
|
(1,198.0) |
|
— |
|
(1,198.0) | |||||
Mortgage loans sold or repaid |
|
— |
|
— |
|
910.4 |
|
— |
|
910.4 | |||||
Real estate acquired |
|
— |
|
— |
|
(66.4) |
|
— |
|
(66.4) | |||||
Net purchases of property and equipment |
|
— |
|
— |
|
(74.7) |
|
— |
|
(74.7) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
594.8 |
|
477.2 |
|
— |
|
(1,072.0) |
|
— |
|||||
Net change in other investments |
|
(5.1) |
|
241.0 |
|
(35.1) |
|
(194.5) |
|
6.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
589.7 |
|
718.2 |
|
(3,715.4) |
|
(1,266.5) |
|
(3,674.0) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
11.2 |
|
— |
|
— |
|
— |
|
11.2 | |||||
Acquisition of treasury stock |
|
(209.7) |
|
— |
|
— |
|
— |
|
(209.7) | |||||
Proceeds from financing element derivatives |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
— |
|
(43.0) |
|
— |
|
(43.0) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.2 |
|
— |
|
5.3 |
|
— |
|
5.5 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(2.3) |
|
— |
|
(2.3) | |||||
Dividends to common stockholders |
|
(223.2) |
|
— |
|
— |
|
— |
|
(223.2) | |||||
Issuance of long-term debt |
|
— |
|
4.0 |
|
70.7 |
|
(71.0) |
|
3.7 | |||||
Principal repayments of long-term debt |
|
— |
|
(10.0) |
|
— |
|
10.0 |
|
— |
|||||
Net repayments of short-term borrowings |
|
— |
|
— |
|
(182.1) |
|
25.2 |
|
(156.9) | |||||
Dividends and capital paid to parent |
|
— |
|
(594.8) |
|
(477.2) |
|
1,072.0 |
|
— |
|||||
Investment contract deposits |
|
— |
|
— |
|
6,877.7 |
|
— |
|
6,877.7 | |||||
Investment contract withdrawals |
|
— |
|
— |
|
(5,071.0) |
|
— |
|
(5,071.0) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
47.1 |
|
— |
|
47.1 | |||||
Other |
|
— |
|
— |
|
(0.3) |
|
— |
|
(0.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
|
(421.5) |
|
(600.8) |
|
1,225.1 |
|
1,036.2 |
|
1,239.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
113.6 |
|
77.4 |
|
(424.2) |
|
(76.2) |
|
(309.4) | |||||
Cash and cash equivalents at beginning of period |
|
578.7 |
|
730.5 |
|
2,413.3 |
|
(1,157.7) |
|
2,564.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
692.3 |
|
$ |
807.9 |
|
$ |
1,989.1 |
|
$ |
(1,233.9) |
|
$ |
2,255.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(37.5) |
|
$ |
69.0 |
|
$ |
2,198.5 |
|
$ |
(112.6) |
|
$ |
2,117.4 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
— |
|
(4,828.5) |
|
— |
|
(4,828.5) | |||||
Sales |
|
— |
|
— |
|
983.1 |
|
— |
|
983.1 | |||||
Maturities |
|
— |
|
— |
|
3,636.1 |
|
— |
|
3,636.1 | |||||
Mortgage loans acquired or originated |
|
— |
|
— |
|
(1,057.1) |
|
— |
|
(1,057.1) | |||||
Mortgage loans sold or repaid |
|
— |
|
— |
|
775.3 |
|
— |
|
775.3 | |||||
Real estate acquired |
|
— |
|
— |
|
(204.1) |
|
— |
|
(204.1) | |||||
Net purchases of property and equipment |
|
— |
|
— |
|
(67.3) |
|
— |
|
(67.3) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
425.5 |
|
282.5 |
|
— |
|
(708.0) |
|
— |
|||||
Net change in other investments |
|
0.9 |
|
(28.9) |
|
(163.5) |
|
16.9 |
|
(174.6) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
426.4 |
|
253.6 |
|
(926.0) |
|
(691.1) |
|
(937.1) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
29.6 |
|
— |
|
— |
|
— |
|
29.6 | |||||
Acquisition of treasury stock |
|
(75.6) |
|
— |
|
— |
|
— |
|
(75.6) | |||||
Proceeds from financing element derivatives |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
— |
|
(39.5) |
|
— |
|
(39.5) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.6 |
|
— |
|
13.5 |
|
— |
|
14.1 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(11.0) |
|
— |
|
(11.0) | |||||
Dividends to common stockholders |
|
(218.3) |
|
— |
|
— |
|
— |
|
(218.3) | |||||
Dividends to preferred stockholders |
|
(16.5) |
|
— |
|
— |
|
— |
|
(16.5) | |||||
Preferred stock redemption |
|
(550.0) |
|
— |
|
— |
|
— |
|
(550.0) | |||||
Issuance of long-term debt |
|
791.8 |
|
— |
|
5.6 |
|
— |
|
797.4 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(19.8) |
|
— |
|
(19.8) | |||||
Net proceeds from short-term borrowings |
|
— |
|
— |
|
0.4 |
|
(0.4) |
|
— |
|||||
Dividends and capital paid to parent |
|
— |
|
(425.5) |
|
(282.5) |
|
708.0 |
|
— |
|||||
Investment contract deposits |
|
— |
|
— |
|
2,722.9 |
|
— |
|
2,722.9 | |||||
Investment contract withdrawals |
|
— |
|
— |
|
(3,414.7) |
|
— |
|
(3,414.7) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
8.2 |
|
— |
|
8.2 | |||||
Other |
|
— |
|
— |
|
(6.8) |
|
— |
|
(6.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash used in financing activities |
|
(38.4) |
|
(425.5) |
|
(1,023.5) |
|
707.6 |
|
(779.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
350.5 |
|
(102.9) |
|
249.0 |
|
(96.1) |
|
400.5 | |||||
Cash and cash equivalents at beginning of period |
|
412.4 |
|
907.2 |
|
1,598.0 |
|
(1,053.7) |
|
1,863.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
762.9 |
|
$ |
804.3 |
|
$ |
1,847.0 |
|
$ |
(1,149.8) |
|
$ |
2,264.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
The separate accounts are legally segregated and are not subject to the claims that arise out of any of our other business. The client, rather than us, directs the investments and bears the investment risk of these funds. The separate account assets represent the fair value of funds that are separately administered by us for contracts with equity, real estate and fixed income investments and are presented as a summary total within the consolidated statements of financial position. An equivalent amount is reported as separate account liabilities, which represent the obligation to return the monies to the client. We receive fees for mortality, withdrawal and expense risks, as well as administrative, maintenance and investment advisory services that are included in the consolidated statements of operations. Net deposits, net investment income and realized and unrealized capital gains and losses of the separate accounts are not reflected in the consolidated statements of operations.
Separate account assets and separate account liabilities include certain international retirement accumulation products where the segregated funds and associated obligation to the client are consolidated within our financial statements. We have determined that summary totals are the most meaningful presentation for these funds.
As of June 30, 2016 and December 31, 2015, the separate account assets included a separate account valued at $126.4 million and $158.2 million, respectively, which primarily included shares of our stock that were allocated and issued to eligible participants of qualified employee benefit plans administered by us as part of the policy credits issued under our 2001 demutualization. These shares are included in both basic and diluted earnings per share calculations. In the consolidated statements of financial position, the separate account shares are recorded at fair value and are reported as separate account assets with a corresponding separate account liability to eligible participants of the qualified plan. Changes in fair value of the separate account shares are reflected in both the separate account assets and separate account liabilities and do not impact our results of operations.
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||||||||
|
|
Total |
|
Total |
|
Total |
|
Total |
||||
|
|
assets |
|
liabilities |
|
assets |
|
liabilities |
||||
|
|
(in millions) |
||||||||||
Grantor trusts (1) |
|
$ |
243.2 |
|
$ |
229.1 |
|
$ |
257.9 |
|
$ |
231.8 |
Collateralized private investment vehicles (2) |
|
82.4 |
|
65.3 |
|
100.4 |
|
85.9 | ||||
CMBS |
|
15.1 |
|
— |
|
18.4 |
|
— |
||||
Mandatory retirement savings funds (3) |
|
36,518.8 |
|
36,186.8 |
|
33,941.3 |
|
33,639.3 | ||||
Real estate (4) |
|
428.3 |
|
66.1 |
|
384.2 |
|
71.3 | ||||
Sponsored investment funds (5) |
|
379.3 |
|
3.4 |
|
— |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
37,667.1 |
|
$ |
36,550.7 |
|
$ |
34,702.2 |
|
$ |
34,028.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The assets of grantor trusts are primarily fixed maturities, available-for-sale. The liabilities are primarily other liabilities that reflect an embedded derivative of the forecasted transaction to deliver the underlying securities. |
(2) |
The assets of the collateralized private investment vehicles are primarily fixed maturities, trading. The liabilities include derivative liabilities and an obligation to redeem notes at maturity or termination of the trusts, which are reported in other liabilities. |
(3) |
The assets of the mandatory retirement savings funds include separate account assets and equity securities, trading. The liabilities include separate account liabilities and contractholder funds. |
(4) |
The assets of the real estate VIEs primarily include real estate, other investments and cash. Liabilities primarily include long-term debt and other liabilities. |
(5) |
The assets of sponsored investment funds are primarily fixed maturities and equity securities reported in other investments and cash. The consolidated statements of financial position included a $266.6 million redeemable noncontrolling interest for sponsored investment funds as of June 30, 2016. |
|
|
|
|
Maximum exposure to |
||
|
|
Asset carrying value |
|
loss (1) |
||
|
|
(in millions) |
||||
June 30, 2016 |
|
|
|
|
||
Fixed maturities, available-for-sale: |
|
|
|
|
||
Corporate |
|
$ |
380.6 |
|
$ |
290.7 |
Residential mortgage-backed pass-through securities |
|
2,819.7 |
|
2,689.4 | ||
Commercial mortgage-backed securities |
|
4,330.6 |
|
4,302.5 | ||
Collateralized debt obligations |
|
871.8 |
|
898.8 | ||
Other debt obligations |
|
4,821.7 |
|
4,758.0 | ||
Fixed maturities, trading: |
|
|
|
|
||
Residential mortgage-backed pass-through securities |
|
22.8 |
|
22.8 | ||
Commercial mortgage-backed securities |
|
2.7 |
|
2.7 | ||
Collateralized debt obligations |
|
35.5 |
|
35.5 | ||
Equity securities, trading |
|
77.0 |
|
77.0 | ||
Other investments: |
|
|
|
|
||
Other limited partnership and fund interests |
|
698.4 |
|
1,220.3 | ||
|
|
|
|
|
||
December 31, 2015 |
|
|
|
|
||
Fixed maturities, available-for-sale: |
|
|
|
|
||
Corporate |
|
$ |
453.4 |
|
$ |
359.8 |
Residential mortgage-backed pass-through securities |
|
2,627.5 |
|
2,549.4 | ||
Commercial mortgage-backed securities |
|
3,919.8 |
|
3,932.5 | ||
Collateralized debt obligations |
|
667.5 |
|
692.7 | ||
Other debt obligations |
|
4,530.8 |
|
4,527.3 | ||
Fixed maturities, trading: |
|
|
|
|
||
Residential mortgage-backed pass-through securities |
|
25.9 |
|
25.9 | ||
Commercial mortgage-backed securities |
|
2.3 |
|
2.3 | ||
Collateralized debt obligations |
|
35.1 |
|
35.1 | ||
Other investments: |
|
|
|
|
||
Other limited partnership and fund interests |
|
255.6 |
|
255.6 |
(1) |
Our risk of loss is limited to our initial investment measured at amortized cost for fixed maturities, available-for-sale. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading and equity securities, trading. Our risk of loss is limited to our carrying value plus any unfunded commitments and/or guarantees for our other investments. Unfunded commitments are not liabilities on our consolidated statements of financial position because we are only required to fund additional equity when called upon to do so by the general partner or investment manager. |
|
|
|
|
|
|
|
|
|
|
|
Other-than- |
|||||
|
|
|
|
Gross |
|
Gross |
|
|
|
temporary |
|||||
|
|
Amortized |
|
unrealized |
|
unrealized |
|
|
|
impairments in |
|||||
|
|
cost |
|
gains |
|
losses |
|
Fair value |
|
AOCI (1) |
|||||
|
|
(in millions) |
|||||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,479.2 |
|
$ |
91.2 |
|
$ |
— |
|
$ |
1,570.4 |
|
$ |
— |
Non-U.S. governments |
|
738.4 |
|
164.4 |
|
1.0 |
|
901.8 |
|
— |
|||||
States and political subdivisions |
|
5,000.4 |
|
472.2 |
|
0.4 |
|
5,472.2 |
|
— |
|||||
Corporate |
|
32,179.8 |
|
2,552.9 |
|
320.4 |
|
34,412.3 |
|
16.0 | |||||
Residential mortgage-backed pass-through securities |
|
2,689.4 |
|
130.6 |
|
0.3 |
|
2,819.7 |
|
— |
|||||
Commercial mortgage-backed securities |
|
4,302.5 |
|
93.4 |
|
65.3 |
|
4,330.6 |
|
76.5 | |||||
Collateralized debt obligations |
|
898.8 |
|
0.9 |
|
27.9 |
|
871.8 |
|
1.0 | |||||
Other debt obligations |
|
4,838.8 |
|
88.4 |
|
24.7 |
|
4,902.5 |
|
53.5 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
$ |
52,127.3 |
|
$ |
3,594.0 |
|
$ |
440.0 |
|
$ |
55,281.3 |
|
$ |
147.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
109.9 |
|
$ |
9.1 |
|
$ |
13.8 |
|
$ |
105.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,488.4 |
|
$ |
23.4 |
|
$ |
8.3 |
|
$ |
1,503.5 |
|
$ |
— |
Non-U.S. governments |
|
669.8 |
|
128.5 |
|
5.0 |
|
793.3 |
|
— |
|||||
States and political subdivisions |
|
4,501.8 |
|
234.7 |
|
19.4 |
|
4,717.1 |
|
— |
|||||
Corporate |
|
30,245.5 |
|
1,532.9 |
|
638.2 |
|
31,140.2 |
|
5.9 | |||||
Residential mortgage-backed pass-through securities |
|
2,549.4 |
|
90.0 |
|
11.9 |
|
2,627.5 |
|
— |
|||||
Commercial mortgage-backed securities |
|
3,932.5 |
|
65.3 |
|
78.0 |
|
3,919.8 |
|
80.7 | |||||
Collateralized debt obligations |
|
692.7 |
|
1.4 |
|
26.6 |
|
667.5 |
|
1.3 | |||||
Other debt obligations |
|
4,594.2 |
|
39.2 |
|
35.8 |
|
4,597.6 |
|
58.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
$ |
48,674.3 |
|
$ |
2,115.4 |
|
$ |
823.2 |
|
$ |
49,966.5 |
|
$ |
146.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
111.2 |
|
$ |
7.5 |
|
$ |
14.2 |
|
$ |
104.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excludes $122.3 million and $131.5 million as of June 30, 2016 and December 31, 2015, respectively, of net unrealized gains on impaired fixed maturities, available-for-sale related to changes in fair value subsequent to the impairment date, which are included in gross unrealized gains and gross unrealized losses. |
|
|
Amortized cost |
|
Fair value |
||
|
|
(in millions) |
||||
Due in one year or less |
|
$ |
2,792.5 |
|
$ |
2,815.4 |
Due after one year through five years |
|
13,079.7 |
|
13,632.2 | ||
Due after five years through ten years |
|
8,901.7 |
|
9,443.1 | ||
Due after ten years |
|
14,623.9 |
|
16,466.0 | ||
|
|
|
|
|
||
Subtotal |
|
39,397.8 |
|
42,356.7 | ||
Mortgage-backed and other asset-backed securities |
|
12,729.5 |
|
12,924.6 | ||
|
|
|
|
|
||
Total |
|
$ |
52,127.3 |
|
$ |
55,281.3 |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
||||
Gross gains |
|
$ |
46.9 |
|
$ |
3.4 |
|
$ |
50.1 |
|
$ |
13.2 |
Gross losses |
|
(1.0) |
|
(1.8) |
|
(3.5) |
|
(3.3) | ||||
Net impairment losses |
|
(8.6) |
|
(6.3) |
|
(56.7) |
|
(13.8) | ||||
Hedging, net |
|
(1.0) |
|
(25.3) |
|
6.4 |
|
(35.9) | ||||
Fixed maturities, trading |
|
1.2 |
|
(5.0) |
|
10.1 |
|
(4.3) | ||||
Equity securities, available-for-sale: |
|
|
|
|
|
|
|
|
||||
Net impairment recoveries (losses) |
|
(1.4) |
|
0.3 |
|
(1.4) |
|
0.3 | ||||
Equity securities, trading |
|
18.7 |
|
2.4 |
|
(4.2) |
|
3.9 | ||||
Mortgage loans |
|
0.1 |
|
2.3 |
|
2.6 |
|
(0.1) | ||||
Derivatives |
|
(27.9) |
|
(57.6) |
|
157.7 |
|
5.0 | ||||
Other |
|
6.7 |
|
(27.0) |
|
9.2 |
|
(13.4) | ||||
|
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses) |
|
$ |
33.7 |
|
$ |
(114.6) |
|
$ |
170.3 |
|
$ |
(48.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale |
|
$ |
(2.0) |
|
$ |
(0.9) |
|
$ |
(57.6) |
|
$ |
13.1 |
Equity securities, available-for-sale |
|
(1.4) |
|
0.3 |
|
(1.4) |
|
0.3 | ||||
|
|
|
|
|
|
|
|
|
||||
Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities |
|
(3.4) |
|
(0.6) |
|
(59.0) |
|
13.4 | ||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) OCI (1) |
|
(6.6) |
|
(5.4) |
|
0.9 |
|
(26.9) | ||||
|
|
|
|
|
|
|
|
|
||||
Net impairment losses on available-for-sale securities |
|
$ |
(10.0) |
|
$ |
(6.0) |
|
$ |
(58.1) |
|
$ |
(13.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents the net impact of (a) gains resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI and (b) losses resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold. |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Beginning balance |
|
$ |
(160.4) |
|
$ |
(138.6) |
|
$ |
(131.5) |
|
$ |
(144.4) |
Credit losses for which an other-than-temporary impairment was not previously recognized |
|
(0.5) |
|
(0.8) |
|
(27.0) |
|
(1.6) | ||||
Credit losses for which an other-than-temporary impairment was previously recognized |
|
(7.8) |
|
(6.4) |
|
(14.1) |
|
(8.1) | ||||
Reduction for credit losses previously recognized on fixed maturities now sold, paid down or intended to be sold |
|
11.7 |
|
10.0 |
|
16.8 |
|
16.2 | ||||
Net reduction for positive changes in cash flows expected to be collected and amortization (1) |
