CNO FINANCIAL GROUP, INC., 10-Q filed on 11/6/2014
Quarterly Report
DOCUMENT AND ENTITY INFORMATION
9 Months Ended
Sep. 30, 2014
Oct. 22, 2014
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
CNO Financial Group, Inc. 
 
Entity Central Index Key
0001224608 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2014 
 
Current Fiscal Year End Date
--12-31 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Voluntary Filers
No 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Current Reporting Status
Yes 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
205,071,028 
CONSOLIDATED BALANCE SHEET (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Investments:
 
 
Fixed maturities, available for sale, at fair value (amortized cost: September 30, 2014 - $18,570.0; December 31, 2013 - $21,891.8)
$ 20,610.5 
$ 23,204.6 
Equity securities at fair value (cost: September 30, 2014 - $360.8; December 31, 2013 - $206.7)
372.8 
223.0 
Mortgage loans
1,621.8 
1,729.5 
Policy loans
106.2 
277.0 
Trading securities
235.0 
247.6 
Investments held by variable interest entities
1,343.0 
1,046.7 
Other invested assets
394.6 
423.3 
Total investments
24,683.9 
27,151.7 
Cash and cash equivalents - unrestricted
452.1 
699.0 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
Accrued investment income
255.4 
286.9 
Present value of future profits
505.1 
679.3 
Deferred acquisition costs
746.6 
968.1 
Reinsurance receivables
3,023.0 
3,392.1 
Income tax assets, net
731.1 
1,147.2 
Assets held in separate accounts
6.9 
10.3 
Other assets
420.2 
341.7 
Total assets
30,975.0 
34,780.6 
Liabilities for insurance products:
 
 
Policyholder account balances
10,659.2 
12,776.4 
Future policy benefits
10,519.8 
11,222.5 
Liability for policy and contract claims
464.4 
566.0 
Unearned and advanced premiums
270.3 
300.6 
Liabilities related to separate accounts
6.9 
10.3 
Other liabilities
704.0 
590.6 
Payable to reinsurer
0 
590.3 
Investment borrowings
1,519.4 
1,900.0 
Borrowings related to variable interest entities
1,295.0 
1,012.3 
Notes payable – direct corporate obligations
814.0 
856.4 
Total liabilities
26,253.0 
29,825.4 
Commitments and Contingencies
   
   
Shareholders' equity:
 
 
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and outstanding: September 30, 2014 – 207,640,050; December 31, 2013 – 220,323,823)
2.1 
2.2 
Additional paid-in capital
3,803.7 
4,092.8 
Accumulated other comprehensive income
859.3 
731.8 
Retained earnings
56.9 
128.4 
Total shareholders' equity
4,722.0 
4,955.2 
Total liabilities and shareholders' equity
$ 30,975.0 
$ 34,780.6 
CONSOLIDATED BALANCE SHEET (Parentheticals) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Investments:
 
 
Fixed maturities, available for sale, amortized cost
$ 18,570.0 
$ 21,891.8 
Equity securities cost
$ 360.8 
$ 206.7 
Shareholders' equity:
 
 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
8,000,000,000 
8,000,000,000 
Common stock, shares issued (in shares)
207,640,050 
220,323,823 
Common stock, shares outstanding (in shares)
207,640,050 
220,323,823 
CONSOLIDATED STATEMENT OF OPERATIONS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Revenues:
 
 
 
 
Insurance policy income
$ 632.1 
$ 686.1 
$ 1,997.0 
$ 2,068.6 
Net investment income (loss):
 
 
 
 
General account assets
300.1 
350.7 
995.6 
1,051.4 
Policyholder and reinsurer accounts and other special-purpose portfolios
14.8 
49.0 
82.9 
158.5 
Realized investment gains (losses):
 
 
 
 
Net realized investment gains, excluding impairment losses
6.8 
2.8 
54.5 
21.9 
Other-than-temporary impairment losses:
 
 
 
 
Total other-than-temporary impairment losses
(2.8)
(2.9)
(14.7)
(3.5)
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income
0 
0 
0 
0 
Net impairment losses recognized
(2.8)
(2.9)
(14.7)
(3.5)
Total realized gains (losses)
4.0 
(0.1)
39.8 
18.4 
Fee revenue and other income
16.0 
8.1 
29.4 
21.0 
Total revenues
967.0 
1,093.8 
3,144.7 
3,317.9 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
565.5 
702.2 
1,946.9 
2,129.5 
Net loss on sale of subsidiary and gain on reinsurance transactions
(32.1)
0 
242.7 
0 
Interest expense
21.9 
25.8 
70.8 
80.0 
Amortization
65.8 
61.4 
197.4 
219.9 
Loss on extinguishment or modification of debt
0 
0 
0.6 
65.4 
Other operating costs and expenses
191.5 
190.0 
587.1 
559.4 
Total benefits and expenses
812.6 
979.4 
3,045.5 
3,054.2 
Income (loss) before income taxes
154.4 
114.4 
99.2 
263.7 
Income tax expense:
 
 
 
 
Tax expense on period income
53.8 
38.1 
133.1 
113.9 
Valuation allowance for deferred tax assets and other tax items
(16.8)
(206.7)
(1.4)
(222.2)
Net income (loss)
$ 117.4 
$ 283.0 
$ (32.5)
$ 372.0 
Basic:
 
 
 
 
Weighted average shares outstanding (in shares)
210,525 
222,876 
215,790 
221,819 
Net income (loss) (in dollars per share)
$ 0.56 
$ 1.27 
$ (0.15)
$ 1.68 
Diluted:
 
 
 
 
Weighted average shares outstanding (in shares)
215,458 
229,347 
215,790 
234,569 
Net income (loss) (in dollars per share)
$ 0.54 
$ 1.23 
$ (0.15)
$ 1.59 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Consolidated Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ 117.4 
$ 283.0 
$ (32.5)
$ 372.0 
Unrealized gains (losses) for the period
(116.2)
(196.9)
756.7 
(1,559.9)
Amortization of present value of future profits and deferred acquisition costs
15.8 
29.6 
(103.6)
163.7 
Amount related to premium deficiencies assuming the net unrealized gains had been realized
11.8 
74.1 
(405.8)
552.1 
Reclassification adjustments:
 
 
 
 
For net realized investment gains included in net income (loss)
(15.5)
(3.8)
(51.2)
(27.5)
For amortization of the present value of future profits and deferred acquisition costs related to net realized investment gains included in net income (loss)
0.1 
0.1 
0.6 
1.3 
Unrealized gains (losses) on investments
(104.0)
(96.9)
196.7 
(870.3)
Change related to deferred compensation plan
0.3 
(1.7)
1.0 
0.7 
Other comprehensive income (loss) before tax
(103.7)
(98.6)
197.7 
(869.6)
Income tax (expense) benefit related to items of accumulated other comprehensive income
36.9 
34.5 
(70.2)
306.2 
Other comprehensive income (loss), net of tax
(66.8)
(64.1)
127.5 
(563.4)
Comprehensive income (loss)
$ 50.6 
$ 218.9 
$ 95.0 
$ (191.4)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Total
Common stock and additional paid-in capital [Member]
Accumulated other comprehensive income [Member]
Retained earnings (accumulated deficit) [Member]
Balance, beginning of period at Dec. 31, 2012
$ 5,049.3 
$ 4,176.9 
$ 1,197.4 
$ (325.0)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Net income (loss)
372.0 
0 
0 
372.0 
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense (benefit))
(561.5)
0 
(561.5)
0 
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense (benefit))
(1.9)
0 
(1.9)
0 
Extinguishment of beneficial conversion feature related to the repurchase of convertible debentures
(12.6)
(12.6)
0 
0 
Cost of common stock repurchased
(87.3)
(87.3)
0 
0 
Dividends on common stock
(17.9)
0 
0 
(17.9)
Conversion of convertible debentures
24.9 
24.9 
0 
0 
Stock options, restricted stock and performance units
21.6 
21.6 
0 
0 
Balance, end of period at Sep. 30, 2013
4,786.6 
4,123.5 
634.0 
29.1 
Balance, beginning of period at Dec. 31, 2013
4,955.2 
4,095.0 
731.8 
128.4 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
Net income (loss)
(32.5)
0 
0 
(32.5)
Change in unrealized appreciation (depreciation) of investments (net of applicable income tax expense (benefit))
127.9 
0 
127.9 
0 
Change in noncredit component of impairment losses on fixed maturities, available for sale (net of applicable income tax expense (benefit))
(0.4)
0 
(0.4)
0 
Cost of common stock repurchased
(301.5)
(301.5)
0 
0 
Dividends on common stock
(39.0)
0 
0 
(39.0)
Stock options, restricted stock and performance units
12.3 
12.3 
0 
0 
Balance, end of period at Sep. 30, 2014
$ 4,722.0 
$ 3,805.8 
$ 859.3 
$ 56.9 
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Parentheticals) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Statement of Stockholders' Equity [Abstract]
 
 
Change in unrealized appreciation (depreciation) of investments, applicable income tax expense (benefit)
$ 70.4 
$ (305.2)
Change in noncredit component of impairment losses on fixed maturities, available for sale, applicable income tax expense (benefit)
$ (0.2)
$ (1.0)
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Cash flows from operating activities:
 
 
Insurance policy income
$ 1,783.2 
$ 1,835.1 
Net investment income
966.2 
1,020.5 
Fee revenue and other income
29.4 
21.0 
Insurance policy benefits
(1,506.8)
(1,596.8)
Payment to reinsurer pursuant to long-term care business reinsured
(590.3)
0 
Interest expense
(59.7)
(66.1)
Deferrable policy acquisition costs
(176.6)
(161.8)
Other operating costs
(566.5)
(575.5)
Taxes
(2.8)
(4.3)
Net cash from operating activities
(123.9)1
472.1 
Cash flows from investing activities:
 
 
Sales of investments
1,695.0 
1,697.0 
Maturities and redemptions of investments
1,323.5 
1,892.3 
Purchases of investments
(2,982.0)
(4,285.3)
Net sales of trading securities
8.0 
19.1 
Change in cash and cash equivalents held by variable interest entities
(46.4)
(30.9)
Cash and cash equivalents held by subsidiary prior to being sold
(164.7)
0 
Proceeds from sale of subsidiary
232.9 
0 
Other
(19.8)
(16.0)
Net cash provided (used) by investing activities
46.5 
(723.8)
Cash flows from financing activities:
 
 
Payments on notes payable
(43.1)
(114.4)
Expenses related to extinguishment or modification of debt
(0.5)
(61.6)
Amount paid to extinguish the beneficial conversion feature associated with repurchase of convertible debentures
0 
(12.6)
Issuance of common stock
4.7 
14.7 
Payments to repurchase common stock and warrants
(297.0)
(87.3)
Common stock dividends paid
(39.0)
(17.9)
Amounts received for deposit products
971.2 
963.5 
Withdrawals from deposit products
(1,047.6)
(1,105.3)
Issuance of investment borrowings:
 
 
Federal Home Loan Bank
350.0 
450.0 
Related to variable interest entities
347.1 
376.3 
Payments on investment borrowings:
 
 
Federal Home Loan Bank
(367.6)
(250.3)
Related to variable interest entities and other
(68.1)
(109.2)
Investment borrowings - repurchase agreements, net
20.4 
0 
Net cash provided (used) by financing activities
(169.5)
45.9 
Net decrease in cash and cash equivalents
(246.9)
(205.8)
Cash and cash equivalents, beginning of period
699.0 
582.5 
Cash and cash equivalents, end of period
$ 452.1 
$ 376.7 
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION

The following notes should be read together with the notes to the consolidated financial statements included in our 2013 Annual Report on Form 10-K.

CNO Financial Group, Inc., a Delaware corporation ("CNO"), is a holding company for a group of insurance companies operating throughout the United States that develop, market and administer health insurance, annuity, individual life insurance and other insurance products.  The terms "CNO Financial Group, Inc.", "CNO", the "Company", "we", "us", and "our" as used in these financial statements refer to CNO and its subsidiaries.  Such terms, when used to describe insurance business and products, refer to the insurance business and products of CNO's insurance subsidiaries.

We focus on serving middle-income pre-retiree and retired Americans, which we believe are attractive, underserved, high growth markets.  We sell our products through three distribution channels: career agents, independent producers (some of whom sell one or more of our product lines exclusively) and direct marketing.

Our unaudited consolidated financial statements reflect normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.  As permitted by rules and regulations of the Securities and Exchange Commission (the "SEC") applicable to quarterly reports on Form 10-Q, we have condensed or omitted certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").  We have reclassified certain amounts from the prior periods to conform to the 2014 presentation.  These reclassifications have no effect on net income or shareholders' equity.  Results for interim periods are not necessarily indicative of the results that may be expected for a full year.