|
1.2 |
|
1.0 |
|
0.2 |
|
3.0 | ||||
Foreign currency translation adjustment |
|
— |
|
0.1 |
|
(0.2) |
|
0.2 | ||||
|
|
|
|
|
|
|
|
|
||||
Ending balance |
|
$ |
(155.8) |
|
$ |
(134.7) |
|
$ |
(155.8) |
|
$ |
(134.7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts are recognized in net investment income. |
|
|
June 30, 2016 |
||||||||||||||||
|
|
Less than |
|
Greater than or |
|
|
|
|
||||||||||
|
|
twelve months |
|
equal to twelve months |
|
Total |
||||||||||||
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
||||||
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
||||||
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
||||||
|
|
(in millions) |
||||||||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agencies |
|
$ |
8.8 |
|
$ |
— |
|
$ |
3.6 |
|
$ |
— |
|
$ |
12.4 |
|
$ |
— |
Non-U.S. governments |
|
1.9 |
|
— |
|
10.7 |
|
1.0 |
|
12.6 |
|
1.0 | ||||||
States and political subdivisions |
|
2.2 |
|
— |
|
17.2 |
|
0.4 |
|
19.4 |
|
0.4 | ||||||
Corporate |
|
1,486.0 |
|
40.7 |
|
1,743.7 |
|
279.7 |
|
3,229.7 |
|
320.4 | ||||||
Residential mortgage-backed pass-through securities |
|
0.4 |
|
— |
|
44.0 |
|
0.3 |
|
44.4 |
|
0.3 | ||||||
Commercial mortgage-backed securities |
|
790.5 |
|
13.0 |
|
517.6 |
|
52.3 |
|
1,308.1 |
|
65.3 | ||||||
Collateralized debt obligations |
|
358.5 |
|
1.7 |
|
293.3 |
|
26.2 |
|
651.8 |
|
27.9 | ||||||
Other debt obligations |
|
595.8 |
|
5.7 |
|
475.1 |
|
19.0 |
|
1,070.9 |
|
24.7 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
$ |
3,244.1 |
|
$ |
61.1 |
|
$ |
3,105.2 |
|
$ |
378.9 |
|
$ |
6,349.3 |
|
$ |
440.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
0.4 |
|
$ |
1.5 |
|
$ |
33.5 |
|
$ |
12.3 |
|
$ |
33.9 |
|
$ |
13.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
||||||||||||||||
|
|
Less than |
|
Greater than or |
|
|
|
|
||||||||||
|
|
twelve months |
|
equal to twelve months |
|
Total |
||||||||||||
|
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
||||||
|
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
|
Fair |
|
unrealized |
||||||
|
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
||||||
|
|
(in millions) |
||||||||||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and agencies |
|
$ |
590.4 |
|
$ |
7.6 |
|
$ |
40.5 |
|
$ |
0.7 |
|
$ |
630.9 |
|
$ |
8.3 |
Non-U.S. governments |
|
86.3 |
|
3.1 |
|
16.1 |
|
1.9 |
|
102.4 |
|
5.0 | ||||||
States and political subdivisions |
|
692.0 |
|
19.0 |
|
6.5 |
|
0.4 |
|
698.5 |
|
19.4 | ||||||
Corporate |
|
7,975.7 |
|
309.3 |
|
1,375.0 |
|
328.9 |
|
9,350.7 |
|
638.2 | ||||||
Residential mortgage-backed pass-through securities |
|
656.7 |
|
6.7 |
|
147.9 |
|
5.2 |
|
804.6 |
|
11.9 | ||||||
Commercial mortgage-backed securities |
|
1,480.8 |
|
27.3 |
|
299.5 |
|
50.7 |
|
1,780.3 |
|
78.0 | ||||||
Collateralized debt obligations |
|
426.9 |
|
3.8 |
|
164.0 |
|
22.8 |
|
590.9 |
|
26.6 | ||||||
Other debt obligations |
|
2,512.7 |
|
19.1 |
|
403.5 |
|
16.7 |
|
2,916.2 |
|
35.8 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
$ |
14,421.5 |
|
$ |
395.9 |
|
$ |
2,453.0 |
|
$ |
427.3 |
|
$ |
16,874.5 |
|
$ |
823.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities, available-for-sale |
|
$ |
0.8 |
|
$ |
1.0 |
|
$ |
32.7 |
|
$ |
13.2 |
|
$ |
33.5 |
|
$ |
14.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Net unrealized gains on fixed maturities, available-for-sale (1) |
|
$ |
3,234.6 |
|
$ |
1,376.0 |
Noncredit component of impairment losses on fixed maturities, available-for-sale |
|
(147.0) |
|
(146.1) | ||
Net unrealized losses on equity securities, available-for-sale |
|
(4.7) |
|
(6.7) | ||
Adjustments for assumed changes in amortization patterns |
|
(239.7) |
|
(127.0) | ||
Adjustments for assumed changes in policyholder liabilities |
|
(994.2) |
|
(309.7) | ||
Net unrealized gains on derivative instruments |
|
197.4 |
|
181.6 | ||
Net unrealized gains on equity method subsidiaries and noncontrolling interest adjustments |
|
123.5 |
|
98.0 | ||
Provision for deferred income taxes |
|
(735.5) |
|
(350.2) | ||
|
|
|
|
|
||
Net unrealized gains on available-for-sale securities and derivative instruments |
|
$ |
1,434.4 |
|
$ |
715.9 |
|
|
|
|
|
|
|
(1) |
Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships. |
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
|
|
|
|
|
||
Commercial mortgage loans |
|
$ |
11,556.0 |
|
$ |
11,265.3 |
Residential mortgage loans |
|
1,178.9 |
|
1,125.7 | ||
|
|
|
|
|
||
|
|
|
|
|
||
Total amortized cost |
|
12,734.9 |
|
12,391.0 | ||
|
|
|
|
|
||
Valuation allowance |
|
(49.1) |
|
(51.6) | ||
|
|
|
|
|
||
|
|
|
|
|
||
Total carrying value |
|
$ |
12,685.8 |
|
$ |
12,339.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||||||||
|
|
Amortized |
|
Percent |
|
Amortized |
|
Percent |
||||
|
|
cost |
|
of total |
|
cost |
|
of total |
||||
|
|
($ in millions) |
||||||||||
Geographic distribution |
|
|
|
|
|
|
|
|
||||
New England |
|
$ |
500.3 |
|
4.3 |
% |
|
$ |
509.4 |
|
4.5 |
% |
Middle Atlantic |
|
3,071.6 |
|
26.6 |
|
|
3,075.6 |
|
27.3 |
|
||
East North Central |
|
533.8 |
|
4.6 |
|
|
451.8 |
|
4.0 |
|
||
West North Central |
|
231.8 |
|
2.0 |
|
|
264.3 |
|
2.3 |
|
||
South Atlantic |
|
2,186.3 |
|
18.9 |
|
|
2,072.7 |
|
18.4 |
|
||
East South Central |
|
198.4 |
|
1.7 |
|
|
215.1 |
|
1.9 |
|
||
West South Central |
|
1,166.9 |
|
10.1 |
|
|
1,120.6 |
|
9.9 |
|
||
Mountain |
|
856.0 |
|
7.4 |
|
|
898.8 |
|
8.0 |
|
||
Pacific |
|
2,762.9 |
|
23.9 |
|
|
2,614.1 |
|
23.2 |
|
||
International |
|
48.0 |
|
0.5 |
|
|
42.9 |
|
0.5 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
$ |
11,556.0 |
|
100.0 |
% |
|
$ |
11,265.3 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Property type distribution |
|
|
|
|
|
|
|
|
|
|
||
Office |
|
$ |
4,238.3 |
|
36.7 |
% |
|
$ |
4,010.0 |
|
35.6 |
% |
Retail |
|
2,601.2 |
|
22.5 |
|
|
2,521.6 |
|
22.4 |
|
||
Industrial |
|
1,712.9 |
|
14.8 |
|
|
1,840.9 |
|
16.3 |
|
||
Apartments |
|
2,570.0 |
|
22.2 |
|
|
2,474.2 |
|
22.0 |
|
||
Hotel |
|
309.7 |
|
2.7 |
|
|
320.5 |
|
2.7 |
|
||
Mixed use/other |
|
123.9 |
|
1.1 |
|
|
98.1 |
|
1.0 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
$ |
11,556.0 |
|
100.0 |
% |
|
$ |
11,265.3 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|||||||
|
|
Brick and mortar |
|
CTL |
|
Total |
|||
|
|
(in millions) |
|||||||
A- and above |
|
$ |
10,107.5 |
|
$ |
211.3 |
|
$ |
10,318.8 |
BBB+ thru BBB- |
|
926.6 |
|
102.4 |
|
1,029.0 | |||
BB+ thru BB- |
|
196.9 |
|
— |
|
196.9 | |||
B+ and below |
|
10.7 |
|
0.6 |
|
11.3 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
11,241.7 |
|
$ |
314.3 |
|
$ |
11,556.0 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||
|
|
Brick and mortar |
|
CTL |
|
Total |
|||
|
|
(in millions) |
|||||||
A- and above |
|
$ |
9,844.2 |
|
$ |
224.0 |
|
$ |
10,068.2 |
BBB+ thru BBB- |
|
892.4 |
|
119.5 |
|
1,011.9 | |||
BB+ thru BB- |
|
159.6 |
|
0.1 |
|
159.7 | |||
B+ and below |
|
24.8 |
|
0.7 |
|
25.5 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
10,921.0 |
|
$ |
344.3 |
|
$ |
11,265.3 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|||||||
|
|
Home equity |
|
First liens |
|
Total |
|||
|
|
(in millions) |
|||||||
|
|
|
|
|
|
|
|||
Performing |
|
$ |
184.7 |
|
$ |
970.9 |
|
$ |
1,155.6 |
Nonperforming |
|
9.9 |
|
13.4 |
|
23.3 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
194.6 |
|
$ |
984.3 |
|
$ |
1,178.9 |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||
|
|
Home equity |
|
First liens |
|
Total |
|||
|
|
(in millions) |
|||||||
|
|
|
|
|
|
|
|||
Performing |
|
$ |
208.0 |
|
$ |
895.6 |
|
$ |
1,103.6 |
Nonperforming |
|
10.8 |
|
11.3 |
|
22.1 | |||
|
|
|
|
|
|
|
|||
Total |
|
$ |
218.8 |
|
$ |
906.9 |
|
$ |
1,125.7 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Residential: |
|
|
|
|
||
Home equity |
|
$ |
9.9 |
|
$ |
10.8 |
First liens |
|
6.2 |
|
7.9 | ||
|
|
|
|
|
||
Total |
|
$ |
16.1 |
|
$ |
18.7 |
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
|||||||
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
|||||||
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
|||||||
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
|||||||
|
|
(in millions) |
|||||||||||||||||||
Commercial-brick and mortar |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
11,241.7 |
|
$ |
11,241.7 |
|
$ |
— |
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
314.3 |
|
314.3 |
|
— |
|||||||
Residential-home equity |
|
1.7 |
|
0.7 |
|
1.0 |
|
3.4 |
|
191.2 |
|
194.6 |
|
— |
|||||||
Residential-first liens |
|
31.9 |
|
11.3 |
|
12.5 |
|
55.7 |
|
928.6 |
|
984.3 |
|
7.2 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
33.6 |
|
$ |
12.0 |
|
$ |
13.5 |
|
$ |
59.1 |
|
$ |
12,675.8 |
|
$ |
12,734.9 |
|
$ |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment |
|||||||
|
|
|
|
|
|
90 days or |
|
|
|
|
|
|
|
90 days or |
|||||||
|
|
30-59 days |
|
60-89 days |
|
more past |
|
Total past |
|
|
|
|
|
more and |
|||||||
|
|
past due |
|
past due |
|
due |
|
due |
|
Current |
|
Total loans |
|
accruing |
|||||||
|
|
(in millions) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial-brick and mortar |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
10,921.0 |
|
$ |
10,921.0 |
|
$ |
— |
Commercial-CTL |
|
— |
|
— |
|
— |
|
— |
|
344.3 |
|
344.3 |
|
— |
|||||||
Residential-home equity |
|
2.0 |
|
1.0 |
|
0.6 |
|
3.6 |
|
215.2 |
|
218.8 |
|
— |
|||||||
Residential-first liens |
|
20.5 |
|
5.5 |
|
10.0 |
|
36.0 |
|
870.9 |
|
906.9 |
|
3.4 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
$ |
22.5 |
|
$ |
6.5 |
|
$ |
10.6 |
|
$ |
39.6 |
|
$ |
12,351.4 |
|
$ |
12,391.0 |
|
$ |
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2016 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.1 |
|
$ |
22.2 |
|
$ |
49.3 |
Provision |
|
1.1 |
|
(1.3) |
|
(0.2) | |||
Charge-offs |
|
— |
|
(0.8) |
|
(0.8) | |||
Recoveries |
|
— |
|
0.8 |
|
0.8 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2016 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.5 |
|
$ |
24.1 |
|
$ |
51.6 |
Provision |
|
0.7 |
|
(3.2) |
|
(2.5) | |||
Charge-offs |
|
— |
|
(1.6) |
|
(1.6) | |||
Recoveries |
|
— |
|
1.6 |
|
1.6 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
— |
|
$ |
6.8 |
|
$ |
6.8 |
Collectively evaluated for impairment |
|
28.2 |
|
14.1 |
|
42.3 | |||
|
|
|
|
|
|
|
|||
Allowance ending balance |
|
$ |
28.2 |
|
$ |
20.9 |
|
$ |
49.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loan balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
— |
|
$ |
20.2 |
|
$ |
20.2 |
Collectively evaluated for impairment |
|
11,556.0 |
|
1,158.7 |
|
12,714.7 | |||
|
|
|
|
|
|
|
|||
Loan ending balance |
|
$ |
11,556.0 |
|
$ |
1,178.9 |
|
$ |
12,734.9 |
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2015 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
27.8 |
|
$ |
29.1 |
|
$ |
56.9 |
Provision |
|
0.6 |
|
0.6 |
|
1.2 | |||
Charge-offs |
|
— |
|
(3.5) |
|
(3.5) | |||
Recoveries |
|
0.1 |
|
1.2 |
|
1.3 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2015 |
|||||||
|
|
Commercial |
|
Residential |
|
Total |
|||
|
|
(in millions) |
|||||||
Beginning balance |
|
$ |
26.9 |
|
$ |
29.6 |
|
$ |
56.5 |
Provision |
|
1.5 |
|
2.5 |
|
4.0 | |||
Charge-offs |
|
— |
|
(6.5) |
|
(6.5) | |||
Recoveries |
|
0.1 |
|
1.8 |
|
1.9 | |||
|
|
|
|
|
|
|
|||
Ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Allowance ending balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
2.4 |
|
$ |
8.4 |
|
$ |
10.8 |
Collectively evaluated for impairment |
|
26.1 |
|
19.0 |
|
45.1 | |||
|
|
|
|
|
|
|
|||
Allowance ending balance |
|
$ |
28.5 |
|
$ |
27.4 |
|
$ |
55.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loan balance by basis of impairment method: |
|
|
|
|
|
|
|||
Individually evaluated for impairment |
|
$ |
4.4 |
|
$ |
25.9 |
|
$ |
30.3 |
Collectively evaluated for impairment |
|
10,987.3 |
|
1,109.0 |
|
12,096.3 | |||
|
|
|
|
|
|
|
|||
Loan ending balance |
|
$ |
10,991.7 |
|
$ |
1,134.9 |
|
$ |
12,126.6 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|||||||
|
|
|
|
Unpaid |
|
|
|||
|
|
Recorded |
|
principal |
|
Related |
|||
|
|
investment |
|
balance |
|
allowance |
|||
|
|
(in millions) |
|||||||
With no related allowance recorded: |
|
|
|
|
|
|
|||
Residential-first liens |
|
$ |
2.3 |
|
$ |
2.3 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|||
Residential-home equity |
|
13.0 |
|
14.1 |
|
6.4 | |||
Residential-first liens |
|
4.9 |
|
4.8 |
|
0.4 | |||
Total: |
|
|
|
|
|
|
|||
Residential |
|
$ |
20.2 |
|
$ |
21.2 |
|
$ |
6.8 |
|
|
December 31, 2015 |
|||||||
|
|
|
|
Unpaid |
|
|
|||
|
|
Recorded |
|
principal |
|
Related |
|||
|
|
investment |
|
balance |
|
allowance |
|||
|
|
(in millions) |
|||||||
With no related allowance recorded: |
|
|
|
|
|
|
|||
Residential-first liens |
|
$ |
3.6 |
|
$ |
3.6 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|||
Residential-home equity |
|
13.7 |
|
14.8 |
|
7.0 | |||
Residential-first liens |
|
5.9 |
|
5.8 |
|
0.5 | |||
Total: |
|
|
|
|
|
|
|||
Residential |
|
$ |
23.2 |
|
$ |
24.2 |
|
$ |
7.5 |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, 2016 |
|
June 30, 2016 |
||||||||
|
|
Average |
|
|
|
Average |
|
|
||||
|
|
recorded |
|
Interest income |
|
recorded |
|
Interest income |
||||
|
|
investment |
|
recognized |
|
investment |
|
recognized |
||||
|
|
(in millions) |
||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
||||
Residential-first liens |
|
$ |
2.7 |
|
$ |
— |
|
$ |
3.0 |
|
$ |
— |
With an allowance recorded: |
|
|
|
|
|
|
|
|
||||
Residential-home equity |
|
13.0 |
|
— |
|
13.4 |
|
0.1 | ||||
Residential-first liens |
|
5.2 |
|
0.1 |
|
5.4 |
|
0.1 | ||||
Total: |
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
20.9 |
|
$ |
0.1 |
|
$ |
21.8 |
|
$ |
0.2 |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, 2015 |
|
June 30, 2015 |
||||||||
|
|
Average |
|
|
|
Average |
|
|
||||
|
|
recorded |
|
Interest income |
|
recorded |
|
Interest income |
||||
|
|
investment |
|
recognized |
|
investment |
|
recognized |
||||
|
|
(in millions) |
||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
||||
Commercial-brick and mortar |
|
$ |
2.3 |
|
$ |
— |
|
$ |
2.6 |
|
$ |
— |
Residential-first liens |
|
3.7 |
|
— |
|
3.7 |
|
— |
||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
||||
Commercial-brick and mortar |
|
4.4 |
|
0.1 |
|
4.4 |
|
0.2 | ||||
Residential-home equity |
|
15.6 |
|
0.1 |
|
16.0 |
|
0.2 | ||||
Residential-first liens |
|
6.7 |
|
0.1 |
|
6.9 |
|
0.1 | ||||
Total: |
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
6.7 |
|
$ |
0.1 |
|
$ |
7.0 |
|
$ |
0.2 |
Residential |
|
$ |
26.0 |
|
$ |
0.2 |
|
$ |
26.6 |
|
$ |
0.3 |
|
|
For the three months ended June 30, 2016 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
1 |
|
$ |
— |
|
— |
|
$ |
— |
Residential-first liens |
|
1 |
|
0.2 |
|
— |
|
— |
||
|
|
|
|
|
|
|
|
|
||
Total |
|
2 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2015 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
4 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
4 |
|
$ |
0.2 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2016 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
3 |
|
$ |
0.2 |
|
— |
|
$ |
— |
Residential-first liens |
|
1 |
|
0.2 |
|
— |
|
— |
||
|
|
|
|
|
|
|
|
|
||
Total |
|
4 |
|
$ |
0.4 |
|
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2015 |
||||||||
|
|
TDRs |
|
TDRs in payment default |
||||||
|
|
Number of |
|
Recorded |
|
Number of |
|
Recorded |
||
|
|
contracts |
|
investment |
|
contracts |
|
investment |
||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
||
Residential-home equity |
|
12 |
|
$ |
0.7 |
|
1 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
12 |
|
$ |
0.7 |
|
1 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amounts not offset in the |
|
|
||||||
|
|
|
|
consolidated statements |
|
|
||||||
|
|
|
|
of financial position |
|
|
||||||
|
|
Gross amount |
|
|
|
|
|
|
||||
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
||||
|
|
assets (1) |
|
instruments (2) |
|
received |
|
Net amount |
||||
|
|
(in millions) |
||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
||||
Derivative assets |
|
$ |
1,286.4 |
|
$ |
(733.1) |
|
$ |
(542.4) |
|
$ |
10.9 |
Reverse repurchase agreements |
|
56.8 |
|
— |
|
(56.8) |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
1,343.2 |
|
$ |
(733.1) |
|
$ |
(599.2) |
|
$ |
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
||||
Derivative assets |
|
$ |
665.4 |
|
$ |
(409.7) |
|
$ |
(233.6) |
|
$ |
22.1 |
Reverse repurchase agreements |
|
79.7 |
|
— |
|
(79.7) |
|
— |
||||
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
745.1 |
|
$ |