The balance sheet at December 31, 2013, presented herein, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

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

The accompanying financial statements include the accounts of the Company and its subsidiaries. Our consolidated financial statements exclude transactions between us and our consolidated affiliates, or among our consolidated affiliates.
AGREEMENT TO SELL SUBSIDIARY
AGREEMENT TO SELL SUBSIDIARY
AGREEMENT TO SELL SUBSIDIARY

On March 2, 2014, CNO entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Wilton Reassurance Company ("Wilton Re"), pursuant to which CNO agreed to sell to Wilton Re all of the issued and outstanding shares of Conseco Life Insurance Company ("CLIC"), an indirect wholly owned subsidiary of CNO. The transaction closed on July 1, 2014, after the receipt of insurance regulatory approvals and satisfaction of other customary closing conditions. After adjustments for transaction costs and post-sale adjustments, we expect the transaction will result in net cash proceeds of approximately $222.0 million, including the impact of intercompany transactions completed in connection with the closing. In the first quarter of 2014, we recognized an estimated loss on the sale of CLIC of $298 million, net of income taxes. In the third quarter of 2014, we recognized a $6 million reduction to the loss on the sale of CLIC to reflect our current estimate. The ultimate loss we recognize is subject to additional adjustments based on the determination of the final sales price and net proceeds, which is expected to be completed in the fourth quarter of 2014.
 
In connection with the closing of the transaction, CNO Services, LLC ("CNO Services"), an indirect wholly owned subsidiary of CNO, entered into a transition services agreement and a special support services agreement with Wilton Re, pursuant to which CNO Services will make available to Wilton Re and its affiliates, for a limited period of time, certain services required for the operation of CLIC's business following the closing. Under such agreements, we will receive $30 million in the year ending June 30, 2015 and $20 million in the year ending June 30, 2016. In addition, certain services will continue to be provided in the three years ending June 30, 2019 for an annual fee of $.2 million. The costs of the services provided to Wilton Re are expected to approximate the fees received under the agreements.

The loss on the sale of CLIC in the nine months ended September 30, 2014, is summarized below (dollars in millions):

Net cash proceeds
 
$
222.0

Net assets being sold:
 
 
Investments
 
3,863.8

Cash and cash equivalents
 
164.7

Accrued investment income
 
42.7

Present value of future profits
 
15.5

Deferred acquisition costs
 
37.6

Reinsurance receivables
 
307.4

Income tax assets, net
 
84.4

Other assets
 
2.8

Liabilities for insurance products
 
(3,201.3
)
Other liabilities
 
(199.1
)
Investment borrowings
 
(383.4
)
Accumulated other comprehensive income
 
(240.5
)
Net assets being sold
 
494.6

Loss before taxes
 
(272.6
)
Tax expense related to tax gain on sale
 
21.6

Previously unrecognized tax benefit now recognized as a result of the gain
 
(7.4
)
Valuation allowance release related to the gain
 
(14.2
)
Valuation allowance increase related to the decrease in projected future taxable income
 
19.4

Net loss
 
$
(292.0
)


Because the tax basis of CLIC is lower than the estimated cash proceeds, the transaction will generate a taxable gain and estimated tax expense of $21.6 million (subject to further adjustment based on the determination of the final sales price and net proceeds from the sale). Fully offsetting the tax is $7.4 million of previously unrecognized tax benefits (pertaining to a corporate matter unrelated to the sale of CLIC) which may now be recognized and $14.2 million of a valuation allowance release pertaining to net operating loss carryforwards ("NOLs") which may now be utilized. However, the disposition of CLIC is expected to result in a net reduction to CNO's taxable income in future periods which also requires us to establish a valuation allowance of $19.4 million.

The Stock Purchase Agreement also provided that, at the closing, Bankers Life and Casualty Company ("Bankers Life"), an indirect wholly owned subsidiary of CNO, recapture the life insurance business written by Bankers Life that was reinsured by Wilton Re.  The recapture agreement was conditioned on the concurrent consummation of the closing. On July 1, 2014, Bankers Life paid $28.0 million to recapture the life insurance business from Wilton Re and recognized a gain (net of income taxes) of $16.9 million in the third quarter of 2014 as a result of the recapture. Refer to the note to the consolidated financial statements entitled "Consolidated Statement of Cash Flows" for additional information.
OUT OF PERIOD ADJUSTMENTS
OUT-OF-PERIOD ADJUSTMENTS
OUT-OF-PERIOD ADJUSTMENTS

In the nine months ended September 30, 2014, we recorded the net effect of an out-of-period adjustment related to the calculation of incentive compensation accruals which increased other operating costs and expenses by $2.4 million, decreased tax expense by $.8 million and increased our net loss by $1.6 million (or 1 cent per diluted share). In the three months ended March 31, 2013, we recorded the net effect of an out-of-period adjustment which increased our insurance policy benefits by $6.7 million, increased amortization expense by $2.5 million, decreased tax expense by $3.2 million and decreased our net income by $6.0 million (or 2 cents per diluted share). In the three months ended September 30, 2013, we recorded an out-of-period increase to tax expense of $2.2 million (or 1 cent per diluted share) to reflect corrections to previously filed federal tax returns related to Internal Revenue Service ("IRS") examinations. We evaluated these adjustments taking into account both qualitative and quantitative factors and considered the impact of these adjustments in relation to each period, as well as the periods in which they originated. The impact of recognizing these adjustments in prior years was not significant to any individual period. Management believes these adjustments are immaterial to the consolidated financial statements and all previously issued financial statements.
INVESTMENTS
INVESTMENTS
INVESTMENTS

We classify our fixed maturity securities into one of two categories: (i) "available for sale" (which we carry at estimated fair value with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders' equity); or (ii) "trading" (which we carry at estimated fair value with changes in such value recognized as net investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios)).

Our trading securities include: (i) investments purchased with the intent of selling in the near term to generate income; and (ii) investments supporting certain insurance liabilities (including investments backing the market strategies of our multibucket annuity products) and certain reinsurance agreements. The change in fair value of these securities is recognized in income from policyholder and reinsurer accounts and other special-purpose portfolios (a component of net investment income). Investment income from trading securities backing certain insurance liabilities and certain reinsurance agreements is substantially offset by the change in insurance policy benefits related to certain products and agreements.  The trading account also includes certain fixed maturity securities containing embedded derivatives for which we have elected the fair value option. The change in value of these securities is recognized in realized investment gains (losses).  Our trading securities totaled $235.0 million and $247.6 million at September 30, 2014 and December 31, 2013, respectively.

Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments.  These amounts, included in shareholders' equity as of September 30, 2014 and December 31, 2013, were as follows (dollars in millions):

 
September 30,
2014
 
December 31,
2013
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
$
5.9

 
$
6.5

 
Net unrealized gains on all other investments
2,028.7

 
1,322.6

(b)
Adjustment to present value of future profits (a)
(151.9
)
 
(47.7
)
 
Adjustment to deferred acquisition costs
(380.7
)
 
(137.0
)
 
Adjustment to insurance liabilities
(160.9
)
 
—

 
Unrecognized net loss related to deferred compensation plan
(6.1
)
 
(7.1
)
 
Deferred income tax liabilities
(475.7
)
 
(405.5
)
 
Accumulated other comprehensive income
$
859.3

 
$
731.8

 
________
(a)
The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003, the date Conseco, Inc., an Indiana corporation (our "Predecessor"), emerged from bankruptcy.
(b)
At December 31, 2013, net unrealized gains on all other investments included $226.2 million related to CLIC which was treated as held for sale effective January 1, 2014 and ultimately sold on July 1, 2014. The unrealized gains (losses) presented as a component of accumulated other comprehensive income for the nine months ended September 30, 2014 were reduced by $226.2 million for the unrealized gains on CLIC's portfolio as of January 1, 2014.

At September 30, 2014, adjustments to the present value of future profits, deferred acquisition costs, insurance liabilities and deferred tax assets included $(130.3) million, $(142.4) million, $(160.9) million and $154.2 million, respectively, for premium deficiencies that would exist on certain long-term health products if unrealized gains on the assets backing such products had been realized and the proceeds from the sales of such assets were invested at then current yields.

At September 30, 2014, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, and equity securities were as follows (dollars in millions):
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
 
Other-than-temporary impairments included in accumulated other comprehensive income
Corporate securities
$
12,378.0

 
$
1,593.3

 
$
(44.1
)
 
$
13,927.2

 
$
—

United States Treasury securities and obligations of United States government corporations and agencies
137.5

 
14.3

 
(.3
)
 
151.5

 
—

States and political subdivisions
1,977.4

 
232.1

 
(5.2
)
 
2,204.3

 
—

Debt securities issued by foreign governments
1.8

 
—

 
—

 
1.8

 
—

Asset-backed securities
1,228.4

 
83.7

 
(3.1
)
 
1,309.0

 
—

Collateralized debt obligations
323.7

 
3.9

 
(.7
)
 
326.9

 
—

Commercial mortgage-backed securities
1,210.3

 
78.7

 
(.6
)
 
1,288.4

 
—

Mortgage pass-through securities
7.7

 
.4

 
—

 
8.1

 
—

Collateralized mortgage obligations
1,305.2

 
89.5

 
(1.4
)
 
1,393.3

 
(3.3
)
Total fixed maturities, available for sale
$
18,570.0

 
$
2,095.9

 
$
(55.4
)
 
$
20,610.5

 
$
(3.3
)
Equity securities
$
360.8

 
$
13.0

 
$
(1.0
)
 
$
372.8

 
 


The following table sets forth the amortized cost and estimated fair value of fixed maturities, available for sale, at September 30, 2014, by contractual maturity.  Actual maturities will differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.  In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as "structured securities") frequently include provisions for periodic principal payments and permit periodic unscheduled payments.

 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
210.9

 
$
216.3

Due after one year through five years
1,829.0

 
2,017.4

Due after five years through ten years
2,847.4

 
3,077.5

Due after ten years
9,607.4

 
10,973.6

Subtotal
14,494.7

 
16,284.8

Structured securities
4,075.3

 
4,325.7

Total fixed maturities, available for sale
$
18,570.0

 
$
20,610.5



Net Realized Investment Gains (Losses)

The following table sets forth the net realized investment gains (losses) for the periods indicated (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Fixed maturity securities, available for sale:
 
 
 
 
 
 
 
Gross realized gains on sale
$
8.3

 
$
12.9

 
$
54.7

 
$
40.3

Gross realized losses on sale
(2.6
)
 
(6.4
)
 
(11.1
)
 
(9.8
)
Impairments:
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
—

 
(1.6
)
 
—

 
(1.6
)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
—

 
—

 
—

 
—

Net impairment losses recognized
—

 
(1.6
)
 
—

 
(1.6
)
Net realized investment gains from fixed maturities
5.7

 
4.9

 
43.6

 
28.9

Equity securities
1.9

 
—

 
9.8

 
—

Commercial mortgage loans
(1.2
)
 
(1.7
)
 
(.1
)
 
(1.0
)
Impairments of mortgage loans and other investments
(2.8
)
 
(1.3
)
 
(14.7
)
 
(1.9
)
Other
.4

 
(2.0
)
 
1.2

 
(7.6
)
Net realized investment gains (losses)
$
4.0

 
$
(.1
)
 
$
39.8

 
$
18.4



During the first nine months of 2014, we recognized net realized investment gains of $39.8 million, which were comprised of $48.4 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $1.7 billion, the increase in fair value of certain fixed maturity investments with embedded derivatives of $6.1 million and $14.7 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

During the first nine months of 2013, we recognized net realized investment gains of $18.4 million, which were comprised of $30.7 million of net gains from the sales of investments (primarily fixed maturities) with proceeds of $1.7 billion and the decrease in fair value of certain fixed maturity investments with embedded derivatives of $8.8 million and $3.5 million of writedowns of investments for other than temporary declines in fair value recognized through net income.

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

During the first nine months of 2014, the $11.1 million of realized losses on sales of $213.1 million of fixed maturity securities, available for sale, included:  (i) $.7 million of losses related to the sales of securities issued by state and political subdivisions; and (ii) $10.4 million of additional losses primarily related to various corporate securities.  Securities are generally sold at a loss following unforeseen issue-specific events or conditions or shifts in perceived risks.  These reasons include but are not limited to:  (i) changes in the investment environment; (ii) expectation that the market value could deteriorate further; (iii) desire to reduce our exposure to an asset class, an issuer or an industry; (iv) prospective or actual changes in credit quality; or (v) changes in expected cash flows.

During the first nine months of 2014, we recognized $14.7 million of impairment losses recorded in earnings which included: (i) a $3.9 million writedown of a commercial mortgage loan related to a property with expected occupancy challenges; and (ii) $10.8 million of impairments related to two legacy private company investments where earnings and cash flows have not met the expectations assumed in our previous valuations.