(409.7) |
|
$ |
(313.3) |
|
$ |
22.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gross amount of recognized derivative and reverse repurchase agreement assets are reported with other investments and cash and cash equivalents on the consolidated statements of financial position. The above excludes $5.2 million and $1.2 million of derivative assets as of June 30, 2016 and December 31, 2015, that are not subject to master netting agreements or similar agreements. The gross amounts of derivative and reverse repurchase agreement assets are not netted against offsetting liabilities for presentation on the consolidated statements of financial position. |
(2) |
Represents amount of offsetting derivative liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets for presentation on the consolidated statements of financial position. |
|
|
|
|
Gross amounts not offset in the |
|
|
||||||
|
|
|
|
consolidated statements |
|
|
||||||
|
|
|
|
of financial position |
|
|
||||||
|
|
Gross amount |
|
|
|
|
|
|
||||
|
|
of recognized |
|
Financial |
|
Collateral |
|
|
||||
|
|
liabilities (1) |
|
instruments (2) |
|
pledged |
|
Net amount |
||||
|
|
(in millions) |
||||||||||
June 30, 2016 |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
$ |
977.9 |
|
$ |
(733.1) |
|
$ |
(174.8) |
|
$ |
70.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
$ |
758.6 |
|
$ |
(409.7) |
|
$ |
(253.9) |
|
$ |
95.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gross amount of recognized derivative liabilities are reported with other liabilities on the consolidated statements of financial position. The above excludes $558.7 million and $421.5 million of derivative liabilities as of June 30, 2016 and December 31, 2015, respectively, which are primarily embedded derivatives that are not subject to master netting agreements or similar agreements. The gross amounts of derivative liabilities are not netted against offsetting assets for presentation on the consolidated statements of financial position. |
(2) |
Represents amount of offsetting derivative assets that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative liabilities for presentation on the consolidated statements of financial position. |
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Notional amounts of derivative instruments |
|
|
|
|
||
Interest rate contracts: |
|
|
|
|
||
Interest rate swaps |
|
$ |
24,000.2 |
|
$ |
21,704.2 |
Interest rate options |
|
4,900.0 |
|
4,900.0 | ||
Interest rate futures |
|
343.0 |
|
162.0 | ||
Swaptions |
|
77.0 |
|
259.0 | ||
Foreign exchange contracts: |
|
|
|
|
||
Currency swaps |
|
1,683.0 |
|
1,751.0 | ||
Currency forwards |
|
1,153.8 |
|
1,040.6 | ||
Equity contracts: |
|
|
|
|
||
Equity options |
|
3,887.3 |
|
3,604.8 | ||
Equity futures |
|
635.1 |
|
514.2 | ||
Credit contracts: |
|
|
|
|
||
Credit default swaps |
|
1,013.9 |
|
1,084.5 | ||
Total return swaps |
|
90.0 |
|
90.0 | ||
Futures |
|
13.8 |
|
13.1 | ||
Other contracts: |
|
|
|
|
||
Embedded derivatives |
|
10,141.8 |
|
9,905.0 | ||
|
|
|
|
|
||
Total notional amounts at end of period |
|
$ |
47,938.9 |
|
$ |
45,028.4 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit exposure of derivative instruments |
|
|
|
|
||
Interest rate contracts: |
|
|
|
|
||
Interest rate swaps |
|
$ |
1,089.3 |
|
$ |
505.5 |
Interest rate options |
|
52.9 |
|
34.1 | ||
Foreign exchange contracts: |
|
|
|
|
||
Currency swaps |
|
94.1 |
|
105.6 | ||
Currency forwards |
|
14.3 |
|
4.4 | ||
Equity contracts: |
|
|
|
|
||
Equity options |
|
83.4 |
|
39.9 | ||
Credit contracts: |
|
|
|
|
||
Credit default swaps |
|
8.6 |
|
13.4 | ||
Total return swaps |
|
— |
|
0.5 | ||
|
|
|
|
|
||
Total gross credit exposure |
|
1,342.6 |
|
703.4 | ||
Less: collateral received |
|
574.0 |
|
234.2 | ||
|
|
|
|
|
||
Net credit exposure |
|
$ |
768.6 |
|
$ |
469.2 |
|
|
|
|
|
|
|
|
|
Derivative assets (1) |
|
Derivative liabilities (2) |
||||||||
|
|
June 30, 2016 |
|
December 31, 2015 |
|
June 30, 2016 |
|
December 31, 2015 |
||||
|
|
(in millions) |
||||||||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
$ |
18.5 |
|
$ |
9.4 |
|
$ |
136.8 |
|
$ |
132.2 |
Foreign exchange contracts |
|
78.5 |
|
94.1 |
|
136.1 |
|
164.2 | ||||
|
|
|
|
|
|
|
|
|
||||
Total derivatives designated as hedging instruments |
|
$ |
97.0 |
|
$ |
103.5 |
|
$ |
272.9 |
|
$ |
296.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
||||
Interest rate contracts |
|
$ |
1,071.8 |
|
$ |
493.0 |
|
$ |
536.6 |
|
$ |
255.8 |
Foreign exchange contracts |
|
30.8 |
|
16.4 |
|
61.6 |
|
68.1 | ||||
Equity contracts |
|
83.4 |
|
39.8 |
|
91.0 |
|
112.3 | ||||
Credit contracts |
|
8.6 |
|
13.9 |
|
22.8 |
|
39.7 | ||||
Other contracts |
|
— |
|
— |
|
551.7 |
|
407.8 | ||||
|
|
|
|
|
|
|
|
|
||||
Total derivatives not designated as hedging instruments |
|
1,194.6 |
|
563.1 |
|
1,263.7 |
|
883.7 | ||||
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
Total derivative instruments |
|
$ |
1,291.6 |
|
$ |
666.6 |
|
$ |
1,536.6 |
|
$ |
1,180.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The fair value of derivative assets is reported with other investments on the consolidated statements of financial position. |
(2) |
The fair value of derivative liabilities is reported with other liabilities on the consolidated statements of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative liabilities with a fair value of $324.3 million and $177.4 million as of June 30, 2016 and December 31, 2015, respectively, are reported with contractholder funds on the consolidated statements of financial position. |
|
|
June 30, 2016 |
|||||||||
|
|
|
|
|
|
|
|
Weighted |
|||
|
|
|
|
|
|
Maximum |
|
average |
|||
|
|
Notional |
|
Fair |
|
future |
|
expected life |
|||
|
|
amount |
|
value |
|
payments |
|
(in years) |
|||
|
|
(in millions) |
|||||||||
Single name credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
AAA |
|
$ |
30.0 |
|
$ |
0.7 |
|
$ |
30.0 |
|
2.7 |
AA |
|
94.0 |
|
1.0 |
|
94.0 |
|
1.7 | |||
A |
|
175.0 |
|
1.6 |
|
175.0 |
|
1.7 | |||
BBB |
|
300.0 |
|
(1.0) |
|
300.0 |
|
2.5 | |||
BB |
|
20.0 |
|
(2.7) |
|
20.0 |
|
3.3 | |||
Near default |
|
10.0 |
|
(2.5) |
|
10.0 |
|
3.5 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
0.5 |
|
30.0 |
|
2.8 | |||
Sovereign |
|
|
|
|
|
|
|
|
|||
AA |
|
10.0 |
|
0.2 |
|
10.0 |
|
3.2 | |||
BBB |
|
40.0 |
|
(0.1) |
|
40.0 |
|
3.2 | |||
|
|
|
|
|
|
|
|
|
|||
Total single name credit default swaps |
|
709.0 |
|
(2.3) |
|
709.0 |
|
2.3 | |||
|
|
|
|
|
|
|
|
|
|||
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
Near default (1) |
|
82.3 |
|
(6.6) |
|
82.3 |
|
0.7 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
(0.8) |
|
30.0 |
|
1.2 | |||
Structured finance |
|
|
|
|
|
|
|
|
|||
AAA |
|
4.3 |
|
— |
|
4.3 |
|
0.2 | |||
|
|
|
|
|
|
|
|
|
|||
Total basket and index credit default swaps |
|
116.6 |
|
(7.4) |
|
116.6 |
|
0.8 | |||
|
|
|
|
|
|
|
|
|
|||
Total credit default swap protection sold |
|
$ |
825.6 |
|
$ |
(9.7) |
|
$ |
825.6 |
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|||||||||
|
|
|
|
|
|
|
|
Weighted |
|||
|
|
|
|
|
|
Maximum |
|
average |
|||
|
|
Notional |
|
Fair |
|
future |
|
expected life |
|||
|
|
amount |
|
value |
|
payments |
|
(in years) |
|||
|
|
(in millions) |
|||||||||
Single name credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
AAA |
|
$ |
30.0 |
|
$ |
0.8 |
|
$ |
30.0 |
|
3.2 |
AA |
|
74.0 |
|
1.1 |
|
74.0 |
|
2.3 | |||
A |
|
195.0 |
|
2.2 |
|
195.0 |
|
2.2 | |||
BBB |
|
310.0 |
|
(0.9) |
|
310.0 |
|
2.9 | |||
BB |
|
30.0 |
|
(4.6) |
|
30.0 |
|
3.1 | |||
CCC |
|
10.0 |
|
(6.8) |
|
10.0 |
|
4.0 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
0.6 |
|
30.0 |
|
3.3 | |||
Sovereign |
|
|
|
|
|
|
|
|
|||
AA |
|
10.0 |
|
— |
|
10.0 |
|
3.7 | |||
BBB |
|
40.0 |
|
(0.9) |
|
40.0 |
|
3.7 | |||
|
|
|
|
|
|
|
|
|
|||
Total single name credit default swaps |
|
729.0 |
|
(8.5) |
|
729.0 |
|
2.8 | |||
|
|
|
|
|
|
|
|
|
|||
Basket and index credit default swaps |
|
|
|
|
|
|
|
|
|||
Corporate debt |
|
|
|
|
|
|
|
|
|||
Near default (1) |
|
100.4 |
|
(17.7) |
|
100.4 |
|
1.2 | |||
Government/municipalities |
|
|
|
|
|
|
|
|
|||
AA |
|
30.0 |
|
(1.1) |
|
30.0 |
|
1.7 | |||
Structured finance |
|
|
|
|
|
|
|
|
|||
AAA |
|
11.9 |
|
— |
|
11.9 |
|
0.6 | |||
|
|
|
|
|
|
|
|
|
|||
Total basket and index credit default swaps |
|
142.3 |
|
(18.8) |
|
142.3 |
|
1.3 | |||
|
|
|
|
|
|
|
|
|
|||
Total credit default swap protection sold |
|
$ |
871.3 |
|
$ |
(27.3) |
|
$ |
871.3 |
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes $60.0 million and $78.0 million as of June 30, 2016 and December 31, 2015, respectively, notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third party investors. |
|
|
June 30, 2016 |
||||||
|
|
|
|
|
|
Weighted |
||
|
|
|
|
|
|
average |
||
|
|
Amortized |
|
Carrying |
|
expected life |
||
|
|
cost |
|
value |
|
(in years) |
||
|
|
(in millions) |
||||||
Corporate debt |
|
|
|
|
|
|
||
A |
|
$ |
24.9 |
|
$ |
24.9 |
|
0.5 |
|
|
|
|
|
|
|
|
|
Total corporate debt |
|
24.9 |
|
24.9 |
|
0.5 | ||
|
|
|
|
|
|
|
||
Structured finance |
|
|
|
|
|
|
||
A |
|
32.5 |
|
32.5 |
|
0.5 | ||
BBB |
|
3.5 |
|
3.5 |
|
1.2 | ||
BB |
|
2.3 |
|
2.3 |
|
1.2 | ||
CCC |
|
4.7 |
|
4.7 |
|
2.3 | ||
|
|
|
|
|
|
|
||
Total structured finance |
|
43.0 |
|
43.0 |
|
0.8 | ||
|
|
|
|
|
|
|
||
Total fixed maturities with credit derivatives |
|
$ |
67.9 |
|
$ |
67.9 |
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
||||||
|
|
|
|
|
|
Weighted |
||
|
|
|
|
|
|
average |
||
|
|
Amortized |
|
Carrying |
|
expected life |
||
|
|
cost |
|
value |
|
(in years) |
||
|
|
(in millions) |
||||||
Corporate debt |
|
|
|
|
|
|
||
A |
|
$ |
24.6 |
|
$ |
24.6 |
|
1.0 |
|
|
|
|
|
|
|
|
|
Total corporate debt |
|
24.6 |
|
24.6 |
|
1.0 | ||
|
|
|
|
|
|
|
||
Structured finance |
|
|
|
|
|
|
||
A |
|
52.2 |
|
52.2 |
|
1.1 | ||
BBB |
|
3.4 |
|
3.4 |
|
1.6 | ||
BB |
|
2.3 |
|
2.3 |
|
1.6 | ||
CCC |
|
4.8 |
|
4.8 |
|
1.9 | ||
|
|
|
|
|
|
|
||
Total structured finance |
|
62.7 |
|
62.7 |
|
1.2 | ||
|
|
|
|
|
|
|
||
Total fixed maturities with credit derivatives |
|
$ |
87.3 |
|
$ |
87.3 |
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) |
||||||
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
||||||||
|
|
recognized in net income on |
|
|
|
related hedged item for the |
||||||||
|
|
derivatives for the three months |
|
|
|
three months ended |
||||||||
Derivatives in fair value hedging |
|
ended June 30, (1) |
|
Hedged items in fair value |
|
June 30, (1) |
||||||||
relationships |
|
2016 |
|
2015 |
|
hedging relationships |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
|
|
|
(in millions) |
||||||||
Interest rate contracts |
|
$ |
0.3 |
|
$ |
20.2 |
|
Fixed maturities, available-for-sale |
|
$ |
(0.3) |
|
$ |
(19.3) |
Interest rate contracts |
|
0.4 |
|
(1.0) |
|
Investment contracts |
|
(0.5) |
|
1.0 | ||||
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
0.7 |
|
$ |
19.2 |
|
Total |
|
$ |
(0.8) |
|
$ |
(18.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) |
||||||
|
|
Amount of gain (loss) |
|
|
|
recognized in net income on |
||||||||
|
|
recognized in net income on |
|
|
|
related hedged item for the |
||||||||
|
|
derivatives for the six months |
|
|
|
for the six months |
||||||||
Derivatives in fair value hedging |
|
ended June 30, (1) |
|
Hedged items in fair value |
|
ended June 30, (1) |
||||||||
relationships |
|
2016 |
|
2015 |
|
hedging relationships |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
|
|
|
(in millions) |
||||||||
Interest rate contracts |
|
$ |
(7.6) |
|
$ |
18.1 |
|
Fixed maturities, available-for-sale |
|
$ |
7.6 |
|
$ |
(17.7) |
Interest rate contracts |
|
3.3 |
|
1.5 |
|
Investment contracts |
|
(3.3) |
|
(1.4) | ||||
Foreign exchange contracts |
|
— |
|
3.8 |
|
Fixed maturities, available-for-sale |
|
— |
|
(3.8) | ||||
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
(4.3) |
|
$ |
23.4 |
|
Total |
|
$ |
4.3 |
|
$ |
(22.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges. |
|
|
Amount of gain (loss) for the three |
|
Amount of gain (loss) for the |
||||||||
|
|
months ended June 30, |
|
six months ended June 30, |
||||||||
Hedged item |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Fixed maturities, available-for-sale (1) |
|
$ |
(11.9) |
|
$ |
(19.2) |
|
$ |
(25.0) |
|
$ |
(39.3) |
Investment contracts (2) |
|
0.7 |
|
1.0 |
|
1.4 |
|
1.9 |
(1) |
Reported in net investment income on the consolidated statements of operations. |
(2) |
Reported in benefits, claims and settlement expenses on the consolidated statements of operations. |
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
|
||||||||
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
|
||||||||
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
|
||||||||
Derivatives in cash |
|
|
|
for the three months ended |
|
reclassified from AOCI |
|
for the three months ended |
|
||||||||
flow hedging |
|
|
|
June 30, |
|
into net income |
|
June 30, |
|
||||||||
relationships |
|
Related hedged item |
|
2016 |
|
2015 |
|
(effective portion) |
|
2016 |
|
2015 |
|
||||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
|
||||||||
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
(6.9) |
|
$ |
(5.6) |
|
Net investment income |
|
$ |
4.8 |
|
$ |
4.1 |
|
Interest rate contracts |
|
Investment contracts |
|
0.5 |
|
1.4 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(2.3) |
|
(2.0) |
|
||||
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
10.9 |
|
(26.7) |
|
Net realized capital gains |
|
0.6 |
|
5.6 |
|
||||
Foreign exchange contracts |
|
Investment contracts |
|
1.3 |
|
2.6 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
$ |
5.8 |
|
$ |
(28.3) |
|
Total |
|
$ |
3.1 |
|
$ |
7.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
Amount of gain (loss) |
|
|
|
Amount of gain (loss) |
|
||||||||
|
|
|
|
recognized in AOCI on |
|
|
|
reclassified from AOCI on |
|
||||||||
|
|
|
|
derivatives (effective portion) |
|
Location of gain (loss) |
|
derivatives (effective portion) |
|
||||||||
Derivatives in cash |
|
|
|
for the six months ended |
|
reclassified from AOCI |
|
for the six months ended |
|
||||||||
flow hedging |
|
|
|
June 30, |
|
into net income |
|
June 30, |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
relationships |
|
Related hedged item |
|
2016 |
|
2015 |
|
(effective portion) |
|
2016 |
|
2015 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
(in millions) |
|
|
|
(in millions) |
|
||||||||
Interest rate contracts |
|
Fixed maturities, available-for-sale |
|
$ |
21.7 |
|
$ |
11.1 |
|
Net investment income |
|
$ |
9.4 |
|
$ |
7.9 |
|
Interest rate contracts |
|
Investment contracts |
|
1.6 |
|
2.3 |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
Interest rate contracts |
|
Debt |
|
— |
|
— |
|
Operating expense |
|
(4.5) |
|
(4.0) |
|
||||
Foreign exchange contracts |
|
Fixed maturities, available-for-sale |
|
5.5 |
|
13.5 |
|
Net realized capital gains |
|
1.2 |
|
13.9 |
|
||||
Foreign exchange contracts |
|
Investment contracts |
|
3.9 |
|
(1.2) |
|
Benefits, claims and settlement expenses |
|
— |
|
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
$ |
32.7 |
|
$ |
25.7 |
|
Total |
|
$ |
6.1 |
|
$ |
17.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) for the |
|
Amount of gain (loss) for the |
|
||||||||
|
|
three months ended June 30, |
|
six months ended June 30, |
|
||||||||
Hedged item |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Fixed maturities, available-for-sale (1) |
|
$ |
1.4 |
|
$ |
1.6 |
|
$ |
2.9 |
|
$ |
3.1 |
|
Investment contracts (2) |
|
(4.3) |
|
(4.8) |
|
(9.3) |
|
(8.7) |
|
(1) |
Reported in net investment income on the consolidated statements of operations. |
(2) |
Reported in benefits, claims and settlement expenses on the consolidated statements of operations. |
|
|
Amount of gain (loss) recognized in |
|
Amount of gain (loss) recognized in |
|
||||||||
|
|
net income on derivatives for the |
|
net income on derivatives for the |
|
||||||||
|
|
three months ended June 30, |
|
six months ended June 30, |
|
||||||||
Derivatives not designated as hedging instruments |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Interest rate contracts |
|
$ |
73.0 |
|
$ |
(151.0) |
|
$ |
260.7 |
|
$ |
(66.1) |
|
Foreign exchange contracts |
|
(4.5) |
|
4.3 |
|
23.1 |
|
(12.2) |
|
||||
Equity contracts |
|
6.5 |
|
(44.3) |
|
15.0 |
|
(32.2) |
|
||||
Credit contracts |
|
5.7 |
|
8.8 |
|
24.5 |
|
13.4 |
|
||||
Other contracts |
|
(112.6) |
|
109.3 |
|
(150.3) |
|
58.9 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
(31.9) |
|
$ |
(72.9) |
|
$ |
173.0 |
|
$ |
(38.2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
|||||||
|
|
|
|
Net unamortized |
|
|
|
|||
|
|
|
|
discount, |
|
|
|
|||
|
|
|
|
premium and |
|
|
|
|||
|
|
|
|
debt issuance |
|
Carrying |
|
|||
|
|
Principal |
|
costs |
|
amount |
|
|||
|
|
(in millions) |
|
|||||||
1.85% notes payable, due 2017 |
|
$ |
300.0 |
|
$ |
(0.7) |
|
$ |
299.3 |
|
8.875% notes payable, due 2019 |
|
350.0 |
|
(1.0) |
|
349.0 |
|
|||
3.3% notes payable, due 2022 |
|
300.0 |
|
(2.3) |
|
297.7 |
|
|||
3.125% notes payable, due 2023 |
|
300.0 |
|
(1.9) |
|
298.1 |
|
|||
3.4% notes payable, due 2025 |
|
400.0 |
|
(4.0) |
|
396.0 |
|
|||
6.05% notes payable, due 2036 |
|
600.0 |
|
(3.3) |
|
596.7 |
|
|||
4.625% notes payable, due 2042 |
|
300.0 |
|
(3.4) |
|
296.6 |
|
|||
4.35% notes payable, due 2043 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.7% notes payable, due 2055 |
|
400.0 |
|
(5.0) |
|
395.0 |
|
|||
Non-recourse mortgages and notes payable |
|
46.5 |
|
(1.2) |
|
45.3 |
|
|||
|
|
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
3,296.5 |
|
$ |
(26.3) |
|
$ |
3,270.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2015 |
|
|||||||
|
|
|
|
|||||||
|
|
|
|
Net unamortized |
|
|
|
|||
|
|
|
|
discount, |
|
|
|
|||
|
|
|
|
premium and |
|
|
|
|||
|
|
|
|
debt issuance |
|
Carrying |
|
|||
|
|
Principal |
|
costs |
|
amount |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
(in millions) |
|
|||||||
1.85% notes payable, due 2017 |
|
$ |
300.0 |
|
$ |
(0.9) |
|
$ |
299.1 |
|
8.875% notes payable, due 2019 |
|
350.0 |
|
(1.2) |
|
348.8 |
|
|||
3.3% notes payable, due 2022 |
|
300.0 |
|
(2.5) |
|
297.5 |
|
|||
3.125% notes payable, due 2023 |
|
300.0 |
|
(2.0) |
|
298.0 |
|
|||
3.4% notes payable, due 2025 |
|
400.0 |
|
(4.3) |
|
395.7 |
|
|||
6.05% notes payable, due 2036 |
|
600.0 |
|
(3.3) |
|
596.7 |
|
|||
4.625% notes payable, due 2042 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.35% notes payable, due 2043 |
|
300.0 |
|
(3.5) |
|
296.5 |
|
|||
4.7% notes payable, due 2055 |
|
400.0 |
|
(5.0) |
|
395.0 |
|
|||
Non-recourse mortgages and notes payable |
|
42.8 |
|
(1.4) |
|
41.4 |
|
|||
|
|
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
3,292.8 |
|
$ |
(27.6) |
|
$ |
3,265.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other postretirement |
|
||||||
|
|
Pension benefits |
|
benefits |
|
||||||||
|
|
For the three months ended |
|
For the three months ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
(in millions) |
|
||||||||||
Service cost |
|
$ |
16.3 |
|
$ |
15.8 |
|
$ |
0.6 |
|
$ |
0.5 |
|
Interest cost |
|
33.7 |
|
30.1 |
|
1.6 |
|
1.7 |
|
||||
Expected return on plan assets |
|
(38.8) |
|
(40.1) |
|
(8.2) |
|
(8.5) |
|
||||
Amortization of prior service benefit |
|
(0.5) |
|
(0.4) |
|
(5.0) |
|
(4.6) |
|
||||
Recognized net actuarial (gain) loss |
|
19.2 |
|
25.5 |
|
— |
|
(0.2) |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost (income) |
|
$ |
29.9 |
|
$ |
30.9 |
|
$ |
(11.0) |
|
$ |
(11.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
Other postretirement |
|
||||||
|
|
Pension benefits |
|
benefits |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
For the six months ended |
|
For the six months ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
(in millions) |
|
||||||||||
Service cost |
|
$ |
32.5 |
|
$ |
31.6 |
|
$ |
1.2 |
|
$ |
1.0 |
|
Interest cost |
|
67.4 |
|
60.2 |
|
3.3 |
|
3.3 |
|
||||
Expected return on plan assets |
|
(77.5) |
|
(80.3) |
|
(16.3) |
|
(17.0) |
|
||||
Amortization of prior service benefit |
|
(1.1) |
|
(0.9) |
|
(10.1) |
|
(9.2) |
|
||||
Recognized net actuarial (gain) loss |
|
38.5 |
|
51.1 |
|
0.1 |
|
(0.4) |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost (income) |
|
$ |
59.8 |
|
$ |
61.7 |
|
$ |
(21.8) |
|
$ |
(22.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A |
|
Series B |
|
Common |
|
|
|
preferred stock |
|
preferred stock |
|
stock |
|
|
|
(in millions) |
|
||||
Outstanding shares as of January 1, 2015 |
|
3.0 |
|
10.0 |
|
293.9 |
|
Shares issued |
|
— |
|
— |
|
2.3 |
|
Treasury stock acquired |
|
— |
|
— |
|
(1.5) |
|
Preferred stock redemption |
|
(3.0) |
|
(10.0) |
|
— |
|
|
|
|
|
|
|
|
|
Outstanding shares as of June 30, 2015 |
|
— |
|
— |
|
294.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding shares as of January 1, 2016 |
|
— |
|
— |
|
291.4 |
|
Shares issued |
|
— |
|
— |
|
1.9 |
|
Treasury stock acquired |
|
— |
|
— |
|
(5.3) |
|
|
|
|
|
|
|
|
|
Outstanding shares as of June 30, 2016 |
|
— |
|
— |
|
288.0 |
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
||||||||||||||
|
|
June 30, 2016 |
|
June 30, 2016 |
|
||||||||||||||
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Net unrealized gains on available-for-sale securities during the period |
|
$ |
954.2 |
|
$ |
(330.6) |
|
$ |
623.6 |
|
$ |
1,866.1 |
|
$ |
(643.5) |
|
$ |
1,222.6 |
|
Reclassification adjustment for (gains) losses included in net income (1) |
|
(35.3) |
|
12.4 |
|
(22.9) |
|
20.0 |
|
(7.0) |
|
13.0 |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
(56.0) |
|
19.7 |
|
(36.3) |
|
(112.1) |
|
39.3 |
|
(72.8) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
(394.1) |
|
132.9 |
|
(261.2) |
|
(687.2) |
|
232.0 |
|
(455.2) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on available-for-sale securities |
|
468.8 |
|
(165.6) |
|
303.2 |
|
1,086.8 |
|
(379.2) |
|
707.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
6.6 |
|
(2.3) |
|
4.3 |
|
(0.9) |
|
0.3 |
|
(0.6) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
(2.4) |
|
0.8 |
|
(1.6) |
|
(1.6) |
|
0.6 |
|
(1.0) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
(0.1) |
|
— |
|
(0.1) |
|
— |
|
— |
|
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
4.1 |
|
(1.5) |
|
2.6 |
|
(2.5) |
|
0.9 |
|
(1.6) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on derivative instruments during the period |
|
16.2 |
|
(5.6) |
|
10.6 |
|
21.9 |
|
(7.6) |
|
14.3 |
|
||||||
Reclassification adjustment for gains included in net income (3) |
|
(3.1) |
|
0.9 |
|
(2.2) |
|
(6.1) |
|
1.8 |
|
(4.3) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
2.4 |
|
(0.8) |
|
1.6 |
|
1.0 |
|
(0.3) |
|
0.7 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
1.7 |
|
(0.5) |
|
1.2 |
|
2.7 |
|
(0.9) |
|
1.8 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on derivative instruments |
|
17.2 |
|
(6.0) |
|
11.2 |
|
19.5 |
|
(7.0) |
|
12.5 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment |
|
25.1 |
|
(11.0) |
|
14.1 |
|
164.0 |
|
(20.2) |
|
143.8 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
13.7 |
|
(5.7) |
|
8.0 |
|
27.4 |
|
(11.4) |
|
16.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrecognized postretirement benefit obligation |
|
13.7 |
|
(5.7) |
|
8.0 |
|
27.4 |
|
(11.4) |
|
16.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
$ |
528.9 |
|
$ |
(189.8) |
|
$ |
339.1 |
|
$ |
1,295.2 |
|
$ |
(416.9) |
|
$ |
878.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
||||||||||||||
|
|
June 30, 2015 |
|
June 30, 2015 |
|
||||||||||||||
|
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
Pre-Tax |
|
Tax |
|
After-Tax |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Net unrealized losses on available-for-sale securities during the period |
|
$ |
(1,090.4) |
|
$ |
372.6 |
|
$ |
(717.8) |
|
$ |
(807.1) |
|
$ |
274.3 |
|
$ |
(532.8) |
|
Reclassification adjustment for (gains) losses included in net income (1) |
|
5.1 |
|
(1.7) |
|
3.4 |
|
(8.5) |
|
3.0 |
|
(5.5) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
95.7 |
|
(33.5) |
|
62.2 |
|
82.4 |
|
(28.8) |
|
53.6 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
526.1 |
|
(180.3) |
|
345.8 |
|
357.3 |
|
(121.9) |
|
235.4 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized losses on available-for-sale securities |
|
(463.5) |
|
157.1 |
|
(306.4) |
|
(375.9) |
|
126.6 |
|
(249.3) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale during the period |
|
5.4 |
|
(2.0) |
|
3.4 |
|
26.9 |
|
(9.4) |
|
17.5 |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
— |
|
— |
|
— |
|
(1.3) |
|
0.5 |
|
(0.8) |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
— |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noncredit component of impairment losses on fixed maturities, available-for-sale (2) |
|
5.4 |
|
(2.0) |
|
3.4 |
|
25.8 |
|
(8.9) |
|
16.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on derivative instruments during the period |
|
(23.9) |
|
8.5 |
|
(15.4) |
|
28.4 |
|
(9.9) |
|
18.5 |
|
||||||
Reclassification adjustment for gains included in net income (3) |
|
(7.7) |
|
2.6 |
|
(5.1) |
|
(17.8) |
|
6.0 |
|
(11.8) |
|
||||||
Adjustments for assumed changes in amortization patterns |
|
2.4 |
|
(0.8) |
|
1.6 |
|
12.5 |
|
(4.4) |
|
8.1 |
|
||||||
Adjustments for assumed changes in policyholder liabilities |
|
4.4 |
|
(1.6) |
|
2.8 |
|
(4.8) |
|
1.7 |
|
(3.1) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on derivative instruments |
|
(24.8) |
|
8.7 |
|
(16.1) |
|
18.3 |
|
(6.6) |
|
11.7 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment |
|
(38.1) |
|
(4.4) |
|
(42.5) |
|
(206.1) |
|
31.0 |
|
(175.1) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of prior service cost and actuarial loss included in net periodic benefit cost (4) |
|
20.3 |
|
(8.3) |
|
12.0 |
|
40.6 |
|
(16.6) |
|
24.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net unrecognized postretirement benefit obligation |
|
20.3 |
|
(8.3) |
|
12.0 |
|
40.6 |
|
(16.6) |
|
24.0 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
$ |
(500.7) |
|
$ |
151.1 |
|
$ |
(349.6) |
|
$ |
(497.3) |
|
$ |
125.5 |
|
$ |
(371.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations. |
(2) |
Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI. |
(3) |
See Note 4, Derivative Financial Instruments – Cash Flow Hedges, for further details. |
(4) |
Pre-tax amortization of prior service cost and actuarial loss included in net periodic benefit cost, which is comprised of amortization of prior service cost (benefit) and recognized net actuarial (gain) loss, is reported in operating expenses on the consolidated statements of operations. See Note 7, Employee and Agent Benefits – Components of Net Periodic Benefit Cost, for further details. |
|
|
|
|
Noncredit |
|
|
|
|
|
|
|
|
|
||||||
|
|
Net unrealized |
|
component of |
|
Net unrealized |
|
Foreign |
|
Unrecognized |
|
Accumulated |
|
||||||
|
|
gains on |
|
impairment losses |
|
gains on |
|
currency |
|
postretirement |
|
other |
|
||||||
|
|
available-for-sale |
|
on fixed maturities |
|
derivative |
|
translation |
|
benefit |
|
comprehensive |
|
||||||
|
|
securities |
|
available-for-sale |
|
instruments |
|
adjustment |
|
obligation |
|
income (loss) |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Balances as of January 1, 2015 |
|
$ |
1,202.8 |
|
$ |
(105.1) |
|
$ |
50.6 |
|
$ |
(686.8) |
|
$ |
(411.1) |
|
$ |
50.4 |
|
Other comprehensive loss during the period, net of adjustments |
|
(243.8) |
|
— |
|
23.5 |
|
(170.4) |
|
— |
|
(390.7) |
|
||||||
Amounts reclassified from AOCI |
|
(5.5) |
|
16.9 |
|
(11.8) |
|
— |
|
24.0 |
|
23.6 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive loss |
|
(249.3) |
|
16.9 |
|
11.7 |
|
(170.4) |
|
24.0 |
|
(367.1) |
|
||||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
— |
|
(9.9) |
|
— |
|
(9.9) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of June 30, 2015 |
|
$ |
953.5 |
|
$ |
(88.2) |
|
$ |
62.3 |
|
$ |
(867.1) |
|
$ |
(387.1) |
|
$ |
(326.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of January 1, 2016 |
|
$ |
732.1 |
|
$ |
(86.0) |
|
$ |
69.8 |
|
$ |
(1,148.2) |
|
$ |
(450.2) |
|
$ |
(882.5) |
|
Other comprehensive income during the period, net of adjustments |
|
694.6 |
|
(1.6) |
|
16.8 |
|
138.0 |
|
— |
|
847.8 |
|
||||||
Amounts reclassified from AOCI |
|
13.0 |
|
— |
|
(4.3) |
|
— |
|
16.0 |
|
24.7 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income |
|
707.6 |
|
(1.6) |
|
12.5 |
|
138.0 |
|
16.0 |
|
872.5 |
|
||||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
— |
|
(9.3) |
|
— |
|
(9.3) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances as of June 30, 2016 |
|
$ |
1,439.7 |
|
$ |
(87.6) |
|
$ |
82.3 |
|
$ |
(1,019.5) |
|
$ |
(434.2) |
|
$ |
(19.3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2015 |
|
$ |
58.0 |
|
Net income attributable to redeemable noncontrolling interest |
|
2.1 |
|
|
Contributions from redeemable noncontrolling interest |
|
24.7 |
|
|
Distributions to redeemable noncontrolling interest |
|
(4.4) |
|
|
Purchase of subsidiary shares from redeemable noncontrolling interest |
|
(6.5) |
|
|
Change in redemption value of redeemable noncontrolling interest |
|
3.3 |
|
|
Foreign currency translation adjustment |
|
(5.6) |
|
|
|
|
|
|
|
Balance as of June 30, 2015 |
|
$ |
71.6 |
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016 |
|
$ |
85.7 |
|
Net income attributable to redeemable noncontrolling interest |
|
3.2 |
|
|
Redeemable noncontrolling interest of newly consolidated entities (1) |
|
179.5 |
|
|
Redeemable noncontrolling interest of deconsolidated entities (2) |
|
(18.7) |
|
|
Contributions from redeemable noncontrolling interest |
|
121.3 |
|
|
Distributions to redeemable noncontrolling interest |
|
(29.6) |
|
|
Purchase of subsidiary shares from redeemable noncontrolling interest |
|
(8.1) |
|
|
Change in redemption value of redeemable noncontrolling interest |
|
(0.4) |
|
|
Foreign currency translation adjustment |
|
4.2 |
|
|
|
|
|
|
|
Balance as of June 30, 2016 |
|
$ |
337.1 |
|
|
|
|
|
|
(1) |
Effective January 1, 2016, certain sponsored investment funds were consolidated as a result of the implementation of new accounting guidance. See Note 2, Variable Interest Entities, for further details. |
(2) |
We deconsolidated certain sponsored investment funds as they no longer met the requirements for consolidation. |
|
|
|
June 30, 2016 |
|
|||||||||||||
|
|
Assets/ |
|
Amount |
|
|
|
|
|
|
|
|||||
|
|
(liabilities) |
|
measured at |
|
Fair value hierarchy level |
|
|||||||||
|
|
measured at |
|
net asset |
|
|
|
|
|
|
|
|||||
|
|
fair value |
|
value (5) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,570.4 |
|
$ |
— |
|
$ |
1,032.3 |
|
$ |
538.1 |
|
$ |
— |
|
Non-U.S. governments |
|
901.8 |
|
— |
|
3.1 |
|
831.2 |
|
67.5 |
|
|||||
States and political subdivisions |
|
5,472.2 |
|
— |
|
— |
|
5,472.2 |
|
— |
|
|||||
Corporate |
|
34,412.3 |
|
— |
|
37.8 |
|
34,132.8 |
|
241.7 |
|
|||||
Residential mortgage-backed securities |
|
2,819.7 |
|
— |
|
— |
|
2,819.7 |
|
— |
|
|||||
Commercial mortgage-backed securities |
|
4,330.6 |
|
— |
|
— |
|
4,315.1 |
|
15.5 |
|
|||||
Collateralized debt obligations |
|
871.8 |
|
— |
|
— |
|
809.0 |
|
62.8 |
|
|||||
Other debt obligations |
|
4,902.5 |
|
— |
|
— |
|
4,895.7 |
|
6.8 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
55,281.3 |
|
— |
|
1,073.2 |
|
53,813.8 |
|
394.3 |
|
|||||
Fixed maturities, trading |
|
656.9 |
|
— |
|
172.9 |
|
366.2 |
|
117.8 |
|
|||||
Equity securities, available-for-sale |
|
105.2 |
|
— |
|
63.8 |
|
38.7 |
|
2.7 |
|
|||||
Equity securities, trading |
|
1,331.1 |
|
— |
|
445.9 |
|
885.2 |
|
— |
|
|||||
Derivative assets (1) |
|
1,291.6 |
|
— |
|
— |
|
1,230.5 |
|
61.1 |
|
|||||
Other investments (2) |
|
713.3 |
|
97.6 |
|
408.7 |
|
170.9 |
|
36.1 |
|
|||||
Cash equivalents (3) |
|
1,089.9 |
|
— |
|
38.8 |
|
1,051.1 |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sub-total excluding separate account assets |
|
60,469.3 |
|
97.6 |
|
2,203.3 |
|
57,556.4 |
|
612.0 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Separate account assets |
|
134,736.0 |
|
— |
|
75,579.6 |
|
51,748.1 |
|
7,408.3 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
195,205.3 |
|
$ |
97.6 |
|
$ |
77,782.9 |
|
$ |
109,304.5 |
|
$ |
8,020.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts (4) |
|
$ |
(324.3) |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(324.3) |
|
Derivative liabilities (1) |
|
(984.8) |
|
— |
|
— |
|
(956.3) |
|
(28.5) |
|
|||||
Other liabilities (4) |
|
(286.1) |
|
— |
|
— |
|
(227.5) |
|
(58.6) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
$ |
(1,595.2) |
|
$ |
— |
|
$ |
— |
|
$ |
(1,183.8) |
|
$ |
(411.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets |
|
$ |
193,610.1 |
|
$ |
97.6 |
|
$ |
77,782.9 |
|
$ |
108,120.7 |
|
$ |
7,608.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||||||||
|
|
Assets/ |
|
Amount |
|
|
|
|
|
|
|
|||||
|
|
(liabilities) |
|
measured at |
|
Fair value hierarchy level |
|
|||||||||
|
|
measured at |
|
net asset |
|
|
|
|
|
|
|
|||||
|
|
fair value |
|
value (5) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies |