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

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

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

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

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

The remaining noncredit impairment, which is recorded in accumulated other comprehensive income, is the difference between the security's estimated fair value and our best estimate of future cash flows discounted at the effective interest rate prior to impairment.  The remaining noncredit impairment typically represents changes in the market interest rates, current market liquidity and risk premiums.  As of September 30, 2014, other-than-temporary impairments included in accumulated other comprehensive income of $3.3 million (before taxes and related amortization) related to structured securities.

The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and nine months ended September 30, 2014, and 2013 (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Credit losses on fixed maturity securities, available for sale, beginning of period
$
(1.2
)
 
$
(1.5
)
 
$
(1.3
)
 
$
(1.6
)
Add:  credit losses on other-than-temporary impairments not previously recognized
—

 
—

 
—

 
—

Less:  credit losses on securities sold
.1

 
.1

 
.2

 
.2

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

 
—

 
—

 
—

Add:  credit losses on previously impaired securities
—

 
—

 
—

 
—

Less:  increases in cash flows expected on previously impaired securities
—

 
—

 
—

 
—

Credit losses on fixed maturity securities, available for sale, end of period
$
(1.1
)
 
$
(1.4
)
 
$
(1.1
)
 
$
(1.4
)
__________
(a)
Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.

Gross Unrealized Investment Losses

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

The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 2014 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
1.0

 
$
—

 
$
18.3

 
$
(.3
)
 
$
19.3

 
$
(.3
)
States and political subdivisions
 
66.1

 
(1.0
)
 
90.6

 
(4.2
)
 
156.7

 
(5.2
)
Corporate securities
 
871.1

 
(20.7
)
 
311.7

 
(23.4
)
 
1,182.8

 
(44.1
)
Asset-backed securities
 
116.7

 
(1.1
)
 
69.5

 
(2.0
)
 
186.2

 
(3.1
)
Collateralized debt obligations
 
91.2

 
(.7
)
 
—

 
—

 
91.2

 
(.7
)
Commercial mortgage-backed securities
 
35.9

 
(.2
)
 
19.1

 
(.4
)
 
55.0

 
(.6
)
Mortgage pass-through securities
 
.9

 
—

 
.8

 
—

 
1.7

 
—

Collateralized mortgage obligations
 
113.6

 
(1.2
)
 
10.2

 
(.2
)
 
123.8

 
(1.4
)
Total fixed maturities, available for sale
 
$
1,296.5

 
$
(24.9
)
 
$
520.2

 
$
(30.5
)
 
$
1,816.7

 
$
(55.4
)
Equity securities
 
$
128.3

 
$
(1.0
)
 
$
.5

 
$
—

 
$
128.8

 
$
(1.0
)

The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2013 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
23.8

 
$
(.6
)
 
$
—

 
$
—

 
$
23.8

 
$
(.6
)
States and political subdivisions
 
473.6

 
(30.3
)
 
79.2

 
(8.7
)
 
552.8

 
(39.0
)
Corporate securities
 
2,432.4

 
(137.7
)
 
170.3

 
(20.8
)
 
2,602.7

 
(158.5
)
Asset-backed securities
 
308.4

 
(6.5
)
 
32.5

 
(.7
)
 
340.9

 
(7.2
)
Collateralized debt obligations
 
46.7

 
(.5
)
 
—

 
—

 
46.7

 
(.5
)
Commercial mortgage-backed securities
 
161.8

 
(5.8
)
 
—

 
—

 
161.8

 
(5.8
)
Mortgage pass-through securities
 
1.6

 
—

 
1.6

 
—

 
3.2

 
—

Collateralized mortgage obligations
 
121.8

 
(1.6
)
 
2.2

 
—

 
124.0

 
(1.6
)
Total fixed maturities, available for sale
 
$
3,570.1

 
$
(183.0
)
 
$
285.8

 
$
(30.2
)
 
$
3,855.9

 
$
(213.2
)
Equity securities
 
$
.5

 
$
—

 
$
—

 
$
—

 
$
.5

 
$
—



Based on management's current assessment of investments with unrealized losses at September 30, 2014, the Company believes the issuers of the securities will continue to meet their obligations (or with respect to equity-type securities, the investment value will recover to its cost basis).  While we do not have the intent to sell securities with unrealized losses and it is not more likely than not that we will be required to sell securities with unrealized losses prior to their anticipated recovery, our intent on an individual security may change, based upon market or other unforeseen developments.  In such instances, if a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we had the intent to sell the security before its anticipated recovery.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE

A reconciliation of net income and shares used to calculate basic and diluted earnings per share is as follows (dollars in millions and shares in thousands):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss) for basic earnings per share
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
372.0

Add:  interest expense on 7.0% Senior Debentures due 2016 (the "7.0% Debentures"), net of income taxes
—

 
—

 
—

 
1.6

Net income (loss) for diluted earnings per share
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
373.6

Shares:
 

 
 

 
 
 
 
Weighted average shares outstanding for basic earnings per share
210,525

 
222,876

 
215,790

 
221,819

Effect of dilutive securities on weighted average shares:
 

 
 

 
 
 
 
7.0% Debentures
—

 
839

 
—

 
7,707

Stock options, restricted stock and performance units
2,447

 
2,858

 
—

 
2,699

Warrants (a)
2,486

 
2,774

 
—

 
2,344

Dilutive potential common shares
4,933

 
6,471

 
—

 
12,750

Weighted average shares outstanding for diluted earnings per share
215,458

 
229,347

 
215,790

 
234,569


________
(a)
All outstanding warrants were repurchased in September 2014 as further discussed in the note to the consolidated financial statements entitled "Changes in Common Stock." Accordingly, the warrants will have no dilutive effect in periods beginning after September 30, 2014.

In the nine months ended September 30, 2014, 5,435 thousand equivalent common shares (comprised of 2,458 thousand shares related to stock options, restricted stock and performance units and 2,977 thousand shares related to warrants) were not included in the diluted weighted average shares outstanding, because their inclusion would have been antidilutive in such period due to the net loss recognized by the Company resulting from the sale of CLIC.

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period.  Restricted shares (including our performance units) are not included in basic earnings per share until vested.  Diluted earnings per share reflect the potential dilution that could occur if outstanding stock options and warrants were exercised and restricted stock was vested.  The dilution from options, warrants and restricted shares is calculated using the treasury stock method.  Under this method, we assume the proceeds from the exercise of the options and warrants (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the average market price during the period, reducing the dilutive effect of the exercise of the options and warrants (or the vesting of the restricted stock and performance units). Initially, the 7.0% Debentures were convertible into 182.1494 shares of our common stock for each $1,000 principal amount of 7.0% Debentures, which was equivalent to an initial conversion price of approximately $5.49 per share. The conversion rate was subject to adjustment following the occurrence of certain events (including the payment of dividends on our common stock) in accordance with the terms of an indenture dated as of October 16, 2009. On July 1, 2013, the Company issued a conversion right termination notice to holders of the 7.0% Debentures and the right to convert the 7.0% Debentures into shares of its common stock was terminated effective July 30, 2013.
BUSINESS SEGMENTS
BUSINESS SEGMENTS
BUSINESS SEGMENTS

Prior to 2014, the Company managed its business through the following operating segments: Bankers Life, Washington National and Colonial Penn, which are defined on the basis of product distribution; Other CNO Business, comprised primarily of products we no longer sell actively; and corporate operations, comprised of holding company activities and certain noninsurance company businesses.  As a result of the sale of CLIC which was completed on July 1, 2014 and the coinsurance agreements to cede certain long-term care business effective December 31, 2013 (as further described in the note to the consolidated financial statements entitled "Reinsurance"), management has changed the manner in which it disaggregates the Company's operations for making operating decisions and assessing performance. In periods prior to 2014: (i) the results in the Washington National segment have been adjusted to include the results from the business in the Other CNO Business segment that are being retained; (ii) the Other CNO Business segment included only the long-term care business that was ceded effective December 31, 2013 and the overhead expense of CLIC that is expected to continue after the completion of the sale; and (iii) the CLIC business being sold is excluded from our analysis of business segment results. Beginning on January 1, 2014: (i) the overhead expense of CLIC that is expected to continue after the completion of the sale has been reallocated primarily to the Bankers Life and Washington National segments; (ii) there is no longer an Other CNO Business segment; and (iii) the CLIC business being sold continues to be excluded from our analysis of business segment results. After the completion of the sale of CLIC: (i) the Bankers Life segment includes the results of certain life insurance business that was recaptured from Wilton Re; and (ii) the revenues and expenses associated with a transition services agreement and a special support services agreement with Wilton Re are included in our non-operating earnings. Our prior period segment disclosures have been revised to reflect management's current view of the Company's operating segments.

We measure segment performance by excluding the net loss on the sale of CLIC and gain on reinsurance transactions, the earnings of CLIC prior to being sold, net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), equity in earnings of certain non-strategic investments and earnings attributable to variable interest entities ("VIEs"), net revenue pursuant to transition and support services agreements, loss on extinguishment or modification of debt and income taxes ("pre-tax operating earnings") because we believe that this performance measure is a better indicator of the ongoing business and trends in our business.  Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of net realized investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.

The net loss on the sale of CLIC and gain on related reinsurance transaction, the earnings of CLIC prior to being sold, net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), equity in earnings of certain non-strategic investments and earnings attributable to VIEs, net revenue pursuant to transition and support services agreements and loss on extinguishment or modification of debt depend on market conditions or represent unusual items that do not necessarily relate to the underlying business of our segments.  Net realized investment gains (losses) and fair value changes in embedded derivative liabilities (net of related amortization) may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business.
Operating information by segment was as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy income:
 
 
 
 
 
 
 
Annuities
$
6.6

 
$
5.6

 
$
21.8

 
$
22.1

Health
319.4

 
323.3

 
970.4

 
990.0

Life
90.4

 
78.5

 
248.6

 
232.4

Net investment income (a)
231.2

 
235.4

 
703.2

 
723.7

Fee revenue and other income (a)
7.0

 
5.8

 
18.1

 
13.5

Total Bankers Life revenues
654.6

 
648.6

 
1,962.1

 
1,981.7

Washington National:
 

 
 

 
 
 
 
Insurance policy income:
 

 
 

 
 
 
 
Annuities
.9

 
6.5

 
3.3

 
9.7

Health
147.1

 
147.0

 
444.8

 
438.2

Life
6.0

 
5.7

 
18.2

 
17.3

Net investment income (a)
65.2

 
72.9

 
206.0

 
220.6

Fee revenue and other income (a)
.3

 
.3

 
.7

 
.7

Total Washington National revenues
219.5

 
232.4

 
673.0

 
686.5

Colonial Penn:
 

 
 

 
 
 
 
Insurance policy income:
 

 
 

 
 
 
 
Health
.8

 
1.1

 
2.7

 
3.3

Life
60.9

 
57.0

 
181.2

 
169.7

Net investment income (a)
10.3

 
10.2

 
31.5

 
30.0

Fee revenue and other income (a)
.2

 
.2

 
.7

 
.6

Total Colonial Penn revenues
72.2

 
68.5

 
216.1

 
203.6

Other CNO Business:
 

 
 

 
 
 
 
Insurance policy income - health
—

 
5.9

 
—

 
18.2

Net investment income (a)
—

 
8.0

 
—

 
24.8

Total Other CNO Business revenues
—

 
13.9

 
—

 
43.0

Corporate operations:
 

 
 

 
 
 
 
Net investment income
(1.0
)
 
11.0

 
11.7

 
25.6

Fee and other income
1.9

 
1.7

 
4.6

 
4.9

Total corporate revenues
0.9

 
12.7

 
16.3

 
30.5

Total revenues
947.2

 
976.1

 
2,867.5

 
2,945.3


(continued on next page)

(continued from previous page)
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Expenses:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy benefits
$
394.9

 
$
427.3

 
$
1,237.8

 
$
1,331.9

Amortization
47.1

 
39.7

 
140.7

 
139.9

Interest expense on investment borrowings
2.0

 
1.8

 
5.8

 
4.9

Other operating costs and expenses
98.8

 
93.5

 
294.4

 
277.5

Total Bankers Life expenses
542.8

 
562.3

 
1,678.7

 
1,754.2

Washington National:
 

 
 

 
 
 
 
Insurance policy benefits
129.5

 
141.6

 
394.1

 
409.6

Amortization
14.8

 
14.4

 
47.1

 
47.7

Interest expense on investment borrowings
.4

 
.5

 
1.3

 
1.5

Other operating costs and expenses
47.2

 
42.9

 
139.5

 
124.9

Total Washington National expenses
191.9

 
199.4

 
582.0

 
583.7

Colonial Penn:
 

 
 

 
 
 
 
Insurance policy benefits
41.1

 
39.8

 
129.0

 
124.0

Amortization
3.7

 
3.7

 
11.5

 
11.1

Other operating costs and expenses
27.0

 
29.2

 
77.6

 
76.9

Total Colonial Penn expenses
71.8

 
72.7

 
218.1

 
212.0

Other CNO Business:
 