|
$ |
1,503.5 |
|
$ |
— |
|
$ |
931.0 |
|
$ |
572.5 |
|
$ |
— |
|
Non-U.S. governments |
|
793.3 |
|
— |
|
3.0 |
|
711.2 |
|
79.1 |
|
|||||
States and political subdivisions |
|
4,717.1 |
|
— |
|
— |
|
4,717.1 |
|
— |
|
|||||
Corporate |
|
31,140.2 |
|
— |
|
38.2 |
|
30,878.1 |
|
223.9 |
|
|||||
Residential mortgage-backed securities |
|
2,627.5 |
|
— |
|
— |
|
2,627.5 |
|
— |
|
|||||
Commercial mortgage-backed securities |
|
3,919.8 |
|
— |
|
— |
|
3,915.0 |
|
4.8 |
|
|||||
Collateralized debt obligations |
|
667.5 |
|
— |
|
— |
|
604.0 |
|
63.5 |
|
|||||
Other debt obligations |
|
4,597.6 |
|
— |
|
— |
|
4,590.1 |
|
7.5 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
49,966.5 |
|
— |
|
972.2 |
|
48,615.5 |
|
378.8 |
|
|||||
Fixed maturities, trading |
|
686.8 |
|
— |
|
199.2 |
|
352.1 |
|
135.5 |
|
|||||
Equity securities, available-for-sale |
|
104.5 |
|
— |
|
62.2 |
|
38.2 |
|
4.1 |
|
|||||
Equity securities, trading |
|
1,202.7 |
|
— |
|
413.9 |
|
788.8 |
|
— |
|
|||||
Derivative assets (1) |
|
666.6 |
|
— |
|
— |
|
619.4 |
|
47.2 |
|
|||||
Other investments (2) |
|
517.2 |
|
69.6 |
|
208.1 |
|
204.4 |
|
35.1 |
|
|||||
Cash equivalents (3) |
|
1,603.2 |
|
— |
|
26.5 |
|
1,576.7 |
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sub-total excluding separate account assets |
|
54,747.5 |
|
69.6 |
|
1,882.1 |
|
52,195.1 |
|
600.7 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Separate account assets |
|
136,978.9 |
|
— |
|
72,303.6 |
|
57,661.4 |
|
7,013.9 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
191,726.4 |
|
$ |
69.6 |
|
$ |
74,185.7 |
|
$ |
109,856.5 |
|
$ |
7,614.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts (4) |
|
$ |
(177.4) |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(177.4) |
|
Derivative liabilities (1) |
|
(772.4) |
|
— |
|
— |
|
(721.9) |
|
(50.5) |
|
|||||
Other liabilities (4) |
|
(298.4) |
|
— |
|
— |
|
(230.3) |
|
(68.1) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
$ |
(1,248.2) |
|
$ |
— |
|
$ |
— |
|
$ |
(952.2) |
|
$ |
(296.0) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net assets |
|
$ |
190,478.2 |
|
$ |
69.6 |
|
$ |
74,185.7 |
|
$ |
108,904.3 |
|
$ |
7,318.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Within the consolidated statements of financial position, derivative assets are reported with other investments and derivative liabilities are reported with other liabilities. Refer to Note 4, Derivative Financial Instruments, for further information on fair value by class of derivative instruments. Our derivatives are primarily Level 2, with the exception of certain credit default swaps and other swaps that are Level 3. |
(2) |
Primarily includes sponsored investment funds, other investment funds, equity method investments reported at fair value and commercial mortgage loans of consolidated VIEs. |
(3) |
Includes money market instruments and short-term investments with a maturity date of three months or less when purchased. |
(4) |
Includes bifurcated embedded derivatives that are reported at fair value within the same line item in the consolidated statements of financial position in which the host contract is reported. Other liabilities also include obligations of consolidated VIEs reported at fair value. |
(5) |
Certain investments are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy. These consist of certain fund interests that are restricted until maturity with unfunded commitments totaling $35.1 million and $7.3 million as of June 30, 2016 and December 31, 2015, respectively. |
|
|
For the three months ended June 30, 2016 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
|
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
Included in |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
March 31, |
|
net income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2016 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2016 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Non-U.S. governments |
|
$ |
97.8 |
|
$ |
— |
|
$ |
— |
|
$ |
2.3 |
|
$ |
— |
|
$ |
(32.6) |
|
$ |
67.5 |
|
$ |
— |
|
Corporate |
|
222.7 |
|
(0.2) |
|
(1.1) |
|
4.6 |
|
15.7 |
|
— |
|
241.7 |
|
(0.2) |
|
||||||||
Commercial mortgage-backed securities |
|
2.4 |
|
— |
|
— |
|
13.1 |
|
— |
|
— |
|
15.5 |
|
— |
|
||||||||
Collateralized debt obligations |
|
62.8 |
|
— |
|
0.2 |
|
(0.2) |
|
— |
|
— |
|
62.8 |
|
— |
|
||||||||
Other debt obligations |
|
7.0 |
|
— |
|
0.1 |
|
(0.3) |
|
— |
|
— |
|
6.8 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
392.7 |
|
(0.2) |
|
(0.8) |
|
19.5 |
|
15.7 |
|
(32.6) |
|
394.3 |
|
(0.2 |
) |
||||||||
Fixed maturities, trading |
|
135.8 |
|
— |
|
— |
|
(18.0) |
|
— |
|
— |
|
117.8 |
|
— |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
(1.3) |
|
(0.1) |
|
— |
|
— |
|
— |
|
2.7 |
|
(1.4) |
|
||||||||
Derivative assets |
|
59.1 |
|
1.7 |
|
— |
|
0.3 |
|
— |
|
— |
|
61.1 |
|
2.4 |
|
||||||||
Other investments |
|
35.9 |
|
0.1 |
|
— |
|
0.1 |
|
— |
|
— |
|
36.1 |
|
0.1 |
|
||||||||
Separate account assets (2) |
|
7,094.5 |
|
140.2 |
|
— |
|
174.2 |
|
0.1 |
|
(0.7) |
|
7,408.3 |
|
95.9 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(213.0) |
|
(113.0) |
|
— |
|
1.7 |
|
— |
|
— |
|
(324.3) |
|
(114.3) |
|
||||||||
Derivative liabilities |
|
(36.1) |
|
6.9 |
|
— |
|
0.7 |
|
— |
|
— |
|
(28.5) |
|
5.1 |
|
||||||||
Other liabilities |
|
(73.1) |
|
(2.9) |
|
— |
|
17.4 |
|
— |
|
— |
|
(58.6) |
|
(2.4) |
|
|
|
For the three months ended June 30, 2015 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||||
|
|
(liability) |
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||||
|
|
balance |
|
Included in |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
March 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2015 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2015 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
40.6 |
|
$ |
(0.1) |
|
$ |
(0.2) |
|
$ |
5.3 |
|
$ |
— |
|
$ |
— |
|
$ |
45.6 |
|
$ |
(0.1) |
|
Corporate |
|
237.0 |
|
— |
|
(4.6) |
|
7.7 |
|
6.7 |
|
(19.8) |
|
227.0 |
|
(0.1) |
|
||||||||
Collateralized debt obligations |
|
63.6 |
|
(0.1) |
|
— |
|
(0.2) |
|
— |
|
— |
|
63.3 |
|
— |
|
||||||||
Other debt obligations |
|
55.3 |
|
— |
|
(0.6) |
|
(3.4) |
|
— |
|
(9.9) |
|
41.4 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
396.5 |
|
(0.2) |
|
(5.4) |
|
9.4 |
|
6.7 |
|
(29.7) |
|
377.3 |
|
(0.2) |
|
||||||||
Fixed maturities, trading |
|
140.2 |
|
(0.5) |
|
— |
|
0.1 |
|
— |
|
— |
|
139.8 |
|
(0.5) |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4.1 |
|
— |
|
||||||||
Derivative assets |
|
60.2 |
|
(15.0) |
|
— |
|
(0.1) |
|
— |
|
— |
|
45.1 |
|
(15.0) |
|
||||||||
Other investments |
|
28.6 |
|
0.2 |
|
— |
|
0.9 |
|
— |
|
— |
|
29.7 |
|
0.2 |
|
||||||||
Separate account assets (2) |
|
6,030.6 |
|
239.2 |
|
— |
|
136.3 |
|
— |
|
(0.1) |
|
6,406.0 |
|
240.8 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(228.7) |
|
108.6 |
|
— |
|
3.1 |
|
— |
|
— |
|
(117.0) |
|
107.0 |
|
||||||||
Derivative liabilities |
|
(50.8) |
|
12.9 |
|
0.9 |
|
— |
|
— |
|
— |
|
(37.0) |
|
12.8 |
|
||||||||
Other liabilities |
|
(65.3) |
|
(2.2) |
|
— |
|
— |
|
— |
|
— |
|
(67.5) |
|
(2.2) |
|
|
|
For the six months ended June 30, 2016 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
Included |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
in net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2015 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2016 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
79.1 |
|
$ |
(0.1) |
|
$ |
2.5 |
|
$ |
18.6 |
|
$ |
— |
|
$ |
(32.6) |
|
$ |
67.5 |
|
$ |
(0.1) |
|
Corporate |
|
223.9 |
|
(0.3) |
|
(3.7) |
|
7.8 |
|
15.7 |
|
(1.7) |
|
241.7 |
|
(0.3) |
|
||||||||
Commercial mortgage-backed securities |
|
4.8 |
|
— |
|
— |
|
13.0 |
|
— |
|
(2.3) |
|
15.5 |
|
— |
|
||||||||
Collateralized debt obligations |
|
63.5 |
|
— |
|
(0.5) |
|
(0.2) |
|
— |
|
— |
|
62.8 |
|
— |
|
||||||||
Other debt obligations |
|
7.5 |
|
— |
|
— |
|
(0.7) |
|
— |
|
— |
|
6.8 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
378.8 |
|
(0.4) |
|
(1.7) |
|
38.5 |
|
15.7 |
|
(36.6) |
|
394.3 |
|
(0.4) |
|
||||||||
Fixed maturities, trading |
|
135.5 |
|
0.3 |
|
— |
|
(18.0) |
|
— |
|
— |
|
117.8 |
|
0.4 |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
(1.3) |
|
(0.1) |
|
— |
|
— |
|
— |
|
2.7 |
|
(1.4) |
|
||||||||
Derivative assets |
|
47.2 |
|
13.2 |
|
— |
|
0.7 |
|
— |
|
— |
|
61.1 |
|
14.4 |
|
||||||||
Other investments |
|
35.1 |
|
0.7 |
|
— |
|
0.3 |
|
— |
|
— |
|
36.1 |
|
0.7 |
|
||||||||
Separate account assets (2) |
|
7,013.9 |
|
293.1 |
|
(0.1) |
|
101.2 |
|
0.9 |
|
(0.7) |
|
7,408.3 |
|
305.7 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(177.4) |
|
(151.3) |
|
— |
|
4.4 |
|
— |
|
— |
|
(324.3) |
|
(153.4) |
|
||||||||
Derivative liabilities |
|
(50.5) |
|
20.5 |
|
0.5 |
|
1.0 |
|
— |
|
— |
|
(28.5) |
|
17.3 |
|
||||||||
Other liabilities |
|
(68.1) |
|
(7.9) |
|
— |
|
17.4 |
|
— |
|
— |
|
(58.6) |
|
(6.2) |
|
|
|
For the six months ended June 30, 2015 |
|
|
|
||||||||||||||||||||
|
|
|
|
Total realized/unrealized |
|
|
|
|
|
|
|
|
|
Changes in |
|
||||||||||
|
|
Beginning |
|
gains (losses) |
|
Net |
|
|
|
|
|
Ending |
|
unrealized |
|
||||||||||
|
|
asset/ |
|
|
|
|
|
purchases, |
|
|
|
|
|
asset/ |
|
gains (losses) |
|
||||||||
|
|
(liability) |
|
|
|
|
|
sales, |
|
|
|
|
|
(liability) |
|
included in |
|
||||||||
|
|
balance |
|
Included |
|
Included in |
|
issuances |
|
|
|
|
|
balance |
|
net income |
|
||||||||
|
|
as of |
|
in net |
|
other |
|
and |
|
Transfers |
|
Transfers |
|
as of |
|
relating to |
|
||||||||
|
|
December 31, |
|
income |
|
comprehensive |
|
settlements |
|
into |
|
out of |
|
June 30, |
|
positions still |
|
||||||||
|
|
2014 |
|
(1) |
|
income |
|
(3) |
|
Level 3 |
|
Level 3 |
|
2015 |
|
held (1) |
|
||||||||
|
|
(in millions) |
|
||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available-for-sale: |
|
$ |
38.7 |
|
$ |
(0.1) |
|
$ |
0.1 |
|
$ |
6.9 |
|
$ |
— |
|
$ |
— |
|
$ |
45.6 |
|
$ |
(0.1) |
|
Corporate |
|
245.6 |
|
(0.1) |
|
(0.9) |
|
23.7 |
|
26.2 |
|
(67.5) |
|
227.0 |
|
(0.2) |
|
||||||||
Collateralized debt obligations |
|
64.2 |
|
— |
|
(0.1) |
|
(0.8) |
|
— |
|
— |
|
63.3 |
|
— |
|
||||||||
Other debt obligations |
|
63.7 |
|
— |
|
(0.1) |
|
2.1 |
|
— |
|
(24.3) |
|
41.4 |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total fixed maturities, available-for-sale |
|
412.2 |
|
(0.2) |
|
(1.0) |
|
31.9 |
|
26.2 |
|
(91.8) |
|
377.3 |
|
(0.3) |
|
||||||||
Fixed maturities, trading |
|
139.7 |
|
0.2 |
|
— |
|
(0.1) |
|
— |
|
— |
|
139.8 |
|
0.1 |
|
||||||||
Equity securities, available-for-sale |
|
4.1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4.1 |
|
— |
|
||||||||
Derivative assets |
|
53.7 |
|
(11.0) |
|
— |
|
2.4 |
|
— |
|
— |
|
45.1 |
|
(10.8) |
|
||||||||
Other investments |
|
127.2 |
|
4.0 |
|
— |
|
(66.5) |
|
— |
|
(35.0) |
|
29.7 |
|
4.0 |
|
||||||||
Separate account assets (2) |
|
5,891.4 |
|
454.9 |
|
— |
|
59.7 |
|
0.1 |
|
(0.1) |
|
6,406.0 |
|
439.6 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment contracts |
|
(176.4) |
|
57.6 |
|
— |
|
1.8 |
|
— |
|
— |
|
(117.0) |
|
54.9 |
|
||||||||
Derivative liabilities |
|
(35.5) |
|
(2.9) |
|
1.2 |
|
0.2 |
|
— |
|
— |
|
(37.0) |
|
(3.0) |
|
||||||||
Other liabilities |
|
(66.3) |
|
(1.2) |
|
— |
|
— |
|
— |
|
— |
|
(67.5) |
|
(1.3) |
|
(1) |
Both realized gains (losses) and mark-to-market unrealized gains (losses) are generally reported in net realized capital gains (losses) within the consolidated statements of operations. Realized and unrealized gains (losses) on certain fixed maturities, trading and certain derivatives used in relation to certain trading portfolios are reported in net investment income within the consolidated statements of operations. |
(2) |
Gains and losses for separate account assets do not impact net income as the change in value of separate account assets is offset by a change in value of separate account liabilities. Foreign currency translation adjustments related to the Principal International segment separate account assets are recorded in AOCI and are offset by foreign currency translation adjustments of the corresponding separate account liabilities. |
(3) |
Gross purchases, sales, issuances and settlements were: |
|
|
For the three months ended June 30, 2016 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
2.6 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.3) |
|
$ |
2.3 |
|
Corporate |
|
7.9 |
|
— |
|
— |
|
(3.3) |
|
4.6 |
|
|||||
Commercial mortgage-backed securities |
|
13.7 |
|
— |
|
— |
|
(0.6) |
|
13.1 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.3) |
|
(0.3) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
24.2 |
|
— |
|
— |
|
(4.7) |
|
19.5 |
|
|||||
Fixed maturities, trading |
|
— |
|
(18.0) |
|
— |
|
— |
|
(18.0) |
|
|||||
Derivative assets |
|
— |
|
0.3 |
|
— |
|
— |
|
0.3 |
|
|||||
Other investments |
|
0.1 |
|
— |
|
— |
|
— |
|
0.1 |
|
|||||
Separate account assets (4) |
|
233.9 |
|
(5.4) |
|
(47.2) |
|
(7.1) |
|
174.2 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
— |
|
1.7 |
|
1.7 |
|
|||||
Derivative liabilities |
|
— |
|
0.7 |
|
— |
|
— |
|
0.7 |
|
|||||
Other liabilities |
|
— |
|
17.4 |
|
— |
|
— |
|
17.4 |
|
|
For the three months ended June 30, 2015 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
5.6 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.3) |
|
$ |
5.3 |
|
Corporate |
|
14.5 |
|
(2.1) |
|
— |
|
(4.7) |
|
7.7 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(3.4) |
|
(3.4) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
20.1 |
|
(2.1) |
|
— |
|
(8.6) |
|
9.4 |
|
|||||
Fixed maturities, trading |
|
— |
|
— |
|
— |
|
0.1 |
|
0.1 |
|
|||||
Derivative assets |
|
— |
|
(0.1) |
|
— |
|
— |
|
(0.1) |
|
|||||
Other investments |
|
0.9 |
|
— |
|
— |
|
— |
|
0.9 |
|
|||||
Separate account assets (4) |
|
221.8 |
|
5.3 |
|
(96.5) |
|
5.7 |
|
136.3 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
0.8 |
|
2.3 |
|
3.1 |
|
|
|
For the six months ended June 30, 2016 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
19.3 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.7) |
|
$ |
18.6 |
|
Corporate |
|
31.8 |
|
(9.3) |
|
— |
|
(14.7) |
|
7.8 |
|
|||||
Commercial mortgage-backed securities |
|
13.7 |
|
— |
|
— |
|
(0.7) |
|
13.0 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.2) |
|
(0.2) |
|
|||||
Other debt obligations |
|
— |
|
— |
|
— |
|
(0.7) |
|
(0.7) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
64.8 |
|
(9.3) |
|
— |
|
(17.0) |
|
38.5 |
|
|||||
Fixed maturities, trading |
|
— |
|
(18.0) |
|
— |
|
— |
|
(18.0) |
|
|||||
Derivative assets |
|
— |
|
0.7 |
|
— |
|
— |
|
0.7 |
|
|||||
Other investments |
|
0.3 |
|
— |
|
— |
|
— |
|
0.3 |
|
|||||
Separate account assets (4) |
|
290.1 |
|
(66.1) |
|
(140.0) |
|
17.2 |
|
101.2 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
1.1 |
|
3.3 |
|
4.4 |
|
|||||
Derivative liabilities |
|
— |
|
1.0 |
|
— |
|
— |
|
1.0 |
|
|||||
Other liabilities |
|
— |
|
17.4 |
|
— |
|
— |
|
17.4 |
|
|
|
For the six months ended June 30, 2015 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
Net purchases, |
|
|||||
|
|
|
|
|
|
|
|
|
|
sales, issuances |
|
|||||
|
|
Purchases |
|
Sales |
|
Issuances |
|
Settlements |
|
and settlements |
|
|||||
|
|
(in millions) |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. governments |
|
$ |
7.5 |
|
$ |
— |
|
$ |
— |
|
$ |
(0.6) |
|
$ |
6.9 |
|
Corporate |
|
41.6 |
|
(5.7) |
|
— |
|
(12.2) |
|
23.7 |
|
|||||
Collateralized debt obligations |
|
— |
|
— |
|
— |
|
(0.8) |
|
(0.8) |
|
|||||
Other debt obligations |
|
10.1 |
|
— |
|
— |
|
(8.0) |
|
2.1 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total fixed maturities, available-for-sale |
|
59.2 |
|
(5.7) |
|
— |
|
(21.6) |
|
31.9 |
|
|||||
Fixed maturities, trading |
|
— |
|
(0.2) |
|
— |
|
0.1 |
|
(0.1) |
|
|||||
Derivative assets |
|
2.5 |
|
(0.1) |
|
— |
|
— |
|
2.4 |
|
|||||
Other investments |
|
1.2 |
|
(67.7) |
|
— |
|
— |
|
(66.5) |
|
|||||
Separate account assets (4) |
|
361.0 |
|
(159.4) |
|
(145.8) |
|
3.9 |
|
59.7 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contracts |
|
— |
|
— |
|
(2.3) |
|
4.1 |
|
1.8 |
|
|||||
Derivative liabilities |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 |
|
(4) |
Issuances and settlements include amounts related to mortgage encumbrances associated with real estate in our separate accounts. |
|
|
For the three months ended June 30, 2016 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
32.6 |
|
Corporate |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