 
 

 
 
 
 
Insurance policy benefits
—

 
13.5

 
—

 
44.4

Other operating costs and expenses
—

 
6.1

 
—

 
18.8

Total Other CNO Business expenses
—

 
19.6

 
—

 
63.2

Corporate operations:
 

 
 

 
 
 
 
Interest expense on corporate debt
10.9

 
11.7

 
33.1

 
39.9

Interest expense on investment borrowings
—

 
—

 
—

 
.1

Other operating costs and expenses
10.0

 
3.3

 
46.9

 
15.6

Total corporate expenses
20.9

 
15.0

 
80.0

 
55.6

Total expenses
827.4

 
869.0

 
2,558.8

 
2,668.7

Pre-tax operating earnings by segment:
 

 
 

 
 
 
 
Bankers Life
111.8

 
86.3

 
283.4

 
227.5

Washington National
27.6

 
33.0

 
91.0

 
102.8

Colonial Penn
.4

 
(4.2
)
 
(2.0
)
 
(8.4
)
Other CNO Business
—

 
(5.7
)
 
—

 
(20.2
)
Corporate operations
(20.0
)
 
(2.3
)
 
(63.7
)
 
(25.1
)
Pre-tax operating earnings
$
119.8

 
$
107.1

 
$
308.7

 
$
276.6

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

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

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Total segment revenues                                                                                            
$
947.2

 
$
976.1

 
$
2,867.5

 
$
2,945.3

Net realized investment gains (losses)                                           
4.0

 
(1.7
)
 
37.0

 
13.1

Revenues related to certain non-strategic investments and earnings attributable to VIEs
8.3

 
9.0

 
21.9

 
24.1

Fee revenue related to transition and support services agreements
7.5

 
—

 
7.5

 
—

Revenues of CLIC prior to being sold
—

 
110.4

 
210.8

 
335.4

Consolidated revenues                                                                                       
967.0

 
1,093.8

 
3,144.7

 
3,317.9

 
 
 
 
 
 
 
 
Total segment expenses                                                                                            
827.4

 
869.0

 
2,558.8

 
2,668.7

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

 
(4.9
)
 
25.3

 
(37.0
)
Amortization related to fair value changes in embedded derivative liabilities
.1

 
1.5

 
(6.8
)
 
13.0

Amortization related to net realized investment gains
.1

 
.1

 
.6

 
1.3

Expenses related to certain non-strategic investments and earnings attributable to VIEs
10.9

 
11.8

 
30.7

 
31.7

Loss on extinguishment or modification of debt
—

 
—

 
.6

 
65.4

Net loss on sale of CLIC and gain on reinsurance transactions
(32.1
)
 
—

 
242.7

 
—

Expenses related to transition and support services agreements
6.2

 
—

 
6.2

 
—

Expenses of CLIC prior to being sold
—

 
101.9

 
187.4

 
311.1

Consolidated expenses                                                                                       
812.6

 
979.4

 
3,045.5

 
3,054.2

Income before tax
154.4

 
114.4

 
99.2

 
263.7

Income tax expense:
 
 
 
 
 
 
 
Tax expense on period income
53.8

 
38.1

 
133.1

 
113.9

Valuation allowance for deferred tax assets and other tax items
(16.8
)
 
(206.7
)
 
(1.4
)
 
(222.2
)
Net income (loss)
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
372.0

ACCOUNTING FOR DERIVATIVES
ACCOUNTING FOR DERIVATIVES
ACCOUNTING FOR DERIVATIVES

Our fixed index annuity products provide a guaranteed minimum rate of return and a higher potential return that is based on a percentage (the "participation rate") of the amount of increase in the value of a particular index, such as the Standard & Poor's 500 Index, over a specified period.  Typically, on each policy anniversary date, a new index period begins.  We are generally able to change the participation rate at the beginning of each index period during a policy year, subject to contractual minimums.  We typically buy call options (including call spreads) referenced to the applicable indices in an effort to offset or hedge potential increases to policyholder benefits resulting from increases in the particular index to which the policy's return is linked.  We reflect changes in the estimated fair value of these options in net investment income (classified as investment income from policyholder and reinsurer accounts and other special-purpose portfolios).  Net investment gains (losses) related to fixed index products were $42.3 million and $102.8 million in the nine months ended September 30, 2014 and 2013, respectively. These amounts were substantially offset by a corresponding change to insurance policy benefits.  The estimated fair value of these options was $98.3 million and $156.2 million at September 30, 2014 and December 31, 2013, respectively.  We classify these instruments as other invested assets.

The Company accounts for the options attributed to the policyholder for the estimated life of the annuity contract as embedded derivatives.  The Company purchases options to hedge liabilities for the next policy period approximately on each policy anniversary date and must estimate the fair value of the forward embedded options related to the policies.  These accounting requirements often create volatility in the earnings from these products.  We record the changes in the fair values of the embedded derivatives in earnings as a component of insurance policy benefits.  The fair value of these derivatives, which are classified as "policyholder account balances", was $992.2 million and $903.7 million at September 30, 2014 and December 31, 2013, respectively. We recognized an increase to earnings of $.1 million and $3.4 million in the third quarters of 2014 and 2013, respectively, and $18.5 million and $24.0 million in the first nine months of 2014 and 2013, respectively, from the volatility caused by the accounting requirements to record embedded options at fair value.

If the counterparties for the call options we hold fail to meet their obligations, we may have to recognize a loss.  We limit our exposure to such a loss by diversifying among several counterparties believed to be strong and creditworthy.  At September 30, 2014, all of our counterparties were rated "BBB" or higher by Standard & Poor's Corporation ("S&P").

In periods prior to the second quarter of 2014, we were required to establish an embedded derivative related to a modified coinsurance agreement which ceded the risks of a block of interest sensitive life business. We recaptured this block in the second quarter of 2014 resulting in a gain of $3.8 million. Prior to the recapture of this block, we maintained the investments related to the modified coinsurance agreement in our trading securities account, which we carried at estimated fair value with changes in such value recognized as investment income.  Such trading securities were sold in the second quarter of 2014 in conjunction with the reinsurance recapture.

We purchase certain fixed maturity securities that contain embedded derivatives that are required to be bifurcated from the instrument and held at fair value on the consolidated balance sheet. For certain of these securities, we have elected the fair value option to carry the entire security at fair value with changes in fair value reported in net income for operational ease. Such securities totaled $204.8 million and $180.6 million at September 30, 2014 and December 31, 2013, respectively.
REINSURANCE
REINSURANCE
REINSURANCE

The cost of reinsurance ceded totaled $34.1 million and $51.1 million in the third quarters of 2014 and 2013, respectively, and $141.6 million and $158.2 million in the first nine months of 2014 and 2013, respectively.  We deduct this cost from insurance policy income.  Reinsurance recoveries netted against insurance policy benefits totaled $35.1 million and $51.9 million in the third quarters of 2014 and 2013, respectively, and $155.9 million and $144.6 million in the first nine months of 2014 and 2013, respectively.

From time-to-time, we assume insurance from other companies.  Any costs associated with the assumption of insurance are amortized consistent with the method used to amortize deferred acquisition costs.  Reinsurance premiums assumed totaled $10.0 million and $4.0 million in the third quarters of 2014 and 2013, respectively, and $24.7 million and $33.1 million in the first nine months of 2014 and 2013, respectively.  Reinsurance premiums included amounts assumed pursuant to marketing and quota-share agreements with Coventry Health Care ("Coventry") of $6.8 million and $19.7 million in the nine months ended September 30, 2014 and 2013, respectively. In August 2013, we received a notice of Coventry's intent to terminate the Medicare Part D prescription drug plan ("PDP") quota-share reinsurance agreement whereby we assumed a portion of the risk related to the PDP business sold through our Bankers Life segment. The PDP premiums received in 2014 (all of which were received in the first quarter of 2014) represent adjustments on such business related to periods prior to the termination of the agreement. We continue to receive distribution income from Coventry for PDP business sold through our Bankers Life segment.

In December 2013, two of our insurance subsidiaries with long-term care business in the Other CNO Business segment entered into 100% coinsurance agreements ceding $495 million of long-term care reserves to Beechwood Re Ltd. ("BRe"). Pursuant to the agreements, the insurance subsidiaries paid an additional premium of $96.9 million to BRe and an amount equal to the related net liabilities. The insurance subsidiaries' ceded reserve credits are secured by assets in market-value trusts subject to a 7% over-collateralization, investment guidelines and periodic true-up provisions. Future payments into the trusts to maintain collateral requirements are the responsibility of BRe.

In the second quarter of 2014, we recaptured a block of interest-sensitive life business that was previously ceded under a modified coinsurance agreement. The recapture of this block resulted in a gain related to reinsurance transaction of $3.8 million.
INCOME TAXES
INCOME TAXES
INCOME TAXES

The Company's interim tax expense is based upon the estimated annual effective tax rate for the respective period. Under authoritative guidance, certain items are required to be excluded from the estimated annual effective tax rate calculation. Such items include changes in judgment about the realizability of deferred tax assets resulting from changes in projections of income expected to be available in future years, and items deemed to be unusual, infrequent, or that can not be reliably estimated. In these cases, the actual tax expense or benefit applicable to that item is treated discretely and is reported in the same period as the related item. Discrete items include: (i) the loss on the sale of CLIC of $272.6 million in the nine months ended September 30, 2014; and (ii) the loss on extinguishment debt of $65.4 million in the nine months ended September 30, 2013. The components of income tax expense are as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Current tax expense
$
5.4

 
$
3.4

 
$
11.5

 
$
8.8

Deferred tax expense
48.4

 
34.7

 
121.6

 
106.5

Valuation allowance applicable to current year income
(3.0
)
 
(9.8
)
 
(3.0
)
 
(9.8
)
Income tax expense calculated based on estimated annual effective tax rate
50.8

 
28.3

 
130.1

 
105.5

Income tax expense (benefit) on discrete items:
 
 
 
 
 
 
 
Related to the sale of CLIC:
 
 
 
 
 
 
 
Tax expense related to tax gain on sale
—

 
—

 
21.6

 
—

Previously unrecognized tax benefit recognized as a result of the gain
—

 
—

 
(7.4
)
 
—

Valuation allowance release related to the gain
—

 
—

 
(14.2
)
 
—

Valuation allowance increase related to the decrease in projected future taxable income
—

 
—

 
19.4

 
—

Valuation allowance reduction resulting from the realization of capital gains and utilization of loss carryforwards
(.4
)
 
(118.0
)
 
(4.4
)
 
(133.5
)
Valuation allowance reduction applicable to the settlement with the IRS regarding the classification of a portion of the cancellation of indebtedness income
—

 
(71.8
)
 
—

 
(71.8
)
Valuation allowance reduction related to the increase in projected future taxable income
(12.6
)
 
—

 
(12.6
)
 
—

Deferred tax benefit related to loss on extinguishment or modification of debt
—

 
—

 
—

 
(1.4
)
Other items
(.8
)
 
(7.1
)
 
(.8
)
 
(7.1
)
Total income tax expense
$
37.0

 
$
(168.6
)
 
$
131.7

 
$
(108.3
)


A reconciliation of the U.S. statutory corporate tax rate to the estimated annual effective rate, before discrete items, reflected in the consolidated statement of operations is as follows:
 
 
Nine months ended
 
September 30,
 
2014
 
2013
U.S. statutory corporate rate
35.0
 %
 
35.0
 %
Valuation allowance
(.7
)
 
(3.5
)
Non-taxable income and nondeductible benefits, net
(.8
)
 
(.9
)
State taxes
1.5

 
1.4

Estimated annual effective tax rate
35.0
 %
 
32.0
 %


The components of the Company's income tax assets and liabilities are summarized below (dollars in millions):

 
September 30,
2014
 
December 31,
2013
Deferred tax assets:
 
 
 
Net federal operating loss carryforwards
$
1,097.6

 
$
1,240.2

Net state operating loss carryforwards
17.2

 
20.0

Tax credits
44.2

 
43.9

Capital loss carryforwards
—

 
13.4

Deductible temporary differences:


 


Investments
62.3

 
74.3

Insurance liabilities
566.5

 
723.8

Other
56.2

 
64.7

Gross deferred tax assets
1,844.0

 
2,180.3

Deferred tax liabilities:
 

 
 

Present value of future profits and deferred acquisition costs
(319.1
)
 
(306.8
)
Accumulated other comprehensive income
(475.7
)
 
(405.5
)
Gross deferred tax liabilities
(794.8
)
 
(712.3
)
Net deferred tax assets before valuation allowance
1,049.2

 
1,468.0

Valuation allowance
(280.0
)
 
(294.8
)
Net deferred tax assets
769.2

 
1,173.2

Current income taxes accrued
(38.1
)
 
(26.0
)
Income tax assets, net
$
731.1

 
$
1,147.2



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

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

Based on our assessment, it appears more likely than not that $769.2 million of our deferred tax assets will be realized through future taxable earnings. We will continue to assess the need for a valuation allowance in the future. If future results are less than projected, a valuation allowance may be required to reduce the deferred tax asset, which could have a material impact on our results of operations in the period in which it is recorded.
 
Our assessment of deferred tax assets is adjusted under our deferred tax valuation model to reflect changes in our projections of future taxable income. For example, such projected future taxable income has been adjusted to reflect the investment trading strategies and the coinsurance agreements to cede certain long-term care business, both completed in 2013. In addition, projected taxable income has been adjusted to reflect the sale of CLIC, which is expected to result in a net reduction to CNO's taxable income in future periods and required us to establish a valuation allowance of $19.4 million in the first nine months of 2014. In the third quarter of 2014, we have identified reductions to the valuation allowance of $4.0 million related to our expected 2014 taxable income exceeding the amount previously reflected in our tax valuation model. This reduction is reflected in the estimate of our annual effective tax rate and, therefore, will be recognized as follows: $3.0 million in the third quarter of 2014; and $1.0 million in the fourth quarter of 2014.

Our September 30, 2014 projection of future taxable income for purposes of determining the valuation allowance is based on the normalized average annual taxable income for the last three years plus: (i) a 3 percent core growth factor (consistent with the prior year assumption); and (ii) an additional 1 percent increase which primarily reflects the impact of the investment trading strategies completed in 2013 (which grade off over time). The aggregate 4 percent factor is used to increase taxable income over the next five years, and level taxable income is assumed thereafter. Our estimated projected taxable income is based on evidence we consider to be objective and verifiable. In the projections used for our September 30, 2014 analysis, our three year average taxable income increased to approximately $320 million, compared to $315 million in our prior projections. Approximately $50 million of the current three year average relates to non-life taxable income and $270 million relates to life income.

As a result of the higher levels of future years taxable income, we recognized a reduction to the allowance for deferred tax assets of $12.6 million in the third quarter of 2014. We have evaluated each component of the deferred tax asset and assessed the effect of limitations and/or interpretations on the value of each component and have concluded that it is more likely than not that the components recognized will be fully realized in the future.

Recovery of our deferred tax asset is dependent on achieving the level of future taxable income projected in our deferred tax valuation model and failure to do so could result in an increase in the valuation allowance in a future period.  Any future increase in the valuation allowance may result in additional income tax expense and reduce shareholders' equity, and such an increase could have a significant impact upon our earnings in the future.  In addition, the use of the Company's NOLs is dependent, in part, on whether the IRS ultimately agrees with the tax position we have taken in our tax returns with respect to the character of the loss recognized as a result of the transfer of the stock of our former subsidiary, Conseco Senior Health Insurance Company ("CSHI"), to Senior Health Care Oversight Trust, an independent trust (the "Independent Trust").

The Internal Revenue Code (the "Code") limits the extent to which losses realized by a non-life entity (or entities) may offset income from a life insurance company (or companies) to the lesser of:  (i) 35 percent of the income of the life insurance company; or (ii) 35 percent of the total loss of the non-life entities (including NOLs of the non-life entities).  There is no similar limitation on the extent to which losses realized by a life insurance entity (or entities) may offset income from a non-life entity (or entities). This limitation is the primary reason a valuation allowance for NOL carryforwards is required.

Section 382 of the Code imposes limitations on a corporation's ability to use its NOLs when the company undergoes an ownership change.  Future transactions and the timing of such transactions could cause an ownership change for Section 382 income tax purposes.  Such transactions may include, but are not limited to, additional repurchases under our securities repurchase program, issuances of common stock and acquisitions or sales of shares of CNO stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future five percent or more of our outstanding common stock for their own account.  Many of these transactions are beyond our control.  If an additional ownership change were to occur for purposes of Section 382, we would be required to calculate an annual restriction on the use of our NOLs to offset future taxable income.  The annual restriction would be calculated based upon the value of CNO's equity at the time of such ownership change, multiplied by a federal long-term tax exempt rate (3.06 percent at September 30, 2014), and the annual restriction could limit our ability to use a substantial portion of our NOLs to offset future taxable income.  We regularly monitor ownership change (as calculated for purposes of Section 382) and, as of September 30, 2014, we were below the 50 percent ownership change level that would trigger further impairment of our ability to utilize our NOLs.

As of September 30, 2014, we had $3.1 billion of federal NOLs. The following table summarizes the expiration dates of our loss carryforwards assuming the IRS ultimately agrees with the position we have taken with respect to the loss on our investment in CSHI (dollars in millions):

Year of expiration
 
Net operating loss carryforwards
 
Total loss
 
 
Life
 
Non-life
 
carryforwards
2018
 
$
47.3

 
$
—

 
$
47.3

2021
 
30.0

 
—

 
30.0

2022
 
152.0

 
—

 
152.0

2023
 
742.6

 
2,073.3

 
2,815.9

2025
 
—

 
115.5

 
115.5

2027
 
—

 
202.6

 
202.6

2028
 
—

 
67.3

 
67.3

2029
 
—

 
205.5

 
205.5

2032
 
—

 
44.0

 
44.0

Subtotal
 
971.9

 
2,708.2

 
3,680.1

Less:
 
 
 
 
 
 
Unrecognized tax benefits
 
(342.9
)
 
(201.2
)
 
(544.1
)
Total
 
$
629.0

 
$
2,507.0

 
$
3,136.0



We had deferred tax assets related to NOLs for state income taxes of $17.2 million and $20.0 million at September 30, 2014 and December 31, 2013, respectively.  The related state NOLs are available to offset future state taxable income in certain states through 2025.

We recognized an $878 million ordinary loss on our investment in CSHI which was worthless when it was transferred to the Independent Trust in 2008. Of this loss, $742 million has been reported as a life loss and $136 million as a non-life loss. The IRS has disagreed with our ordinary loss treatment and believes that it should be treated as a capital loss, subject to a five year carryover. If the IRS position is ultimately determined to be correct, $473 million would have expired unused in 2013. Due to this uncertainty, we have not recognized a tax benefit of $166.0 million. However, if this unrecognized tax benefit would have been recognized, we would also have established a valuation allowance of $41.0 million at September 30, 2014.

Tax years 2004 and 2008 through 2013 are open to examination by the IRS.  The Company's various state income tax returns are generally open for tax years 2011 through 2013 based on the individual state statutes of limitation. Generally, for tax years which generate NOLs, capital losses or tax credit carryforwards, the statute of limitations does not close until the expiration of the statute of limitations for the tax year in which such carryforwards are utilized.
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS

The following notes payable were direct corporate obligations of the Company as of September 30, 2014 and December 31, 2013 (dollars in millions):

 
September 30,
2014
 
December 31,
2013
Senior Secured Credit Agreement (as defined below)
$
541.9

 
$
581.5

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

 
275.0

7.0% Debentures
—

 
3.5

Unamortized discount on Senior Secured Credit Agreement
(2.9
)
 
(3.6
)
Direct corporate obligations
$
814.0

 
$
856.4



Senior Secured Credit Agreement

On September 28, 2012, the Company entered into a new senior secured credit agreement, providing for: (i) a $425.0 million six-year term loan facility ($391.9 million remained outstanding at September 30, 2014); (ii) a $250.0 million four-year term loan facility ($150.0 million remained outstanding at September 30, 2014); and (iii) a $50.0 million three-year revolving credit facility, with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (the "Senior Secured Credit Agreement"). The Senior Secured Credit Agreement is guaranteed by the Subsidiary Guarantors (as defined below) and secured by a first-priority lien (which ranks pari passu with the liens securing the 6.375% Notes) on substantially all of the Company's and the Subsidiary Guarantors' assets. As of September 30, 2014, no amounts have been borrowed under the revolving credit facility.

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

The interest rates with respect to loans under: (i) the six-year term loan facility are, at the Company's option, equal to a eurodollar rate, plus 2.75% per annum, or a base rate, plus 1.75% per annum, subject to a eurodollar rate "floor" of 1.00% and a base rate "floor" of 2.25% (such rate was 3.75% at September 30, 2014); (ii) the four-year term loan facility are, at the Company's option, equal to a eurodollar rate, plus 2.25% per annum, or a base rate, plus 1.25% per annum, subject to a eurodollar rate "floor" of .75% and a base rate "floor" of 2.00% (such rate was 3.00% at September 30, 2014); and (iii) the revolving credit facility will be, at the Company's option, equal to a eurodollar rate, plus 3.00% per annum, or a base rate, plus 2.00% per annum, in each case, with respect to revolving credit facility borrowings only, subject to certain step-downs based on the debt to total capitalization ratio of the Company.

In the first nine months of 2014, we made $39.6 million of scheduled quarterly principal payments due under the Senior Secured Credit Agreement.

On May 30, 2014, the Company completed an amendment to the Senior Secured Credit Agreement to waive the requirement that the net proceeds in excess of $125 million received from the sale of CLIC be used to prepay amounts outstanding under the Senior Secured Credit Agreement. In the second quarter of 2014, we recognized expenses related to the amendment of the Senior Secured Credit Agreement totaling $.4 million which are included in the loss on extinguishment or modification of debt.

The amendment to the Senior Secured Credit Agreement did not impact the restrictions set forth in the 6.375% Indenture dated as of September 28, 2012 (the "6.375% Indenture") for the Company’s 6.375% Notes regarding the Company’s use of the proceeds from the sale of CLIC. Under the Indenture, the net proceeds received by the Company from the sale of CLIC (defined as "Net Available Cash" under the Indenture) may be used to: (i) reinvest in or acquire assets to be used in the insurance business or a related business; or (ii) repay the Senior Secured Credit Agreement. Under the Indenture, any Net Available Cash not so reinvested or applied within 365 days after the closing of the sale of CLIC must be used to make an offer to purchase the outstanding notes at par and, in the interim, may only be invested as set forth in the Indenture. The Company currently plans to reinvest the cash received from the sale of CLIC in its business including the payment on July 1, 2014, of $28.0 million to recapture a block of life insurance business from Wilton Re.

Mandatory prepayments of the Senior Secured Credit Agreement will be required, subject to certain exceptions, in an amount equal to: (i) 100% of the net cash proceeds from certain asset sales or casualty events; (ii) 100% of the net cash proceeds received by the Company or any of its restricted subsidiaries from certain debt issuances; and (iii) 100% of the amount of certain restricted payments made (including any common stock dividends and share repurchases) as defined in the Senior Secured Credit Agreement provided that if, as of the end of the fiscal quarter immediately preceding such restricted payment, the debt to total capitalization ratio is: (x) equal to or less than 25.0%, but greater than 20.0%, the prepayment requirement shall be reduced to 33.33%; or (y) equal to or less than 20.0%, the prepayment requirement shall not apply.

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

The Senior Secured Credit Agreement requires the Company to maintain (each as calculated in accordance with the Senior Secured Credit Agreement): (i) a debt to total capitalization ratio of not more than 27.5 percent (such ratio was 17.6 percent at September 30, 2014); (ii) an interest coverage ratio of not less than 2.50 to 1.00 for each rolling four quarters (or, if less, the number of full fiscal quarters commencing after the effective date of the Senior Secured Credit Agreement) (such ratio was 16.62 to 1.00 for the four quarters ended September 30, 2014); (iii) an aggregate ratio of total adjusted capital to company action level risk-based capital for the Company's insurance subsidiaries of not less than 250 percent (such ratio was 425 percent at September 30, 2014); and (iv) a combined statutory capital and surplus for the Company's insurance subsidiaries of at least $1,300.0 million (combined statutory capital and surplus at September 30, 2014, was $1,806 million).

6.375% Notes

On September 28, 2012, we issued $275.0 million in aggregate principal amount of 6.375% Notes pursuant to the 6.375% Indenture, among the Company, the subsidiary guarantors party thereto (the "Subsidiary Guarantors") and Wilmington Trust, National Association, as trustee and as collateral agent. The net proceeds from the issuance of the 6.375% Notes, together with the net proceeds from the Senior Secured Credit Agreement, were used to repay other outstanding indebtedness and for general corporate purposes. The 6.375% Notes mature on October 1, 2020. Interest on the 6.375% Notes accrues at a rate of 6.375% per annum and is payable semiannually in arrears on April 1 and October 1 of each year, commencing on April 1, 2013. The 6.375% Notes and the guarantees thereof (the "Guarantees") are senior secured obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future senior obligations, and senior to all of the Company's and the Subsidiary Guarantors' future subordinated indebtedness. The 6.375% Notes are secured by a first-priority lien on substantially all of the assets of the Company and the Subsidiary Guarantors, subject to certain exceptions. The 6.375% Notes and the Guarantees are pari passu with respect to security and in right of payment with all of the Company's and the Subsidiary Guarantors' existing and future secured indebtedness under the Senior Secured Credit Agreement. The 6.375% Notes are structurally subordinated to all of the liabilities and preferred stock of each of the Company's insurance subsidiaries, which are not guarantors of the 6.375% Notes.