— |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
32.6 |
|
||||||
Separate account assets |
|
0.2 |
|
— |
|
0.2 |
|
0.1 |
|
— |
|
0.7 |
|
|
|
For the three months ended June 30, 2015 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
6.7 |
|
$ |
— |
|
$ |
19.8 |
|
Other debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
9.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
6.7 |
|
— |
|
29.7 |
|
||||||
Separate account assets |
|
0.9 |
|
— |
|
6.2 |
|
— |
|
— |
|
0.1 |
|
|
|
For the six months ended June 30, 2016 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-U.S. governments |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
32.6 |
|
Corporate |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
1.7 |
|
||||||
Commercial mortgage-backed securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2.3 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
15.7 |
|
— |
|
36.6 |
|
||||||
Separate account assets |
|
26.4 |
|
— |
|
4.7 |
|
0.9 |
|
— |
|
0.7 |
|
|
|
For the six months ended June 30, 2015 |
|
||||||||||||||||
|
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
Transfers out |
|
||||||
|
|
of Level 1 into |
|
of Level 1 into |
|
of Level 2 into |
|
of Level 2 into |
|
of Level 3 into |
|
of Level 3 into |
|
||||||
|
|
Level 2 |
|
Level 3 |
|
Level 1 |
|
Level 3 |
|
Level 1 |
|
Level 2 |
|
||||||
|
|
(in millions) |
|
||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
26.2 |
|
$ |
— |
|
$ |
67.5 |
|
Other debt obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
|
24.3 |
|
||||||
Total fixed maturities, available-for-sale |
|
— |
|
— |
|
— |
|
26.2 |
|
— |
|
91.8 |
|
||||||
Other investments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
35.0 |
|
||||||
Separate account assets |
|
2.0 |
|
— |
|
6.8 |
|
0.1 |
|
— |
|
0.1 |
|
|
|
June 30, 2016 |
|
|||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governments |
|
$ |
8.4 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.5% |
|
1.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 basis points (“bps”) |
|
50bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
(25)bps |
|
(25)bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Corporate |
|
49.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.2%-7.5% |
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
29bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
0bps-20bps |
|
6bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations |
|
3.0 |
|
Discounted cash flow |
|
Discount rate (1) |
|
8.5% |
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of default |
|
100.0% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential loss severity |
|
55.9% |
|
55.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
6.8 |
|
Discounted cash flow |
|
Discount rate (1) |
|
5.0% |
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
750bps |
|
750bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading |
|
10.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.9%-2.9% |
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-300bps |
|
240bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
36.1 |
|
Discounted cash flow - equity method real estate investments |
|
Discount rate (1) |
|
7.8% |
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
6.8% |
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.0% |
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - equity method real estate investments - debt |
|
Loan to value |
|
52.0% |
|
52.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.1% |
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Separate account assets |
|
7,288.0 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
1.1%-7.4% |
|
3.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
10bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
76bps-699bps |
|
233bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
5.8%-19.1% |
|
7.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.3%-9.3% |
|
6.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
1.9%-4.4% |
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
2.3%-71.1% |
|
46.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.3%-4.2% |
|
3.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment contracts |
|
(324.3 |
) |
Discounted cash flow |
|
Long duration interest rate |
|
1.8% (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
14.9%-44.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.5%-2.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. governments |
|
$ |
8.9 |
|
Discounted cash flow |
|
Discount rate (1) |
|
2.2% |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
50 bps |
|
50bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
43.2 |
|
Discounted cash flow |
|
Discount rate (1) |
|
0.0%-7.5% |
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparability adjustment |
|
(4)bps-7bps |
|
0bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
33bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
||||||||
|
|
Assets / |
|
|
|
|
|
|
|
|
|
|
|
(liabilities) |
|
|
|
|
|
|
|
|
|
|
|
measured at |
|
Valuation |
|
Unobservable |
|
Input/range of |
|
Weighted |
|
|
|
fair value |
|
technique(s) |
|
input description |
|
inputs |
|
average |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
Collateralized debt obligations |
|
3.1 |
|
Discounted cash flow |
|
Discount rate (1) |
|
28.0% |
|
28.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability of default |
|
100.0% |
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential loss severity |
|
67.0% |
|
67.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt obligations |
|
7.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
5.0% |
|
5.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
750bps |
|
750bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading |
|
10.5 |
|
Discounted cash flow |
|
Discount rate (1) |
|
1.1%-2.7% |
|
2.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-300bps |
|
240bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
|
35.1 |
|
Discounted cash flow - equity method real estate investments |
|
Discount rate (1) |
|
7.8% |
|
7.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
6.8% |
|
6.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
3.2% |
|
3.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - equity method real estate investments - debt |
|
Loan to value |
|
52.3% |
|
52.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
2.3% |
|
2.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate account assets |
|
6,881.8 |
|
Discounted cash flow - mortgage loans |
|
Discount rate (1) |
|
1.4%-8.2% |
|
3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquidity premium |
|
0bps-60bps |
|
7bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
81bps-750bps |
|
241bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate |
|
Discount rate (1) |
|
5.3%-16.4% |
|
7.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal capitalization rate |
|
4.3%-9.8% |
|
6.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average market rent growth rate |
|
2.0%-4.3% |
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted cash flow - real estate debt |
|
Loan to value |
|
7.8%-63.1% |
|
47.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit spread rate |
|
1.4%-4.6% |
|
2.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment contracts |
|
(177.4) |
|
Discounted cash flow |
|
Long duration interest rate |
|
2.5%-2.6% (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term equity market volatility |
|
14.9%-44.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performance risk |
|
0.4%-1.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization rate |
|
See note (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse rate |
|
0.5%-14.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortality rate |
|
See note (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents market comparable interest rate or an index adjusted rate used as the base rate in the discounted cash flow analysis prior to any credit spread, illiquidity or other adjustments, where applicable. |
(2) |
Represents the range of rate curves used in the valuation analysis that we have determined market participants would use when pricing the instrument. Derived from interpolation between various observable swap rates. |
(3) |
This input factor is the number of contractholders taking withdrawals as well as the amount and timing of the withdrawals and a range does not provide a meaningful presentation. |
(4) |
This input is based on an appropriate industry mortality table and a range does not provide a meaningful presentation. |
|
|
June 30, 2016 |
|||||||||||||
|
|
|
|
|
|
Fair value hierarchy level |
|||||||||
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
|
|
(in millions) |
|||||||||||||
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans |
|
$ |
12,685.8 |
|
$ |
13,398.4 |
|
$ |
— |
|
$ |
— |
|
$ |
13,398.4 |
Policy loans |
|
831.6 |
|
1,102.5 |
|
— |
|
— |
|
1,102.5 | |||||
Other investments |
|
249.9 |
|
260.4 |
|
— |
|
180.2 |
|
80.2 | |||||
Cash and cash equivalents |
|
1,165.5 |
|
1,165.5 |
|
1,108.7 |
|
56.8 |
|
— |
|||||
Investment contracts |
|
(30,866.6) |
|
(30,928.8) |
|
— |
|
(5,460.5) |
|
(25,468.3) | |||||
Short-term debt |
|
(25.9) |
|
(25.9) |
|
— |
|
(25.9) |
|
— |
|||||
Long-term debt |
|
(3,270.2) |
|
(3,551.2) |
|
— |
|
(3,504.7) |
|
(46.5) | |||||
Separate account liabilities |
|
(122,818.2) |
|
(121,664.7) |
|
— |
|
— |
|
(121,664.7) | |||||
Bank deposits |
|
(2,117.9) |
|
(2,121.0) |
|
(1,490.8) |
|
(630.2) |
|
— |
|||||
Cash collateral payable |
|
(556.5) |
|
(556.5) |
|
(556.5) |
|
— |
|
— |
|
|
December 31, 2015 |
|||||||||||||
|
|
|
|
|
|
Fair value hierarchy level |
|||||||||
|
|
Carrying amount |
|
Fair value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||||
|
|
(in millions) |
|||||||||||||
Assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|||||
Mortgage loans |
|
$ |
12,339.4 |
|
$ |
12,653.5 |
|
$ |
— |
|
$ |
— |
|
$ |
12,653.5 |
Policy loans |
|
817.1 |
|
1,023.1 |
|
— |
|
— |
|
1,023.1 | |||||
Other investments |
|
185.0 |
|
197.8 |
|
— |
|
118.9 |
|
78.9 | |||||
Cash and cash equivalents |
|
961.6 |
|
961.6 |
|
961.6 |
|
— |
|
— |
|||||
Investment contracts |
|
(29,063.6) |
|
(28,703.2) |
|
— |
|
(4,925.0) |
|
(23,778.2) | |||||
Short-term debt |
|
(181.1) |
|
(181.1) |
|
— |
|
(181.1) |
|
— |
|||||
Long-term debt |
|
(3,265.2) |
|
(3,411.9) |
|
— |
|
(3,369.1) |
|
(42.8) | |||||
Separate account liabilities |
|
(125,265.0) |
|
(124,005.9) |
|
— |
|
— |
|
(124,005.9) | |||||
Bank deposits |
|
(2,070.8) |
|
(2,074.4) |
|
(1,457.4) |
|
(617.0) |
|
— |
|||||
Cash collateral payable |
|
(216.3) |
|
(216.3) |
|
(216.3) |
|
— |
|
— |
|
|
|
June 30, 2016 |
|
December 31, 2015 |
||
|
|
(in millions) |
||||
Assets: |
|
|
|
|
||
Retirement and Income Solutions |
|
$ |
148,097.3 |
|
$ |
139,678.5 |
Principal Global Investors |
|
1,853.4 |
|
1,880.4 | ||
Principal International |
|
45,249.2 |
|
50,588.6 | ||
U.S. Insurance Solutions |
|
23,101.3 |
|
22,156.9 | ||
Corporate |
|
4,773.0 |
|
4,355.9 | ||
|
|
|
|
|
||
Total consolidated assets |
|
$ |
223,074.2 |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Operating revenues by segment: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions – Fee |
|
$ |
428.8 |
|
$ |
454.3 |
|
$ |
842.1 |
|
$ |
892.0 |
Retirement and Income Solutions – Spread |
|
1,045.8 |
|
1,450.9 |
|
2,096.5 |
|
2,137.7 | ||||
|
|
|
|
|
|
|
|
|
||||
Total Retirement and Income Solutions (1) |
|
1,474.6 |
|
1,905.2 |
|
2,938.6 |
|
3,029.7 | ||||
Principal Global Investors (2) |
|
351.3 |
|
337.8 |
|
660.8 |
|
666.7 | ||||
Principal International |
|
318.7 |
|
328.3 |
|
605.3 |
|
579.1 | ||||
U.S. Insurance Solutions: |
|
|
|
|
|
|
|
|
||||
Specialty benefits insurance |
|
498.2 |
|
464.7 |
|
981.1 |
|
931.0 | ||||
Individual life insurance |
|
409.9 |
|
393.2 |
|
817.9 |
|
788.6 | ||||
Eliminations |
|
(0.1) |
|
(0.1) |
|
(0.1) |
|
(0.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Total U.S. Insurance Solutions |
|
908.0 |
|
857.8 |
|
1,798.9 |
|
1,719.5 | ||||
Corporate |
|
(17.5) |
|
(9.0) |
|
(30.6) |
|
(15.7) | ||||
|
|
|
|
|
|
|
|
|
||||
Total segment operating revenues |
|
3,035.1 |
|
3,420.1 |
|
5,973.0 |
|
5,979.3 | ||||
Net realized capital gains (losses), net of related revenue adjustments |
|
7.5 |
|
(141.3) |
|
121.1 |
|
(95.7) | ||||
Certain adjustments related to equity method investments |
|
(16.9) |
|
(13.3) |
|
(31.8) |
|
(27.9) | ||||
Other income on a tax indemnification |
|
— |
|
(6.7) |
|
— |
|
60.2 | ||||
Exited group medical insurance business |
|
— |
|
0.4 |
|
— |
|
0.6 | ||||
|
|
|
|
|
|
|
|
|
||||
Total revenues per consolidated statements of operations |
|
$ |
3,025.7 |
|
$ |
3,259.2 |
|
$ |
6,062.3 |
|
$ |
5,916.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pre-tax operating earnings (losses) by segment: |
|
|
|
|
|
|
|
|
||||
Retirement and Income Solutions |
|
$ |
194.7 |
|
$ |
216.9 |
|
$ |
376.1 |
|
$ |
419.8 |
Principal Global Investors |
|
117.5 |
|
98.5 |
|
197.2 |
|
191.1 | ||||
Principal International |
|
69.9 |
|
72.2 |
|
137.9 |
|
153.0 | ||||
U.S. Insurance Solutions |
|
103.6 |
|
88.1 |
|
184.1 |
|
170.0 | ||||
Corporate |
|
(54.5) |
|
(46.2) |
|
(107.8) |
|
(83.5) | ||||
|
|
|
|
|
|
|
|
|
||||
Total segment pre-tax operating earnings |
|
431.2 |
|
429.5 |
|
787.5 |
|
850.4 | ||||
Pre-tax net realized capital gains (losses), as adjusted (3) |
|
(16.0) |
|
(128.0) |
|
80.8 |
|
(94.5) | ||||
Pre-tax other adjustments (4) |
|
— |
|
(1.8) |
|
— |
|
14.8 | ||||
Certain adjustments related to equity method investments and noncontrolling interest |
|
(15.3) |
|
(5.2) |
|
(28.6) |
|
(18.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Income before income taxes per consolidated statements of operations |
|
$ |
399.9 |
|
$ |
294.5 |
|
$ |
839.7 |
|
$ |
752.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects inter-segment revenues of $92.6 million and $112.8 million for the three months ended June 30, 2016 and 2015, respectively, $181.8 million and $218.0 million for the six months December 31, 2016 and 2015, respectively. |
(2) |
Reflects inter-segment revenues of $57.0 million and $53.5 million for the three months ended June 30, 2016 and 2015, respectively, $111.3 million and $113.9 million for the six months December 31, 2016 and 2015, respectively. |
(3) |
Pre-tax net realized capital gains (losses), as adjusted, is derived as follows: |
|
|
For the three months ended |
|
For the six months ended |
||||||||
|
|
June 30, |
|
June 30, |
||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
||||
|
|
(in millions) |
||||||||||
Net realized capital gains (losses): |
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses) |
|
$ |
33.7 |
|
$ |
(114.6) |
|
$ |
170.3 |
|
$ |
(48.4) |
Certain derivative and hedging-related adjustments |
|
(26.0) |
|
(26.4) |
|
(50.3) |
|
(46.1) | ||||
Certain adjustments related to equity method investments |
|
(0.5) |
|
— |
|
(0.2) |
|
— |
||||
Certain market value adjustments to fee revenues |
|
(1.6) |
|
— |
|
(2.3) |
|
(1.1) | ||||
Certain adjustments related to sponsored investment funds |
|
1.9 |
|
— |
|
3.3 |
|
— |
||||
Recognition of front-end fee (revenue) expense |
|
— |
|
(0.3) |
|
0.3 |
|
(0.1) | ||||
|
|
|
|
|
|
|
|
|
||||
Net realized capital gains (losses), net of related revenue adjustments |
|
7.5 |
|
(141.3) |
|
121.1 |
|
(95.7) | ||||
Amortization of deferred acquisition costs and other actuarial balances |
|
(7.2) |
|
16.2 |
|
(53.5) |
|
0.2 | ||||
Capital (gains) losses distributed |
|
(17.1) |
|
(2.9) |
|
10.0 |
|
1.9 | ||||
Certain market value adjustments of embedded derivatives |
|
0.8 |
|
— |
|
3.2 |
|
(0.9) | ||||
|
|
|
|
|
|
|
|
|
||||
Pre-tax net realized capital gains (losses), as adjusted (a) |
|
$ |
(16.0) |
|
$ |
(128.0) |
|
$ |
80.8 |
|
$ |
(94.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
As adjusted before noncontrolling interest capital gains (losses) and net realized capital gains (losses) associated with exited group medical insurance business. |
(4) |
For the three months ended June 30, 2015, pre-tax other adjustments included the negative effect of the impact of a court ruling on some uncertain tax positions. |
For the six months ended June 30, 2015, pre-tax other adjustments included the positive effect of the impact of a court ruling on some uncertain tax positions ($15.1 million) and the negative effect of losses associated with our exited group medical insurance business that did not qualify for discontinued operations accounting treatment under U.S. GAAP ($0.3 million).