Under the 6.375% Indenture, the Company can make Restricted Payments (as such term is defined in the 6.375% Indenture) up to a calculated limit, provided that the Company's pro forma risk-based capital ratio exceeds 225% after giving effect to the Restricted Payment and certain other conditions are met. Restricted Payments include, among other items, repurchases of common stock and cash dividends on common stock (to the extent such dividends exceed $30.0 million in the aggregate in any calendar year).

The limit of Restricted Payments permitted under the 6.375% Indenture is the sum of (x) 50% of the Company's "Net Excess Cash Flow" (as defined in the 6.375% Indenture) for the period (taken as one accounting period) from July 1, 2012 to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment, (y) $175.0 million and (z) certain other amounts specified in the 6.375% Indenture. Based on the provisions set forth in the 6.375% Indenture and the Company's Net Excess Cash Flow for the period from July 1, 2012 through September 30, 2014, the Company could have made additional Restricted Payments under this 6.375% Indenture covenant of approximately $172 million as of September 30, 2014. This limitation on Restricted Payments does not apply if the Debt to Total Capitalization Ratio (as defined in the 6.375% Indenture) as of the last day of the Company's most recently ended fiscal quarter for which financial statements are available that immediately precedes the date of any Restricted Payment, calculated immediately after giving effect to such Restricted Payment and any related transactions on a pro forma basis, is equal to or less than 17.5%.

7.0% Debentures

On May 30, 2014, we repurchased the remaining $3.5 million principal amount of the 7.0% Debentures for a purchase price of $3.7 million and recognized a loss on the extinguishment of debt of $.2 million.

Scheduled Repayment of our Direct Corporate Obligations

The scheduled repayment of our direct corporate obligations was as follows at September 30, 2014 (dollars in millions):

Year ending September 30,
 
2015
$
79.2

2016
79.2

2017
4.3

2018
379.2

2019
—

Thereafter
275.0

 
$
816.9

INVESTMENT BORROWINGS
INVESTMENT BORROWINGS
INVESTMENT BORROWINGS

Two of the Company's insurance subsidiaries (Washington National Insurance Company ("Washington National") and Bankers Life) are members of the Federal Home Loan Bank ("FHLB").  As members of the FHLB, Washington National and Bankers Life have the ability to borrow on a collateralized basis from the FHLB.  Washington National and Bankers Life are required to hold certain minimum amounts of FHLB common stock as a condition of membership in the FHLB, and additional amounts based on the amount of the borrowings.  At September 30, 2014, the carrying value of the FHLB common stock was $73.5 million.  As of September 30, 2014, collateralized borrowings from the FHLB totaled $1.5 billion and the proceeds were used to purchase fixed maturity securities.  The borrowings are classified as investment borrowings in the accompanying consolidated balance sheet.  The borrowings are collateralized by investments with an estimated fair value of $1.8 billion at September 30, 2014, which are maintained in a custodial account for the benefit of the FHLB.  Substantially all of such investments are classified as fixed maturities, available for sale, in our consolidated balance sheet.  

The following summarizes the terms of the borrowings from the FHLB by Washington National and Bankers Life (dollars in millions):

Amount
 
Maturity
 
Interest rate at
borrowed
 
date
 
September 30, 2014
$
50.0

 
October 2015
 
Variable rate – 0.504%
100.0

 
June 2016
 
Variable rate – 0.595%
75.0

 
June 2016
 
Variable rate – 0.393%
100.0

 
October 2016
 
Variable rate – 0.412%
50.0

 
November 2016
 
Variable rate – 0.504%
50.0

 
November 2016
 
Variable rate – 0.624%
57.7

 
June 2017
 
Variable rate – 0.586%
50.0

 
August 2017
 
Variable rate – 0.434%
75.0

 
August 2017
 
Variable rate – 0.385%
100.0

 
October 2017
 
Variable rate – 0.666%
50.0

 
November 2017
 
Variable rate – 0.745%
50.0

 
January 2018
 
Variable rate – 0.584%
50.0

 
January 2018
 
Variable rate – 0.573%
50.0

 
February 2018
 
Variable rate – 0.547%
50.0

 
February 2018
 
Variable rate – 0.321%
22.0

 
February 2018
 
Variable rate – 0.568%
100.0

 
May 2018
 
Variable rate – 0.602%
50.0

 
July 2018
 
Variable rate – 0.705%
50.0

 
August 2018
 
Variable rate – 0.354%
50.0

 
January 2019
 
Variable rate – 0.653%
50.0

 
February 2019
 
Variable rate – 0.321%
100.0

 
March 2019
 
Variable rate – 0.634%
21.8

 
July 2019
 
Variable rate – 0.644%
21.8

 
June 2020
 
Fixed rate – 1.960%
28.3

 
August 2021
 
Fixed rate – 2.550%
26.9

 
March 2023
 
Fixed rate – 2.160%
20.5

 
June 2025
 
Fixed rate – 2.940%
$
1,499.0

 
 
 
 


The variable rate borrowings are pre-payable on each interest reset date without penalty.  The fixed rate borrowings are pre-payable subject to payment of a yield maintenance fee based on prevailing market interest rates.  At September 30, 2014, the aggregate yield maintenance fee to prepay all fixed rate borrowings was $.3 million.

Interest expense of $16.2 million and $20.8 million in the first nine months of 2014 and 2013, respectively, was recognized related to total borrowings from the FHLB.

As part of our investment strategy, we may enter into repurchase agreements to increase our investment return. Pursuant to such agreements, the Company sells securities subject to an obligation to repurchase the same securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. Such borrowings totaled $20.4 million at September 30, 2014 and mature prior to June 30, 2015.

The primary risks associated with short-term collateralized borrowings are: (i) a substantial decline in the market value of the margined security; and (ii) that a counterparty may be unable to perform under the terms of the contract or be unwilling to extend such financing in future periods especially if the liquidity or value of the margined security has declined. Exposure is limited to any depreciation in value of the related securities.
CHANGES IN COMMON STOCK
CHANGES IN COMMON STOCK
CHANGES IN COMMON STOCK

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

Balance, December 31, 2013
220,324

 
Treasury stock purchased and retired
(14,118
)
 
Stock options exercised
893

 
Restricted and performance stock vested
541

(a)
Balance, September 30, 2014
207,640

 
____________________
(a)
Such amount was reduced by 230 thousand shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock.

In May 2011, the Company announced a common share repurchase program of up to $100.0 million. In February 2012, June 2012, December 2012 and December 2013, the Company's Board of Directors approved, in aggregate, an additional $800.0 million to repurchase the Company's outstanding securities. In the first nine months of 2014, we repurchased 14.1 million shares of common stock for $244.1 million under the securities repurchase program. In addition, in September 2014, we repurchased all outstanding common stock warrants for $57.4 million under the securities repurchase program. Such warrants had been held by Paulson & Co., Inc. on behalf of several investment funds and accounts managed by them, and were issued in conjunction with a private sale of our common stock in 2009. The Company had remaining repurchase authority of $95.9 million as of September 30, 2014.

In the first nine months of 2014, dividends declared and paid on common stock totaled $39.0 million ($0.18 per common share). In March 2014, the Company increased its quarterly common stock dividend to $0.06 per share from $0.03 per share.
SALES INDUCEMENTS
SALES INDUCEMENTS
SALES INDUCEMENTS

Certain of our annuity products offer sales inducements to contract holders in the form of enhanced crediting rates or bonus payments in the initial period of the contract.  Certain of our life insurance products offer persistency bonuses credited to the contract holders balance after the policy has been outstanding for a specified period of time.  These enhanced rates and persistency bonuses are considered sales inducements in accordance with GAAP.  Such amounts are deferred and amortized in the same manner as deferred acquisition costs.  Sales inducements deferred totaled $.9 million and $1.4 million in the third quarters of 2014 and 2013, respectively, and $4.0 million and $3.9 million during the nine months ended September 30, 2014 and 2013, respectively.  Amounts amortized totaled $3.6 million and $3.7 million in the third quarters of 2014 and 2013, respectively, and $13.0 million and $17.0 million during the nine months ended September 30, 2014 and 2013, respectively.  The unamortized balance of deferred sales inducements was $65.7 million and $108.6 million at September 30, 2014 and December 31, 2013, respectively.  The balance of insurance liabilities for persistency bonus benefits was $1.7 million and $28.9 million at September 30, 2014 and December 31, 2013, respectively.
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS

Call options

As further described in the note entitled "Accounting for Derivatives", we buy call options (including call spreads) referenced to applicable indices in an effort to offset or hedge potential increases to policyholder benefits resulting from increases in the particular index to which the policy's return is linked. We limit our exposure to the counterparties failing to meet their obligation with respect to the call options by diversifying among several counterparties believed to be strong and credit worthy. The call options are free-standing derivatives and are recorded at fair value in the Company's consolidated balance sheet. The Company and its subsidiaries are parties to master netting arrangements with its counterparties related to entering into various derivative contracts. However, the offsetting of assets and liabilities is not applicable to the derivative contracts that were in place at September 30, 2014 or December 31, 2013. The counterparties do not provide collateral to the Company related to their obligations under the call options.

The following table summarizes information related to call options as of September 30, 2014 and December 31, 2013 (dollars in millions):

 
 
 
 
 
 
 
 
 
Gross amounts not offset in the balance sheet
 
 
 
 
 
Gross amounts of recognized assets
 
Gross amounts offset in the balance sheet
 
Net amounts of assets presented in the balance sheet
 
Financial instruments
 
Cash collateral received
 
Net amount
September 30, 2014:
 
 
 
Call Options
 
$
98.3

 
$
—

 
$
98.3

 
$
—

 
$
—

 
$
98.3

December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
Call Options
 
156.2

 
—

 
156.2

 
—

 
—

 
156.2



Repurchase agreements

We may enter into agreements under which we sell securities subject to an obligation to repurchase the same securities. These repurchase agreements are accounted for as collateralized financing arrangements and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as investment borrowings in the Company's consolidated balance sheet, while the securities underlying the repurchase agreements remain in the respective investment asset accounts. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Company does not currently have any outstanding reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.

The right of offset for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Company be in default under the agreement (e.g., fails to make an interest payment to the counterparty). If the counterparty were to default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest), and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third party financial institution in the counterparty's custodial account. The counterparty has the right to sell or repledge the investment securities.

The following table summarizes information related to repurchase agreements as of September 30, 2014 (dollars in millions):

 
 
 
 
 
 
 
 
 
Gross amounts not offset in the balance sheet
 
 
 
 
 
Gross amounts of recognized liabilities
 
Gross amounts offset in the balance sheet
 
Net amounts of liabilities presented in the balance sheet
 
Financial instruments
 
Cash collateral pledged
 
Net amount
September 30, 2014:
 
 
 
Repurchase agreements (a)
 
$
20.4

 
$
—

 
$
20.4

 
$
—

 
$
—

 
$
20.4


_________________
(a)
As of September 30, 2014, these agreements were collateralized by investment securities with a fair value of $25.5 million. There were no repurchase agreements outstanding at December 31, 2013.
RECENTLY ISSUED ACCOUNTING STANDARDS
RECENTLY ISSUED ACCOUNTING STANDARDS
RECENTLY ISSUED ACCOUNTING STANDARDS

Pending Accounting Standards

In April 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance changing the criteria for reporting discontinued operations. Under the revised guidance, only disposals of a component or a group of components, including those classified as held for sale, which represent a strategic shift that has or will have a major effect on a company's operations and financial results will be reported as discontinued operations. The guidance is effective prospectively for new disposals occurring after January 1, 2015.

In May 2014, the FASB issued authoritative guidance for recognizing revenue from contracts with customers. Certain contracts with customers are specifically excluded from this guidance, including insurance contracts. The core principle of the new guidance is that an entity should recognize revenue when it transfers promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance will be effective for the Company on January 1, 2017 and permits two methods of transition upon adoption; full retrospective and modified retrospective. Under the full retrospective method, prior periods would be restated under the new revenue standard, providing for comparability in all periods presented. Under the modified retrospective method, prior periods would not be restated. Instead, revenues and other disclosures for pre-2017 periods would be provided in the notes to the financial statements as previously reported under the current revenue standard. The Company is currently assessing the impact the guidance will have upon adoption.

In June 2014, the FASB issued authoritative guidance on the accounting and disclosure of repurchase-to-maturity transactions and repurchase financings. Under this new accounting guidance, repurchase-to-maturity transactions will be accounted for as secured borrowings rather than sales of an asset, and transfers of financial assets with a contemporaneous repurchase financing arrangement will no longer be evaluated to determine whether they should be accounted for on a combined basis as forward contracts. The new guidance also prescribes additional disclosures particularly on the nature of collateral pledged in the repurchase agreement accounted for as a secured borrowing. The new guidance is effective beginning on January 1, 2015. The Company is currently assessing the impact the guidance will have upon adoption.
In August 2014, the FASB issued authoritative guidance related to measuring the financial assets and the financial liabilities of a consolidated collateralized financing entity which provides a measurement alternative for an entity that consolidates collateralized financing entities. A collateralized financing entity is a variable interest entity with no more than nominal equity that holds financial assets and issues beneficial interests in those financial assets; the beneficial interests have contractual recourse only to the related assets of the collateralized financing entity and are classified as financial liabilities. If elected, the alternative method results in the reporting entity measuring both the financial assets and the financial liabilities of the collateralized financing entity using the more observable of the two fair value measurements, which effectively removes measurement differences between the financial assets and the financial liabilities of the collateralized financing entity previously recorded as net income (loss) attributable to non-controlling and other beneficial interests and as an adjustment to appropriated retained earnings. The reporting entity continues to measure its own beneficial interests in the collateralized financing entity (other than those that represent compensation for services) at fair value. The guidance is effective for interim and annual periods beginning after December 15, 2015. A reporting entity may apply the guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the annual period of adoption. A reporting entity may also apply the guidance retrospectively to all relevant prior periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have upon adoption.

Adopted Accounting Standards

In July 2013, the FASB issued authoritative guidance regarding the financial statement presentation of an unrecognized tax benefit when a NOL carryforward, a similar tax loss or a tax credit carryforward exists. Such guidance will require an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a NOL carryforward, a similar tax loss, or a tax credit carryforward, except under certain circumstances as further described in the guidance. Such guidance does not require new recurring disclosures. This guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have a material impact on our consolidated financial statements.
CONSOLIDATED STATEMENT CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS

The following disclosures supplement our consolidated statement of cash flows.

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

 
Nine months ended
 
September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(32.5
)
 
$
372.0

Adjustments to reconcile net income to net cash from operating activities:
 
 
 

Amortization and depreciation
218.2

 
241.1

Income taxes
128.9

 
(112.6
)
Insurance liabilities
228.9

 
298.8

Accrual and amortization of investment income
(112.3
)
 
(189.4
)
Deferral of policy acquisition costs
(176.6
)
 
(161.8
)
Net realized investment gains
(39.8
)
 
(18.4
)
Payment to reinsurer pursuant to long-term care business reinsured
(590.3
)
 
—

Net loss on sale of CLIC and gain on reinsurance transactions
242.7

 
—

Loss on extinguishment or modification of debt
.6

 
65.4

Other
8.3

 
(23.0
)
Net cash from operating activities
$
(123.9
)
(a)
$
472.1


______________________
(a)
Cash flows from operating activities reflect outflows in the 2014 period due to the payment to reinsurer to transfer certain long-term care business.

On July 1, 2014, Bankers Life recaptured the life business written by Bankers Life that was reinsured by Wilton Re in 2009. The following summarizes the impact of the recapture (dollars in millions):
Investments
$
139.4

(a) (b)
Cash
7.7

 
Present value of future profits and deferred acquisition costs
29.0

(b)
Reinsurance receivables
(155.9
)
(b)
Other liabilities
5.9

(b)
Gain on reinsurance transaction (classified as "Net loss on sale of subsidiary and gain on reinsurance transactions")
26.1

 
Income tax expense
9.2

 
Gain on reinsurance transaction (net of income taxes)
$
16.9

 
___________________
(a)    Such amount has been reduced by a $28.0 million recapture fee.
(b)    Such non-cash amounts have been excluded from the consolidated statement of cash flows.
Other non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):

 
Nine months ended
 
September 30,
 
2014
 
2013
Stock options, restricted stock and performance units
$
11.6

 
$
10.8

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

We have concluded that we are the primary beneficiary with respect to certain VIEs, which are consolidated in our financial statements.  All of such VIEs are collateralized loan trusts that were established to issue securities to finance the purchase of corporate loans and other permitted investments (including two new VIEs which were consolidated in 2014).  The assets held by the trusts are legally isolated and not available to the Company.  The liabilities of the VIEs are expected to be satisfied from the cash flows generated by the underlying loans held by the trusts, not from the assets of the Company.  The Company has no financial obligation to the VIEs beyond its investment in each VIE.

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

The following table provides supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):
 
September 30, 2014
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
1,343.0

 
$
—

 
$
1,343.0

Notes receivable of VIEs held by insurance subsidiaries
—

 
(148.2
)
 
(148.2
)
Cash and cash equivalents held by variable interest entities
150.7

 
—

 
150.7

Accrued investment income
3.1

 
—

 
3.1

Income tax assets, net
12.9

 
(2.3
)
 
10.6

Other assets
18.2

 
(1.3
)
 
16.9

Total assets
$
1,527.9

 
$
(151.8
)
 
$
1,376.1

Liabilities:
 

 
 

 
 

Other liabilities
$
104.5

 
$
(3.7
)
 
$
100.8

Borrowings related to variable interest entities
1,295.0

 
—

 
1,295.0

Notes payable of VIEs held by insurance subsidiaries
152.2

 
(152.2
)
 
—

Total liabilities
$
1,551.7

 
$
(155.9
)
 
$
1,395.8


 
December 31, 2013
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
1,046.7

 
$
—

 
$
1,046.7

Notes receivable of VIEs held by insurance subsidiaries
—

 
(108.5
)
 
(108.5
)
Cash and cash equivalents held by variable interest entities
104.3

 
—

 
104.3

Accrued investment income
1.9

 
—

 
1.9

Income tax assets, net
5.4

 
(2.5
)
 
2.9

Other assets
22.6

 
(.9
)
 
21.7

Total assets
$
1,180.9

 
$
(111.9
)
 
$
1,069.0

Liabilities:
 

 
 

 
 

Other liabilities
$
66.0

 
$
(4.0
)
 
$
62.0

Borrowings related to variable interest entities
1,012.3

 
—

 
1,012.3

Notes payable of VIEs held by insurance subsidiaries
112.5

 
(112.5
)
 
—

Total liabilities
$
1,190.8

 
$
(116.5
)
 
$
1,074.3



The investment portfolios held by the VIEs are primarily comprised of commercial bank loans to corporate obligors which are almost entirely rated below-investment grade.  At September 30, 2014, such loans had an amortized cost of $1,359.7 million; gross unrealized gains of $.7 million; gross unrealized losses of $17.4 million; and an estimated fair value of $1,343.0 million.

The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at September 30, 2014, by contractual maturity.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due after one year through five years
$
389.0

 
$
385.5

Due after five years through ten years
970.7

 
957.5

Total
$
1,359.7

 
$
1,343.0



During the first nine months of 2014, the VIEs recognized net realized investment losses of $2.2 million.  During the first nine months of 2013, the VIEs recognized net realized investment losses of $1.4 million, which were comprised of $.3 million of net losses from the sales of fixed maturities, and $1.1 million of writedowns of investments as a result of our intent to sell such investments.

At September 30, 2014, there were no investments held by the VIEs that were in default.

During the first nine months of 2014, $38.7 million of investments held by the VIEs were sold which resulted in gross investment losses (before income taxes) of $2.4 million. During the first nine months of 2013, $9.3 million of investments held by the VIEs were sold which resulted in gross investment losses (before income taxes) of $.6 million.

At September 30, 2014, the VIEs held:  (i) investments with a fair value of $1,051.7 million and gross unrealized losses of $14.1 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $142.3 million and gross unrealized losses of $3.3 million that had been in an unrealized loss position for greater than twelve months.

At December 31, 2013, the VIEs held: (i) investments with a fair value of $355.5 million and gross unrealized losses of $3.1 million that had been in an unrealized loss position for less than twelve months; and (ii) investments with a fair value of $7.9 million and gross unrealized losses of less than $.1 million that had been in an unrealized loss position for greater than twelve months.

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

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

At September 30, 2014, we held investments in various limited partnerships, in which we are not the primary beneficiary, totaling $26.2 million (classified as other invested assets).  At September 30, 2014, we had unfunded commitments to these partnerships of $69.1 million.  Our maximum exposure to loss on these investments is limited to the amount of our investment.
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS

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

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

Valuation Hierarchy

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

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

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

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

At each reporting date, we classify assets and liabilities into the three input levels based on the lowest level of input that is significant to the measurement of fair value for each asset and liability reported at fair value.  This classification is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions.  Our assessment of the significance of a particular input to the fair value measurement and the ultimate classification of each asset and liability requires judgment and is subject to change from period to period based on the observability of the valuation inputs. Any transfers between levels are reported as having occurred at the beginning of the period. There were no transfers between Level 1 and Level 2 in both the first nine months of 2014 and 2013.

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

For securities that are not priced by pricing services and may not be reliably priced using pricing models, we obtain broker quotes.  These broker quotes are non-binding and represent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs.  Approximately 27 percent of our Level 3 fixed maturity securities were valued using unadjusted broker quotes or broker-provided valuation inputs.  The remaining Level 3 fixed maturity investments do not have readily determinable market prices and/or observable inputs.  For these securities, we use internally developed valuations.  Key assumptions used to determine fair value for these securities may include risk premiums, projected performance of underlying collateral and other factors involving significant assumptions which may not be reflective of an active market.  For certain investments, we use a matrix or model process to develop a security price where future cash flow expectations are discounted at an estimated market rate.  The pricing matrix incorporates term interest rates as well as a spread level based on the issuer's credit rating, other factors relating to the issuer, and the security's maturity.  In some instances issuer-specific spread adjustments, which can be positive or negative, are made based upon internal analysis of security specifics such as liquidity, deal size, and time to maturity.

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

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

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

The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at September 30, 2014 is as follows (dollars in millions):

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

 
$
13,592.4

 
$
334.8

 
$
13,927.2

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

 
151.5

 
—

 
151.5

States and political subdivisions
—

 
2,204.3

 
—

 
2,204.3

Debt securities issued by foreign governments
—

 
1.8

 
—

 
1.8

Asset-backed securities
—

 
1,246.7

 
62.3

 
1,309.0

Collateralized debt obligations
—

 
326.9

 
—

 
326.9

Commercial mortgage-backed securities
—

 
1,287.3

 
1.1

 
1,288.4

Mortgage pass-through securities
—

 
7.0

 
1.1

 
8.1

Collateralized mortgage obligations
—

 
1,393.2

 
.1

 
1,393.3

Total fixed maturities, available for sale
—

 
20,211.1

 
399.4

 
20,610.5

Equity securities - corporate securities
172.7

 
173.0

 
27.1

 
372.8

Trading securities:
 

 
 

 
 

 
 

Corporate securities
—

 
24.0

 
—

 
24.0

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

 
3.7

 
—

 
3.7

Asset-backed securities
—

 
26.6

 
—

 
26.6

Commercial mortgage-backed securities
—

 
119.7

 
28.7

 
148.4

Mortgage pass-through securities
—

 
.1

 
—

 
.1

Collateralized mortgage obligations
—

 
24.3

 
6.0

 
30.3

Equity securities
1.9

 
—

 
—

 
1.9

Total trading securities
1.9

 
198.4

 
34.7

 
235.0

Investments held by variable interest entities - corporate securities
—

 
1,339.1

 
3.9

 
1,343.0

Other invested assets - derivatives
.9

 
98.3

 
—

 
99.2

Assets held in separate accounts
—

 
6.9

 
—

 
6.9

Total assets carried at fair value by category
$
175.5

 
$
22,026.8

 
$
465.1

 
$
22,667.4

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

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

 
$
—

 
$
992.2

 
$
992.2

Total liabilities for insurance products
—

 
—

 
992.2

 
992.2

Total liabilities carried at fair value by category
$
—

 
$
—

 
$
992.2

 
$
992.2



The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 2013 is as follows (dollars in millions):

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

 
$
15,340.1

 
$
359.6

 
$
15,699.7

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

 
73.1

 
—

 
73.1

States and political subdivisions
—

 
2,204.4

 
—

 
2,204.4

Asset-backed securities
—

 
1,419.9

 
42.2

 
1,462.1

Collateralized debt obligations
—

 
47.3

 
246.7

 
294.0

Commercial mortgage-backed securities
—

 
1,609.0

 
—

 
1,609.0

Mortgage pass-through securities
—

 
11.8

 
1.6

 
13.4

Collateralized mortgage obligations
—

 
1,848.9

 
—

 
1,848.9

Total fixed maturities, available for sale
—

 
22,554.5

 
650.1

 
23,204.6

Equity securities - corporate securities
79.6

 
118.9

 
24.5

 
223.0

Trading securities:
 

 
 

 
 

 
 

Corporate securities
—

 
45.2

 
—

 
45.2

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

 
4.6

 
—

 
4.6

States and political subdivisions
—

 
14.1

 
—

 
14.1

Asset-backed securities
—

 
24.3

 
—

 
24.3

Commercial mortgage-backed securities
—

 
125.8

 
—

 
125.8

Mortgage pass-through securities
—

 
.1

 
—

 
.1

Collateralized mortgage obligations
—

 
31.1

 
—

 
31.1

Equity securities
2.4

 
—

 
—

 
2.4

Total trading securities
2.4

 
245.2

 
—

 
247.6

Investments held by variable interest entities - corporate securities
—

 
1,046.7

 
—

 
1,046.7

Other invested assets - derivatives
.6

 
156.2

 
—

 
156.8

Assets held in separate accounts
—

 
10.3

 
—

 
10.3

Total assets carried at fair value by category
$
82.6

 
$
24,131.8

 
$
674.6

 
$
24,889.0

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

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

 
$
—

 
$
903.7

 
$
903.7

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

 
—

 
1.8

 
1.8

Total liabilities for insurance products
—

 
—

 
905.5

 
905.5

Total liabilities carried at fair value by category
$
—

 
$
—

 
$
905.5

 
$
905.5






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

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

Company-owned life insurance is backed by a series of mutual funds and is carried at cash surrender value which approximates estimated fair value.