|
|
|
For the six months ended June 30, |
||||
|
|
2016 |
|
2015 |
||
|
|
(in millions) |
||||
Compensation cost |
|
$ |
34.5 |
|
$ |
36.1 |
Related income tax benefit |
|
10.7 |
|
11.5 | ||
Capitalized as part of an asset |
|
1.3 |
|
1.3 |
|
|
For the six months ended |
|
|
|
June 30, 2016 |
|
Expected volatility |
|
31.7% | |
Expected term (in years) |
|
6.5 | |
Risk-free interest rate |
|
1.5% | |
Expected dividend yield |
|
4.07% | |
Weighted average estimated fair value per common share |
|
$ |
8.91 |
|
Condensed Consolidating Statements of Financial Position
June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
48,954.3 |
|
$ |
6,699.5 |
|
$ |
(372.5) |
|
$ |
55,281.3 |
Fixed maturities, trading |
|
— |
|
378.3 |
|
278.6 |
|
— |
|
656.9 | |||||
Equity securities, available-for-sale |
|
— |
|
102.7 |
|
2.5 |
|
— |
|
105.2 | |||||
Equity securities, trading |
|
— |
|
0.3 |
|
1,330.8 |
|
— |
|
1,331.1 | |||||
Mortgage loans |
|
— |
|
12,040.0 |
|
1,205.8 |
|
(560.0) |
|
12,685.8 | |||||
Real estate |
|
— |
|
5.4 |
|
1,468.6 |
|
— |
|
1,474.0 | |||||
Policy loans |
|
— |
|
797.1 |
|
34.5 |
|
— |
|
831.6 | |||||
Investment in unconsolidated entities |
|
13,275.3 |
|
1,709.8 |
|
7,405.7 |
|
(21,618.8) |
|
772.0 | |||||
Other investments |
|
9.7 |
|
5,590.1 |
|
1,896.5 |
|
(3,946.8) |
|
3,549.5 | |||||
Cash and cash equivalents |
|
692.3 |
|
482.0 |
|
1,561.8 |
|
(480.7) |
|
2,255.4 | |||||
Accrued investment income |
|
— |
|
494.4 |
|
76.1 |
|
(7.5) |
|
563.0 | |||||
Premiums due and other receivables |
|
— |
|
1,562.3 |
|
2,675.6 |
|
(2,733.1) |
|
1,504.8 | |||||
Deferred acquisition costs |
|
— |
|
2,959.5 |
|
214.2 |
|
— |
|
3,173.7 | |||||
Property and equipment |
|
— |
|
583.7 |
|
84.2 |
|
— |
|
667.9 | |||||
Goodwill |
|
— |
|
54.3 |
|
982.9 |
|
— |
|
1,037.2 | |||||
Other intangibles |
|
— |
|
24.2 |
|
1,334.3 |
|
— |
|
1,358.5 | |||||
Separate account assets |
|
— |
|
98,596.6 |
|
36,139.4 |
|
— |
|
134,736.0 | |||||
Other assets |
|
444.3 |
|
904.5 |
|
3,249.6 |
|
(3,508.1) |
|
1,090.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
14,421.6 |
|
$ |
175,239.5 |
|
$ |
66,640.6 |
|
$ |
(33,227.5) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
35,073.2 |
|
$ |
3,034.4 |
|
$ |
(326.6) |
|
$ |
37,781.0 |
Future policy benefits and claims |
|
— |
|
23,534.5 |
|
5,051.0 |
|
(589.4) |
|
27,996.1 | |||||
Other policyholder funds |
|
— |
|
790.1 |
|
99.8 |
|
(1.5) |
|
888.4 | |||||
Short-term debt |
|
— |
|
— |
|
25.9 |
|
— |
|
25.9 | |||||
Long-term debt |
|
3,224.8 |
|
— |
|
583.8 |
|
(538.4) |
|
3,270.2 | |||||
Income taxes currently payable |
|
— |
|
— |
|
104.3 |
|
(94.1) |
|
10.2 | |||||
Deferred income taxes |
|
— |
|
964.9 |
|
862.7 |
|
(592.9) |
|
1,234.7 | |||||
Separate account liabilities |
|
— |
|
98,596.6 |
|
36,139.4 |
|
— |
|
134,736.0 | |||||
Other liabilities |
|
697.1 |
|
7,322.7 |
|
7,142.3 |
|
(8,935.2) |
|
6,226.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,921.9 |
|
166,282.0 |
|
53,043.6 |
|
(11,078.1) |
|
212,169.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
337.1 |
|
— |
|
337.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
2.5 |
|
— |
|
(2.5) |
|
4.7 | |||||
Additional paid-in capital |
|
9,615.7 |
|
5,349.7 |
|
9,044.3 |
|
(14,394.0) |
|
9,615.7 | |||||
Retained earnings |
|
7,339.6 |
|
2,274.9 |
|
3,697.8 |
|
(5,972.7) |
|
7,339.6 | |||||
Accumulated other comprehensive income (loss) |
|
(19.3) |
|
1,330.4 |
|
445.2 |
|
(1,775.6) |
|
(19.3) | |||||
Treasury stock, at cost |
|
(6,441.0) |
|
— |
|
— |
|
— |
|
(6,441.0) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
10,499.7 |
|
8,957.5 |
|
13,187.3 |
|
(22,144.8) |
|
10,499.7 | |||||
Noncontrolling interest |
|
— |
|
— |
|
72.6 |
|
(4.6) |
|
68.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
10,499.7 |
|
8,957.5 |
|
13,259.9 |
|
(22,149.4) |
|
10,567.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
14,421.6 |
|
$ |
175,239.5 |
|
$ |
66,640.6 |
|
$ |
(33,227.5) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Financial Position
December 31, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
43,862.7 |
|
$ |
6,482.5 |
|
$ |
(378.7) |
|
$ |
49,966.5 |
Fixed maturities, trading |
|
— |
|
436.2 |
|
250.6 |
|
— |
|
686.8 | |||||
Equity securities, available-for-sale |
|
— |
|
101.7 |
|
2.8 |
|
— |
|
104.5 | |||||
Equity securities, trading |
|
— |
|
0.3 |
|
1,202.4 |
|
— |
|
1,202.7 | |||||
Mortgage loans |
|
— |
|
11,696.9 |
|
1,155.3 |
|
(512.8) |
|
12,339.4 | |||||
Real estate |
|
— |
|
6.3 |
|
1,445.5 |
|
— |
|
1,451.8 | |||||
Policy loans |
|
— |
|
786.3 |
|
30.8 |
|
— |
|
817.1 | |||||
Investment in unconsolidated entities |
|
12,223.4 |
|
2,220.5 |
|
6,229.8 |
|
(20,041.0) |
|
632.7 | |||||
Other investments |
|
9.7 |
|
3,944.3 |
|
1,636.5 |
|
(2,971.5) |
|
2,619.0 | |||||
Cash and cash equivalents |
|
578.7 |
|
1,127.9 |
|
1,253.7 |
|
(395.5) |
|
2,564.8 | |||||
Accrued investment income |
|
— |
|
477.9 |
|
76.7 |
|
(9.0) |
|
545.6 | |||||
Premiums due and other receivables |
|
— |
|
1,512.7 |
|
2,465.9 |
|
(2,549.3) |
|
1,429.3 | |||||
Deferred acquisition costs |
|
— |
|
3,057.3 |
|
218.8 |
|
— |
|
3,276.1 | |||||
Property and equipment |
|
— |
|
552.0 |
|
81.8 |
|
— |
|
633.8 | |||||
Goodwill |
|
— |
|
54.3 |
|
954.7 |
|
— |
|
1,009.0 | |||||
Other intangibles |
|
— |
|
24.6 |
|
1,334.6 |
|
— |
|
1,359.2 | |||||
Separate account assets |
|
— |
|
94,762.8 |
|
42,216.1 |
|
— |
|
136,978.9 | |||||
Other assets |
|
458.0 |
|
878.0 |
|
2,995.6 |
|
(3,288.5) |
|
1,043.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
13,269.8 |
|
$ |
165,502.7 |
|
$ |
70,034.1 |
|
$ |
(30,146.3) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
33,151.7 |
|
$ |
2,885.1 |
|
$ |
(320.7) |
|
$ |
35,716.1 |
Future policy benefits and claims |
|
— |
|
21,914.0 |
|
4,479.3 |
|
(536.8) |
|
25,856.5 | |||||
Other policyholder funds |
|
— |
|
718.1 |
|
88.2 |
|
(0.9) |
|
805.4 | |||||
Short-term debt |
|
— |
|
— |
|
181.1 |
|
— |
|
181.1 | |||||
Long-term debt |
|
3,223.8 |
|
— |
|
535.2 |
|
(493.8) |
|
3,265.2 | |||||
Income taxes currently payable |
|
— |
|
— |
|
101.9 |
|
(83.5) |
|
18.4 | |||||
Deferred income taxes |
|
— |
|
415.2 |
|
928.9 |
|
(646.9) |
|
697.2 | |||||
Separate account liabilities |
|
— |
|
94,762.8 |
|
42,216.1 |
|
— |
|
136,978.9 | |||||
Other liabilities |
|
734.4 |
|
6,330.1 |
|
6,323.6 |
|
(7,709.7) |
|
5,678.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,958.2 |
|
157,291.9 |
|
57,739.4 |
|
(9,792.3) |
|
209,197.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
85.7 |
|
— |
|
85.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
2.5 |
|
— |
|
(2.5) |
|
4.7 | |||||
Additional paid-in capital |
|
9,544.8 |
|
5,334.4 |
|
9,000.0 |
|
(14,334.4) |
|
9,544.8 | |||||
Retained earnings |
|
6,875.9 |
|
2,232.6 |
|
3,522.3 |
|
(5,754.9) |
|
6,875.9 | |||||
Accumulated other comprehensive income (loss) |
|
(882.5) |
|
641.3 |
|
(383.6) |
|
(257.7) |
|
(882.5) | |||||
Treasury stock, at cost |
|
(6,231.3) |
|
— |
|
— |
|
— |
|
(6,231.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
9,311.6 |
|
8,210.8 |
|
12,138.7 |
|
(20,349.5) |
|
9,311.6 | |||||
Noncontrolling interest |
|
— |
|
— |
|
70.3 |
|
(4.5) |
|
65.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
9,311.6 |
|
8,210.8 |
|
12,209.0 |
|
(20,354.0) |
|
9,377.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
13,269.8 |
|
$ |
165,502.7 |
|
$ |
70,034.1 |
|
$ |
(30,146.3) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
2,382.0 |
|
$ |
176.4 |
|
$ |
— |
|
$ |
2,558.4 |
Fees and other revenues |
|
— |
|
962.8 |
|
1,000.4 |
|
(190.5) |
|
1,772.7 | |||||
Net investment income |
|
1.4 |
|
1,139.9 |
|
969.2 |
|
(549.6) |
|
1,560.9 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
701.7 |
|
(473.3) |
|
— |
|
228.4 | |||||
Net other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
(58.0) |
|
(1.0) |
|
— |
|
(59.0) | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income |
|
— |
|
1.0 |
|
(0.1) |
|
— |
|
0.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
(57.0) |
|
(1.1) |
|
— |
|
(58.1) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital gains (losses) |
|
— |
|
644.7 |
|
(474.4) |
|
— |
|
170.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
1.4 |
|
5,129.4 |
|
1,671.6 |
|
(740.1) |
|
6,062.3 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
2,990.2 |
|
333.7 |
|
(5.5) |
|
3,318.4 | |||||
Dividends to policyholders |
|
— |
|
76.8 |
|
— |
|
— |
|
76.8 | |||||
Operating expenses |
|
113.7 |
|
1,089.8 |
|
785.5 |
|
(161.6) |
|
1,827.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
113.7 |
|
4,156.8 |
|
1,119.2 |
|
(167.1) |
|
5,222.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(112.3) |
|
972.6 |
|
552.4 |
|
(573.0) |
|
839.7 | |||||
Income taxes (benefits) |
|
(45.7) |
|
251.2 |
|
(61.2) |
|
(0.8) |
|
143.5 | |||||
Equity in the net income (loss) of subsidiaries |
|
756.9 |
|
(149.8) |
|
145.9 |
|
(753.0) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
690.3 |
|
571.6 |
|
759.5 |
|
(1,325.2) |
|
696.2 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
5.9 |
|
— |
|
5.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
$ |
690.3 |
|
$ |
571.6 |
|
$ |
753.6 |
|
$ |
(1,325.2) |
|
$ |
690.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
690.3 |
|
$ |
571.6 |
|
$ |
759.5 |
|
$ |
(1,325.2) |
|
$ |
696.2 |
Other comprehensive income |
|
866.9 |
|
699.3 |
|
862.4 |
|
(1,550.3) |
|
878.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
1,557.2 |
|
$ |
1,270.9 |
|
$ |
1,621.9 |
|
$ |
(2,875.5) |
|
$ |
1,574.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
2,431.1 |
|
$ |
167.7 |
|
$ |
— |
|
$ |
2,598.8 |
Fees and other revenues |
|
— |
|
1,035.5 |
|
1,022.5 |
|
(205.7) |
|
1,852.3 | |||||
Net investment income |
|
0.8 |
|
1,074.2 |
|
707.4 |
|
(268.6) |
|
1,513.8 | |||||
Net realized capital losses, excluding impairment losses on available-for-sale securities |
|
— |
|
(4.9) |
|
(30.0) |
|
— |
|
(34.9) | |||||
Net other-than-temporary impairment (losses) recoveries on available-for-sale securities |
|
— |
|
13.5 |
|
(0.1) |
|
— |
|
13.4 | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income |
|
— |
|
(26.9) |
|
— |
|
— |
|
(26.9) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
(13.4) |
|
(0.1) |
|
— |
|
(13.5) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital losses |
|
— |
|
(18.3) |
|
(30.1) |
|
— |
|
(48.4) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
0.8 |
|
4,522.5 |
|
1,867.5 |
|
(474.3) |
|
5,916.5 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
2,983.9 |
|
312.8 |
|
(5.8) |
|
3,290.9 | |||||
Dividends to policyholders |
|
— |
|
82.8 |
|
— |
|
— |
|
82.8 | |||||
Operating expenses |
|
82.4 |
|
1,078.3 |
|
799.4 |
|
(169.9) |
|
1,790.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
82.4 |
|
4,145.0 |
|
1,112.2 |
|
(175.7) |
|
5,163.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(81.6) |
|
377.5 |
|
755.3 |
|
(298.6) |
|
752.6 | |||||
Income taxes (benefits) |
|
(33.9) |
|
83.8 |
|
9.5 |
|
(0.8) |
|
58.6 | |||||
Equity in the net income (loss) of subsidiaries |
|
727.7 |
|
147.8 |
|
(7.6) |
|
(867.9) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
680.0 |
|
441.5 |
|
738.2 |
|
(1,165.7) |
|
694.0 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
14.0 |
|
— |
|
14.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
680.0 |
|
441.5 |
|
724.2 |
|
(1,165.7) |
|
680.0 | |||||
Preferred stock dividends |
|
16.5 |
|
— |
|
— |
|
— |
|
16.5 | |||||
Excess of redemption value over carrying value of preferred shares redeemed |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income available to common stockholders |
|
$ |
655.3 |
|
$ |
441.5 |
|
$ |
724.2 |
|
$ |
(1,165.7) |
|
$ |
655.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
680.0 |
|
$ |
441.5 |
|
$ |
738.2 |
|
$ |
(1,165.7) |
|
$ |
694.0 |
Other comprehensive loss |
|
(436.8) |
|
(203.0) |
|
(369.5) |
|
637.5 |
|
(371.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
243.2 |
|
$ |
238.5 |
|
$ |
368.7 |
|
$ |
(528.2) |
|
$ |
322.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2016
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(54.6) |
|
$ |
1,872.7 |
|
$ |
882.8 |
|
$ |
(575.3) |
|
$ |
2,125.6 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
(7,072.5) |
|
(409.7) |
|
5.3 |
|
(7,476.9) | |||||
Sales |
|
— |
|
295.3 |
|
262.1 |
|
— |
|
557.4 | |||||
Maturities |
|
— |
|
3,383.2 |
|
284.7 |
|
— |
|
3,667.9 | |||||
Mortgage loans acquired or originated |
|
— |
|
(1,123.0) |
|
(126.8) |
|
51.8 |
|
(1,198.0) | |||||
Mortgage loans sold or repaid |
|
— |
|
776.1 |
|
137.6 |
|
(3.3) |
|
910.4 | |||||
Real estate acquired |
|
— |
|
— |
|
(66.4) |
|
— |
|
(66.4) | |||||
Net purchases of property and equipment |
|
— |
|
(54.8) |
|
(19.9) |
|
— |
|
(74.7) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
594.8 |
|
1.5 |
|
544.8 |
|
(1,141.1) |
|
— |
|||||
Net change in other investments |
|
(5.1) |
|
186.9 |
|
(656.3) |
|
480.8 |
|
6.3 | |||||
Net cash provided by (used in) investing activities |
|
589.7 |
|
(3,607.3) |
|
(49.9) |
|
(606.5) |
|
(3,674.0) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
11.2 |
|
— |
|
— |
|
— |
|
11.2 | |||||
Acquisition of treasury stock |
|
(209.7) |
|
— |
|
— |
|
— |
|
(209.7) | |||||
Proceeds from financing element derivatives |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
(43.0) |
|
— |
|
— |
|
(43.0) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.2 |
|
2.0 |
|
3.3 |
|
— |
|
5.5 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(2.3) |
|
— |
|
(2.3) | |||||
Dividends to common stockholders |
|
(223.2) |
|
— |
|
— |
|
— |
|
(223.2) | |||||
Issuance of long-term debt |
|
— |
|
— |
|
51.4 |
|
(47.7) |
|
3.7 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(3.2) |
|
3.2 |
|
— |
|||||
Net repayments of short-term borrowings |
|
— |
|
— |
|
(156.9) |
|
— |
|
(156.9) | |||||
Dividends and capital paid to parent |
|
— |
|
(544.8) |
|
(596.3) |
|
1,141.1 |
|
— |
|||||
Investment contract deposits |
|
— |
|
6,735.4 |
|
142.3 |
|
— |
|
6,877.7 | |||||
Investment contract withdrawals |
|
— |
|
(5,060.6) |
|
(10.4) |
|
— |
|
(5,071.0) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
47.1 |
|
— |
|
47.1 | |||||
Other |
|
— |
|
(0.5) |
|
0.2 |
|
— |
|
(0.3) | |||||
Net cash provided by (used in) financing activities |
|
(421.5) |
|
1,088.7 |
|
(524.8) |
|
1,096.6 |
|
1,239.0 | |||||
Net increase (decrease) in cash and cash equivalents |
|
113.6 |
|
(645.9) |
|
308.1 |
|
(85.2) |
|
(309.4) | |||||
Cash and cash equivalents at beginning of period |
|
578.7 |
|
1,127.9 |
|
1,253.7 |
|
(395.5) |
|
2,564.8 | |||||
Cash and cash equivalents at end of period |
|
$ |
692.3 |
|
$ |
482.0 |
|
$ |
1,561.8 |
|
$ |
(480.7) |
|
$ |
2,255.4 |
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2015
|
|
Principal |
|
Principal Life |
|
Principal Financial |
|
|
|
Principal |
|||||
|
|
Financial |
|
Insurance |
|
Services, Inc. and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Company |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(37.5) |
|
$ |
1,901.3 |
|
$ |
209.1 |
|
$ |
44.5 |
|
$ |
2,117.4 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
(4,332.1) |
|
(496.4) |
|
— |
|
(4,828.5) | |||||
Sales |
|
— |
|
759.7 |
|
224.1 |
|
(0.7) |
|
983.1 | |||||
Maturities |
|
— |
|
3,226.9 |
|
409.2 |
|
— |
|
3,636.1 | |||||
Mortgage loans acquired or originated |
|
— |
|
(1,013.3) |
|
(147.9) |
|
104.1 |
|
(1,057.1) | |||||
Mortgage loans sold or repaid |
|
— |
|
663.8 |
|
139.6 |
|
(28.1) |
|
775.3 | |||||
Real estate acquired |
|
— |
|
(0.3) |
|
(203.8) |
|
— |
|
(204.1) | |||||
Net purchases of property and equipment |
|
— |
|
(55.4) |
|
(11.9) |
|
— |
|
(67.3) | |||||
Dividends and returns of capital received from (contributed to) unconsolidated entities |
|
425.5 |
|
(2.8) |
|
225.6 |
|
(648.3) |
|
— |
|||||
Net change in other investments |
|
0.9 |
|
111.0 |
|
(188.9) |
|
(97.6) |
|
(174.6) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
426.4 |
|
(642.5) |
|
(50.4) |
|
(670.6) |
|
(937.1) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
29.6 |
|
— |
|
0.1 |
|
(0.1) |
|
29.6 | |||||
Acquisition of treasury stock |
|
(75.6) |
|
— |
|
— |
|
— |
|
(75.6) | |||||
Proceeds from financing element derivatives |
|
— |
|
0.2 |
|
— |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
(39.5) |
|
— |
|
— |
|
(39.5) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.6 |
|
5.1 |
|
8.4 |
|
— |
|
14.1 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(11.6) |
|
0.6 |
|
(11.0) | |||||
Sale of subsidiary shares to noncontrolling interest |
|
— |
|
— |
|
0.6 |
|
(0.6) |
|
— |
|||||
Dividends to common stockholders |
|
(218.3) |
|
— |
|
— |
|
— |
|
(218.3) | |||||
Dividends to preferred stockholders |
|
(16.5) |
|
— |
|
— |
|
— |
|
(16.5) | |||||
Preferred stock redemption |
|
(550.0) |
|
— |
|
— |
|
— |
|
(550.0) | |||||
Issuance of long-term debt |
|
791.8 |
|
— |
|
107.1 |
|
(101.5) |
|
797.4 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(49.3) |
|
29.5 |
|
(19.8) | |||||
Dividends and capital paid to parent |
|
— |
|
(225.6) |
|
(422.7) |
|
648.3 |
|
— |
|||||
Investment contract deposits |
|
— |
|
2,586.1 |
|
136.8 |
|
— |
|
2,722.9 | |||||
Investment contract withdrawals |
|
— |
|
(3,410.3) |
|
(4.4) |
|
— |
|
(3,414.7) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
8.2 |
|
— |
|
8.2 | |||||
Other |
|
— |
|
(6.8) |
|
— |
|
— |
|
(6.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash used in financing activities |
|
(38.4) |
|
(1,090.8) |
|
(226.8) |
|
576.2 |
|
(779.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
350.5 |
|
168.0 |
|
(68.1) |
|
(49.9) |
|
400.5 | |||||
Cash and cash equivalents at beginning of period |
|
412.4 |
|
602.7 |
|
1,253.6 |
|
(404.8) |
|
1,863.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
762.9 |
|
$ |
770.7 |
|
$ |
1,185.5 |
|
$ |
(454.7) |
|
$ |
2,264.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Financial Position
June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
55,281.3 |
|
$ |
— |
|
$ |
55,281.3 |
Fixed maturities, trading |
|
— |
|
— |
|
656.9 |
|
— |
|
656.9 | |||||
Equity securities, available-for-sale |
|
— |
|
— |
|
105.2 |
|
— |
|
105.2 | |||||
Equity securities, trading |
|
— |
|
— |
|
1,331.1 |
|
— |
|
1,331.1 | |||||
Mortgage loans |
|
— |
|
— |
|
12,685.8 |
|
— |
|
12,685.8 | |||||
Real estate |
|
— |
|
— |
|
1,474.0 |
|
— |
|
1,474.0 | |||||
Policy loans |
|
— |
|
— |
|
831.6 |
|
— |
|
831.6 | |||||
Investment in unconsolidated entities |
|
13,275.3 |
|
13,308.2 |
|
710.7 |
|
(26,522.2) |
|
772.0 | |||||
Other investments |
|
9.7 |
|
103.6 |
|
3,436.2 |
|
— |
|
3,549.5 | |||||
Cash and cash equivalents |
|
692.3 |
|
807.9 |
|
1,989.1 |
|
(1,233.9) |
|
2,255.4 | |||||
Accrued investment income |
|
— |
|
2.3 |
|
560.7 |
|
— |
|
563.0 | |||||
Premiums due and other receivables |
|
— |
|
90.6 |
|
1,630.9 |
|
(216.7) |
|
1,504.8 | |||||
Deferred acquisition costs |
|
— |
|
— |
|
3,173.7 |
|
— |
|
3,173.7 | |||||
Property and equipment |
|
— |
|
— |
|
667.9 |
|
— |
|
667.9 | |||||
Goodwill |
|
— |
|
— |
|
1,037.2 |
|
— |
|
1,037.2 | |||||
Other intangibles |
|
— |
|
— |
|
1,358.5 |
|
— |
|
1,358.5 | |||||
Separate account assets |
|
— |
|
— |
|
134,736.0 |
|
— |
|
134,736.0 | |||||
Other assets |
|
444.3 |
|
193.1 |
|
1,096.2 |
|
(643.3) |
|
1,090.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
14,421.6 |
|
$ |
14,505.7 |
|
$ |
222,763.0 |
|
$ |
(28,616.1) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
37,781.0 |
|
$ |
— |
|
$ |
37,781.0 |
Future policy benefits and claims |
|
— |
|
— |
|
27,996.1 |
|
— |
|
27,996.1 | |||||
Other policyholder funds |
|
— |
|
— |
|
888.4 |
|
— |
|
888.4 | |||||
Short-term debt |
|
— |
|
— |
|
109.5 |
|
(83.6) |
|
25.9 | |||||
Long-term debt |
|
3,224.8 |
|
150.0 |
|
112.4 |
|
(217.0) |
|
3,270.2 | |||||
Income taxes currently payable |
|
— |
|
2.4 |
|
74.3 |
|
(66.5) |
|
10.2 | |||||
Deferred income taxes |
|
— |
|
— |
|
1,813.3 |
|
(578.6) |
|
1,234.7 | |||||
Separate account liabilities |
|
— |
|
— |
|
134,736.0 |
|
— |
|
134,736.0 | |||||
Other liabilities |
|
697.1 |
|
1,166.0 |
|
5,162.1 |
|
(798.3) |
|
6,226.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,921.9 |
|
1,318.4 |
|
208,673.1 |
|
(1,744.0) |
|
212,169.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
337.1 |
|
— |
|
337.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
— |
|
17.8 |
|
(17.8) |
|
4.7 | |||||
Additional paid-in capital |
|
9,615.7 |
|
9,044.3 |
|
10,311.3 |
|
(19,355.6) |
|
9,615.7 | |||||
Retained earnings |
|
7,339.6 |
|
3,697.8 |
|
3,024.5 |
|
(6,722.3) |
|
7,339.6 | |||||
Accumulated other comprehensive income (loss) |
|
(19.3) |
|
445.2 |
|
333.2 |
|
(778.4) |
|
(19.3) | |||||
Treasury stock, at cost |
|
(6,441.0) |
|
— |
|
(2.0) |
|
2.0 |
|
(6,441.0) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
10,499.7 |
|
13,187.3 |
|
13,684.8 |
|
(26,872.1) |
|
10,499.7 | |||||
Noncontrolling interest |
|
— |
|
— |
|
68.0 |
|
— |
|
68.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
10,499.7 |
|
13,187.3 |
|
13,752.8 |
|
(26,872.1) |
|
10,567.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
14,421.6 |
|
$ |
14,505.7 |
|
$ |
222,763.0 |
|
$ |
(28,616.1) |
|
$ |
223,074.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Financial Position
December 31, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance Company |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
and Other |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|||||
Fixed maturities, available-for-sale |
|
$ |
— |
|
$ |
— |
|
$ |
49,966.5 |
|
$ |
— |
|
$ |
49,966.5 |
Fixed maturities, trading |
|
— |
|
— |
|
686.8 |
|
— |
|
686.8 | |||||
Equity securities, available-for-sale |
|
— |
|
— |
|
104.5 |
|
— |
|
104.5 | |||||
Equity securities, trading |
|
— |
|
— |
|
1,202.7 |
|
— |
|
1,202.7 | |||||
Mortgage loans |
|
— |
|
— |
|
12,339.4 |
|
— |
|
12,339.4 | |||||
Real estate |
|
— |
|
— |
|
1,451.8 |
|
— |
|
1,451.8 | |||||
Policy loans |
|
— |
|
— |
|
817.1 |
|
— |
|
817.1 | |||||
Investment in unconsolidated entities |
|
12,223.4 |
|
12,209.1 |
|
583.2 |
|
(24,383.0) |
|
632.7 | |||||
Other investments |
|
9.7 |
|
185.9 |
|
2,423.4 |
|
— |
|
2,619.0 | |||||
Cash and cash equivalents |
|
578.7 |
|
730.5 |
|
2,413.3 |
|
(1,157.7) |
|
2,564.8 | |||||
Accrued investment income |
|
— |
|
— |
|
545.6 |
|
— |
|
545.6 | |||||
Premiums due and other receivables |
|
— |
|
0.1 |
|
1,584.6 |
|
(155.4) |
|
1,429.3 | |||||
Deferred acquisition costs |
|
— |
|
— |
|
3,276.1 |
|
— |
|
3,276.1 | |||||
Property and equipment |
|
— |
|
— |
|
633.8 |
|
— |
|
633.8 | |||||
Goodwill |
|
— |
|
— |
|
1,009.0 |
|
— |
|
1,009.0 | |||||
Other intangibles |
|
— |
|
— |
|
1,359.2 |
|
— |
|
1,359.2 | |||||
Separate account assets |
|
— |
|
— |
|
136,978.9 |
|
— |
|
136,978.9 | |||||
Other assets |
|
458.0 |
|
205.2 |
|
1,065.4 |
|
(685.5) |
|
1,043.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total assets |
|
$ |
13,269.8 |
|
$ |
13,330.8 |
|
$ |
218,441.3 |
|
$ |
(26,381.6) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|||||
Contractholder funds |
|
$ |
— |
|
$ |
— |
|
$ |
35,716.1 |
|
$ |
— |
|
$ |
35,716.1 |
Future policy benefits and claims |
|
— |
|
— |
|
25,856.5 |
|
— |
|
25,856.5 | |||||
Other policyholder funds |
|
— |
|
— |
|
805.4 |
|
— |
|
805.4 | |||||
Short-term debt |
|
— |
|
— |
|
290.0 |
|
(108.9) |
|
181.1 | |||||
Long-term debt |
|
3,223.8 |
|
156.0 |
|
41.4 |
|
(156.0) |
|
3,265.2 | |||||
Income taxes currently payable |
|
— |
|
3.2 |
|
69.6 |
|
(54.4) |
|
18.4 | |||||
Deferred income taxes |
|
— |
|
— |
|
1,325.2 |
|
(628.0) |
|
697.2 | |||||
Separate account liabilities |
|
— |
|
— |
|
136,978.9 |
|
— |
|
136,978.9 | |||||
Other liabilities |
|
734.4 |
|
1,032.9 |
|
4,912.9 |
|
(1,001.8) |
|
5,678.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities |
|
3,958.2 |
|
1,192.1 |
|
205,996.0 |
|
(1,949.1) |
|
209,197.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest |
|
— |
|
— |
|
85.7 |
|
— |
|
85.7 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|||||
Common stock |
|
4.7 |
|
— |
|
17.8 |
|
(17.8) |
|
4.7 | |||||
Additional paid-in capital |
|
9,544.8 |
|
9,000.0 |
|
9,888.7 |
|
(18,888.7) |
|
9,544.8 | |||||
Retained earnings |
|
6,875.9 |
|
3,522.3 |
|
2,905.9 |
|
(6,428.2) |
|
6,875.9 | |||||
Accumulated other comprehensive loss |
|
(882.5) |
|
(383.6) |
|
(516.6) |
|
900.2 |
|
(882.5) | |||||
Treasury stock, at cost |
|
(6,231.3) |
|
— |
|
(2.0) |
|
2.0 |
|
(6,231.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity attributable to PFG |
|
9,311.6 |
|
12,138.7 |
|
12,293.8 |
|
(24,432.5) |
|
9,311.6 | |||||
Noncontrolling interest |
|
— |
|
— |
|
65.8 |
|
— |
|
65.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total stockholders’ equity |
|
9,311.6 |
|
12,138.7 |
|
12,359.6 |
|
(24,432.5) |
|
9,377.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
|
$ |
13,269.8 |
|
$ |
13,330.8 |
|
$ |
218,441.3 |
|
$ |
(26,381.6) |
|
$ |
218,660.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
2,558.4 |
|
$ |
— |
|
$ |
2,558.4 |
Fees and other revenues |
|
— |
|
0.2 |
|
1,776.9 |
|
(4.4) |
|
1,772.7 | |||||
Net investment income |
|
1.4 |
|
10.8 |
|
1,545.0 |
|
3.7 |
|
1,560.9 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
(6.9) |
|
235.4 |
|
(0.1) |
|
228.4 | |||||
Net other-than-temporary impairment losses on available-for-sale securities |
|
— |
|
— |
|
(59.0) |
|
— |
|
(59.0) | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income |
|
— |
|
— |
|
0.9 |
|
— |
|
0.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(58.1) |
|
— |
|
(58.1) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized capital gains (losses) |
|
— |
|
(6.9) |
|
177.3 |
|
(0.1) |
|
170.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues |
|
1.4 |
|
4.1 |
|
6,057.6 |
|
(0.8) |
|
6,062.3 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
— |
|
3,318.4 |
|
— |
|
3,318.4 | |||||
Dividends to policyholders |
|
— |
|
— |
|
76.8 |
|
— |
|
76.8 | |||||
Operating expenses |
|
113.7 |
|
5.7 |
|
1,712.1 |
|
(4.1) |
|
1,827.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Total expenses |
|
113.7 |
|
5.7 |
|
5,107.3 |
|
(4.1) |
|
5,222.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(112.3) |
|
(1.6) |
|
950.3 |
|
3.3 |
|
839.7 | |||||
Income taxes (benefits) |
|
(45.7) |
|
(24.0) |
|
213.2 |
|
— |
|
143.5 | |||||
Equity in the net income of subsidiaries |
|
756.9 |
|
731.2 |
|
— |
|
(1,488.1) |
|
— |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
690.3 |
|
753.6 |
|
737.1 |
|
(1,484.8) |
|
696.2 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
5.9 |
|
— |
|
5.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to PFG |
|
$ |
690.3 |
|
$ |
753.6 |
|
$ |
731.2 |
|
$ |
(1,484.8) |
|
$ |
690.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
690.3 |
|
$ |
753.6 |
|
$ |
737.1 |
|
$ |
(1,484.8) |
|
$ |
696.2 |
Other comprehensive income |
|
866.9 |
|
842.6 |
|
875.1 |
|
(1,706.3) |
|
878.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Comprehensive income |
|
$ |
1,557.2 |
|
$ |
1,596.2 |
|
$ |
1,612.2 |
|
$ |
(3,191.1) |
|
$ |
1,574.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Operations
For the six months ended June 30, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|||||
Premiums and other considerations |
|
$ |
— |
|
$ |
— |
|
$ |
2,598.8 |
|
$ |
— |
|
$ |
2,598.8 |
Fees and other revenues |
|
— |
|
0.1 |
|
1,852.5 |
|
(0.3) |
|
1,852.3 | |||||
Net investment income |
|
0.8 |
|
— |
|
1,507.6 |
|
5.4 |
|
1,513.8 | |||||
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities |
|
— |
|
4.5 |
|
(37.7) |
|
(1.7) |
|
(34.9) | |||||
Net other-than-temporary impairment recoveries on available-for-sale securities |
|
— |
|
— |
|
13.4 |
|
— |
|
13.4 | |||||
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income |
|
— |
|
— |
|
(26.9) |
|
— |
|
(26.9) | |||||
Net impairment losses on available-for-sale securities |
|
— |
|
— |
|
(13.5) |
|
— |
|
(13.5) | |||||
Net realized capital gains (losses) |
|
— |
|
4.5 |
|
(51.2) |
|
(1.7) |
|
(48.4) | |||||
Total revenues |
|
0.8 |
|
4.6 |
|
5,907.7 |
|
3.4 |
|
5,916.5 | |||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|||||
Benefits, claims and settlement expenses |
|
— |
|
— |
|
3,290.9 |
|
— |
|
3,290.9 | |||||
Dividends to policyholders |
|
— |
|
— |
|
82.8 |
|
— |
|
82.8 | |||||
Operating expenses |
|
82.4 |
|
2.4 |
|
1,705.5 |
|
(0.1) |
|
1,790.2 | |||||
Total expenses |
|
82.4 |
|
2.4 |
|
5,079.2 |
|
(0.1) |
|
5,163.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income taxes |
|
(81.6) |
|
2.2 |
|
828.5 |
|
3.5 |
|
752.6 | |||||
Income taxes (benefits) |
|
(33.9) |
|
2.0 |
|
90.5 |
|
— |
|
58.6 | |||||
Equity in the net income of subsidiaries |
|
727.7 |
|
724.0 |
|
— |
|
(1,451.7) |
|
— |
|||||
Net income |
|
680.0 |
|
724.2 |
|
738.0 |
|
(1,448.2) |
|
694.0 | |||||
Net income attributable to noncontrolling interest |
|
— |
|
— |
|
14.0 |
|
— |
|
14.0 | |||||
Net income attributable to PFG |
|
680.0 |
|
724.2 |
|
724.0 |
|
(1,448.2) |
|
680.0 | |||||
Preferred stock dividends |
|
16.5 |
|
— |
|
— |
|
— |
|
16.5 | |||||
Excess of redemption value over carrying value of preferred shares redeemed |
|
8.2 |
|
— |
|
— |
|
— |
|
8.2 | |||||
Net income available to common stockholders |
|
$ |
655.3 |
|
$ |
724.2 |
|
$ |
724.0 |
|
$ |
(1,448.2) |
|
$ |
655.3 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
680.0 |
|
$ |
724.2 |
|
$ |
738.0 |
|
$ |
(1,448.2) |
|
$ |
694.0 |
Other comprehensive loss |
|
(436.8) |
|
(408.4) |
|
(433.0) |
|
906.4 |
|
(371.8) | |||||
Comprehensive income |
|
$ |
243.2 |
|
$ |
315.8 |
|
$ |
305.0 |
|
$ |
(541.8) |
|
$ |
322.2 |
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2016
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(54.6) |
|
$ |
(40.0) |
|
$ |
2,066.1 |
|
$ |
154.1 |
|
$ |
2,125.6 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
— |
|
(7,476.9) |
|
— |
|
(7,476.9) | |||||
Sales |
|
— |
|
— |
|
557.4 |
|
— |
|
557.4 | |||||
Maturities |
|
— |
|
— |
|
3,667.9 |
|
— |
|
3,667.9 | |||||
Mortgage loans acquired or originated |
|
— |
|
— |
|
(1,198.0) |
|
— |
|
(1,198.0) | |||||
Mortgage loans sold or repaid |
|
— |
|
— |
|
910.4 |
|
— |
|
910.4 | |||||
Real estate acquired |
|
— |
|
— |
|
(66.4) |
|
— |
|
(66.4) | |||||
Net purchases of property and equipment |
|
— |
|
— |
|
(74.7) |
|
— |
|
(74.7) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
594.8 |
|
477.2 |
|
— |
|
(1,072.0) |
|
— |
|||||
Net change in other investments |
|
(5.1) |
|
241.0 |
|
(35.1) |
|
(194.5) |
|
6.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
589.7 |
|
718.2 |
|
(3,715.4) |
|
(1,266.5) |
|
(3,674.0) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
11.2 |
|
— |
|
— |
|
— |
|
11.2 | |||||
Acquisition of treasury stock |
|
(209.7) |
|
— |
|
— |
|
— |
|
(209.7) | |||||
Proceeds from financing element derivatives |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
— |
|
(43.0) |
|
— |
|
(43.0) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.2 |
|
— |
|
5.3 |
|
— |
|
5.5 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(2.3) |
|
— |
|
(2.3) | |||||
Dividends to common stockholders |
|
(223.2) |
|
— |
|
— |
|
— |
|
(223.2) | |||||
Issuance of long-term debt |
|
— |
|
4.0 |
|
70.7 |
|
(71.0) |
|
3.7 | |||||
Principal repayments of long-term debt |
|
— |
|
(10.0) |
|
— |
|
10.0 |
|
— |
|||||
Net repayments of short-term borrowings |
|
— |
|
— |
|
(182.1) |
|
25.2 |
|
(156.9) | |||||
Dividends and capital paid to parent |
|
— |
|
(594.8) |
|
(477.2) |
|
1,072.0 |
|
— |
|||||
Investment contract deposits |
|
— |
|
— |
|
6,877.7 |
|
— |
|
6,877.7 | |||||
Investment contract withdrawals |
|
— |
|
— |
|
(5,071.0) |
|
— |
|
(5,071.0) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
47.1 |
|
— |
|
47.1 | |||||
Other |
|
— |
|
— |
|
(0.3) |
|
— |
|
(0.3) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
|
(421.5) |
|
(600.8) |
|
1,225.1 |
|
1,036.2 |
|
1,239.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
113.6 |
|
77.4 |
|
(424.2) |
|
(76.2) |
|
(309.4) | |||||
Cash and cash equivalents at beginning of period |
|
578.7 |
|
730.5 |
|
2,413.3 |
|
(1,157.7) |
|
2,564.8 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
692.3 |
|
$ |
807.9 |
|
$ |
1,989.1 |
|
$ |
(1,233.9) |
|
$ |
2,255.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2015
|
|
|
|
|
|
Principal Life |
|
|
|
|
|||||
|
|
Principal |
|
Principal |
|
Insurance |
|
|
|
Principal |
|||||
|
|
Financial |
|
Financial |
|
Company and |
|
|
|
Financial |
|||||
|
|
Group, Inc. |
|
Services, Inc. |
|
Other Subsidiaries |
|
|
|
Group, Inc. |
|||||
|
|
Parent Only |
|
Only |
|
Combined |
|
Eliminations |
|
Consolidated |
|||||
|
|
(in millions) |
|||||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
(37.5) |
|
$ |
69.0 |
|
$ |
2,198.5 |
|
$ |
(112.6) |
|
$ |
2,117.4 |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|||||
Purchases |
|
— |
|
— |
|
(4,828.5) |
|
— |
|
(4,828.5) | |||||
Sales |
|
— |
|
— |
|
983.1 |
|
— |
|
983.1 | |||||
Maturities |
|
— |
|
— |
|
3,636.1 |
|
— |
|
3,636.1 | |||||
Mortgage loans acquired or originated |
|
— |
|
— |
|
(1,057.1) |
|
— |
|
(1,057.1) | |||||
Mortgage loans sold or repaid |
|
— |
|
— |
|
775.3 |
|
— |
|
775.3 | |||||
Real estate acquired |
|
— |
|
— |
|
(204.1) |
|
— |
|
(204.1) | |||||
Net purchases of property and equipment |
|
— |
|
— |
|
(67.3) |
|
— |
|
(67.3) | |||||
Dividends and returns of capital received from unconsolidated entities |
|
425.5 |
|
282.5 |
|
— |
|
(708.0) |
|
— |
|||||
Net change in other investments |
|
0.9 |
|
(28.9) |
|
(163.5) |
|
16.9 |
|
(174.6) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
|
426.4 |
|
253.6 |
|
(926.0) |
|
(691.1) |
|
(937.1) | |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of common stock |
|
29.6 |
|
— |
|
— |
|
— |
|
29.6 | |||||
Acquisition of treasury stock |
|
(75.6) |
|
— |
|
— |
|
— |
|
(75.6) | |||||
Proceeds from financing element derivatives |
|
— |
|
— |
|
0.2 |
|
— |
|
0.2 | |||||
Payments for financing element derivatives |
|
— |
|
— |
|
(39.5) |
|
— |
|
(39.5) | |||||
Excess tax benefits from share-based payment arrangements |
|
0.6 |
|
— |
|
13.5 |
|
— |
|
14.1 | |||||
Purchase of subsidiary shares from noncontrolling interest |
|
— |
|
— |
|
(11.0) |
|
— |
|
(11.0) | |||||
Dividends to common stockholders |
|
(218.3) |
|
— |
|
— |
|
— |
|
(218.3) | |||||
Dividends to preferred stockholders |
|
(16.5) |
|
— |
|
— |
|
— |
|
(16.5) | |||||
Preferred stock redemption |
|
(550.0) |
|
— |
|
— |
|
— |
|
(550.0) | |||||
Issuance of long-term debt |
|
791.8 |
|
— |
|
5.6 |
|
— |
|
797.4 | |||||
Principal repayments of long-term debt |
|
— |
|
— |
|
(19.8) |
|
— |
|
(19.8) | |||||
Net proceeds from short-term borrowings |
|
— |
|
— |
|
0.4 |
|
(0.4) |
|
— |
|||||
Dividends and capital paid to parent |
|
— |
|
(425.5) |
|
(282.5) |
|
708.0 |
|
— |
|||||
Investment contract deposits |
|
— |
|
— |
|
2,722.9 |
|
— |
|
2,722.9 | |||||
Investment contract withdrawals |
|
— |
|
— |
|
(3,414.7) |
|
— |
|
(3,414.7) | |||||
Net increase in banking operation deposits |
|
— |
|
— |
|
8.2 |
|
— |
|
8.2 | |||||
Other |
|
— |
|
— |
|
(6.8) |
|
— |
|
(6.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash used in financing activities |
|
(38.4) |
|
(425.5) |
|
(1,023.5) |
|
707.6 |
|
(779.8) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
350.5 |
|
(102.9) |
|
249.0 |
|
(96.1) |
|
400.5 | |||||
Cash and cash equivalents at beginning of period |
|
412.4 |
|
907.2 |
|
1,598.0 |
|
(1,053.7) |
|
1,863.9 | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
762.9 |
|
$ |
804.3 |
|
$ |
1,847.0 |
|
$ |
(1,149.8) |
|
$ |
2,264.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|