Alternative investment funds are carried at their net asset values which approximates estimated fair value.

Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates estimated fair value.

Liabilities for policyholder account balances.  We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities.

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

The fair value measurements for our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):
 
September 30, 2014
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
Mortgage loans
$
—

 
$
—

 
$
1,675.5

 
$
1,675.5

 
$
1,621.8

Policy loans
—

 
—

 
106.2

 
106.2

 
106.2

Other invested assets:
 
 
 
 
 
 
 
 
 
Company-owned life insurance
—

 
146.2

 
—

 
146.2

 
146.2

Alternative investment funds
—

 
84.7

 
—

 
84.7

 
84.7

Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
Unrestricted
344.1

 
108.0

 
—

 
452.1

 
452.1

Held by variable interest entities
150.7

 
—

 
—

 
150.7

 
150.7

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholder account balances (a)
—

 
—

 
10,659.2

 
10,659.2

 
10,659.2

Investment borrowings
—

 
1,519.7

 
—

 
1,519.7

 
1,519.4

Borrowings related to variable interest entities
—

 
941.7

 
—

 
941.7

 
1,295.0

Notes payable – direct corporate obligations
—

 
828.7

 
—

 
828.7

 
814.0


 
December 31, 2013
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
Mortgage loans
$
—

 
$
—

 
$
1,749.5

 
$
1,749.5

 
$
1,729.5

Policy loans
—

 
—

 
277.0

 
277.0

 
277.0

Other invested assets:
 
 
 
 
 
 
 
 
 
Company-owned life insurance
—

 
144.8

 
—

 
144.8

 
144.8

Alternative investment funds
—

 
67.6

 
—

 
67.6

 
67.6

Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
Unrestricted
457.8

 
241.2

 
—

 
699.0

 
699.0

Held by variable interest entities
104.3

 
—

 
—

 
104.3

 
104.3

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholder account balances (a)
—

 
—

 
12,776.4

 
12,776.4

 
12,776.4

Investment borrowings
—

 
1,948.5

 
—

 
1,948.5

 
1,900.0

Borrowings related to variable interest entities
—

 
993.7

 
—

 
993.7

 
1,012.3

Notes payable – direct corporate obligations
—

 
872.5

 
—

 
872.5

 
856.4


____________________
(a)
The estimated fair value of insurance liabilities for policyholder account balances was approximately equal to its carrying value at September 30, 2014 and December 31, 2013.  This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2014 (dollars in millions):
 
 
September 30, 2014
 
 
 
 
Beginning balance as of June 30, 2014
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2014
 
Amount of total gains (losses) for the three months ended September 30, 2014 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
389.8

 
$
6.6

 
$
—

 
$
(.9
)
 
$
37.5

 
$
(98.2
)
 
$
334.8

 
$
—

States and political subdivisions
 
28.7

 
—

 
—

 
—

 
—

 
(28.7
)
 
—

 
—

Asset-backed securities
 
52.7

 
(.1
)
 
—

 
.2

 
9.5

 
—

 
62.3

 
—

Collateralized debt obligations
 
14.2

 
—

 
—

 
—

 
—

 
(14.2
)
 
—

 
—

Commercial mortgage-backed securities
 
—

 
1.1

 
—

 
—

 
—

 
—

 
1.1

 
—

Mortgage pass-through securities
 
1.3

 
(.2
)
 
—

 
—

 
—

 
—

 
1.1

 
—

Collateralized mortgage obligations
 
.1

 
—

 
—

 
—

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
 
486.8

 
7.4

 
—

 
(.7
)
 
47.0

 
(141.1
)
 
399.4

 
—

Equity securities - corporate securities
 
26.2

 
.9

 
—

 
—

 
—

 
—

 
27.1

 
—

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial mortgage-backed securities
 
—

 
—

 
—

 
(.4
)
 
29.1

 
—

 
28.7

 
(.4
)
Collateralized mortgage obligations
 
5.9

 
—

 
—

 
.1

 
—

 
—

 
6.0

 
.1

Total trading securities
 
5.9

 
—

 
—

 
(.3
)
 
29.1

 
—

 
34.7

 
(.3
)
Investments held by variable interest entities - corporate securities
 
—

 
3.0

 
—

 
(.1
)
 
1.0

 
—

 
3.9

 
—

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
 
(980.3
)
 
(12.2
)
 
.3

 
—

 
—

 
—

 
(992.2
)
 
.3

Total liabilities for insurance products
 
(980.3
)
 
(12.2
)
 
.3

 
—

 
—

 
—

 
(992.2
)
 
.3

_________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2014 (dollars in millions):
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
15.7

 
$
(9.1
)
 
$
—

 
$
—

 
$
6.6

Asset-backed securities
1.9

 
(2.0
)
 
—

 
—

 
(.1
)
Commercial mortgage-backed securities
1.1

 
—

 
—

 
—

 
1.1

Mortgage pass-through securities
—

 
(.2
)
 
—

 
—

 
(.2
)
Total fixed maturities, available for sale
18.7

 
(11.3
)
 
—

 
—

 
7.4

Equity securities - corporate securities
.9

 
—

 
—

 
—

 
.9

Investments held by variable interest entities - corporate securities
3.0

 
—

 
—

 
—

 
3.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(29.2
)
 
3.9

 
(.5
)
 
13.6

 
(12.2
)
Total liabilities for insurance products
(29.2
)
 
3.9

 
(.5
)
 
13.6

 
(12.2
)

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2014 (dollars in millions):
 
 
September 30, 2014
 
 
 
 
Beginning balance as of December 31, 2013
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Assets of CLIC sold
 
Ending balance as of September 30, 2014
 
Amount of total gains (losses) for the nine months ended September 30, 2014 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
359.6

 
$
44.9

 
$
—

 
$
11.6

 
$
52.7

 
$
(82.8
)
 
$
(51.2
)
 
$
334.8

 
$
—

States and political subdivisions
 
—

 
—

 
—

 
.1

 
2.1

 
—

 
(2.2
)
 
—

 
—

Asset-backed securities
 
42.2

 
8.9

 
—

 
4.0

 
16.9

 
—

 
(9.7
)
 
62.3

 
—

Collateralized debt obligations
 
246.7

 
—

 
—

 
—

 
—

 
(246.7
)
 
—

 
—

 
—

Commercial mortgage-backed securities
 
—

 
1.1

 
—

 
—

 
—

 
—

 
—

 
1.1

 
—

Mortgage pass-through securities
 
1.6

 
(.5
)
 
—

 
—

 
—

 
—

 
—

 
1.1

 
—

Collateralized mortgage obligations
 
—

 
(.1
)
 
—

 
—

 
.2

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
 
650.1

 
54.3

 
—

 
15.7

 
71.9

 
(329.5
)
 
(63.1
)
 
399.4

 
—

Equity securities - corporate securities
 
24.5

 
2.6

 
—

 
—

 
—

 
—

 
—

 
27.1

 
—

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Commercial mortgage-backed securities
 
—

 
29.1

 
—

 
(.4
)
 
—

 
—

 
—

 
28.7

 
(.4
)
Collateralized mortgage obligations
 
—

 
—

 
—

 
.2

 
5.8

 
—

 
—

 
6.0

 
.2

Total trading securities
 
—

 
29.1

 
—

 
(.2
)
 
5.8

 
—

 
—

 
34.7

 
(.2
)
Investments held by variable interest entities - corporate securities
 
—

 
3.0

 
—

 
(.1
)
 
1.0

 
—

 
—

 
3.9

 
—

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
 
(903.7
)
 
(62.0
)
 
(26.5
)
 
—

 
—

 
—

 
—

 
(992.2
)
 
(26.5
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
 
(1.8
)
 
1.8

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total liabilities for insurance products
 
(905.5
)
 
(60.2
)
 
(26.5
)
 
—

 
—

 
—

 
—

 
(992.2
)
 
(26.5
)
_________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2014 (dollars in millions):
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
47.7

 
$
(2.8
)
 
$
—

 
$
—

 
$
44.9

Asset-backed securities
11.8

 
(2.9
)
 
—

 
—

 
8.9

Commercial mortgage-backed securities
1.1

 
—

 
—

 
—

 
1.1

Mortgage pass-through securities
1.1

 
(1.6
)
 
—

 
—

 
(.5
)
Collateralized mortgage obligations
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
61.7

 
(7.4
)
 
—

 
—

 
54.3

Equity securities - corporate securities
2.6

 
—

 
—

 
—

 
2.6

Trading securities - commercial mortgage-backed securities
29.1

 
—

 
—

 
—

 
29.1

Investments held by variable interest entities - corporate securities
3.0

 
—

 
—

 
—

 
3.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(86.9
)
 
7.5

 
(25.1
)
 
42.5

 
(62.0
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
3.4

 
(1.6
)
 
—

 
1.8

Total liabilities for insurance products
(86.9
)
 
10.9

 
(26.7
)
 
42.5

 
(60.2
)


The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2013 (dollars in millions):

 
September 30, 2013
 
 
Beginning balance as of June 30, 2013
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2013
 
Amount of total gains (losses) for the three months ended September 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
393.1

 
$
(2.1
)
 
$
—

 
$
1.4

 
$
12.9

 
$
(48.0
)
 
$
357.3

 
$
—

Asset-backed securities
45.4

 
(7.2
)
 
—

 
.3

 
—

 
(2.0
)
 
36.5

 
—

Collateralized debt obligations
287.6

 
(18.0
)
 
—

 
.6

 
—

 
(10.1
)
 
260.1

 
—

Commercial mortgage-backed securities
3.3

 
—

 
—

 
—

 
—

 
(3.3
)
 
—

 
—

Mortgage pass-through securities
1.8

 
(.1
)
 
—

 
—

 
—

 
—

 
1.7

 
—

Collateralized mortgage obligations
.1

 
—

 
—

 
—

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
731.3

 
(27.4
)
 
—

 
2.3

 
12.9

 
(63.4
)
 
655.7

 
—

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
.1

 
.7

 
—

 
—

 
23.0

 
—

 
23.8

 
—

Venture capital investments
3.1

 
—

 
—

 
.2

 
—

 
—

 
3.3

 
—

Total equity securities
3.2

 
.7

 
—

 
.2

 
23.0

 
—

 
27.1

 
—

Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Asset-backed securities
—

 
—

 
—

 
.6

 
25.7

 
—

 
26.3

 
.6

Collateralized mortgage obligations
10.4

 
—

 
—

 
—

 
—

 
(4.8
)
 
5.6

 
—

Total trading securities
10.4

 
—

 
—

 
.6

 
25.7

 
(4.8
)
 
31.9

 
.6

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(796.3
)
 
(45.2
)
 
(1.4
)
 
—

 
—

 
—

 
(842.9
)
 
(1.4
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
(2.6
)
 
.5

 
—

 
—

 
—

 
—

 
(2.1
)
 
—

Total liabilities for insurance products
(798.9
)
 
(44.7
)
 
(1.4
)
 
—

 
—

 
—

 
(845.0
)
 
(1.4
)
____________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2013 (dollars in millions):

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

 
$
(2.1
)
 
$
—

 
$
—

 
$
(2.1
)
Asset-backed securities
—

 
(7.2
)
 
—

 
—

 
(7.2
)
Collateralized debt obligations
5.9

 
(23.9
)
 
—

 
—

 
(18.0
)
Mortgage pass-through securities
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
5.9

 
(33.3
)
 
—

 
—

 
(27.4
)
Equity securities - corporate securities
.7

 
—

 
—

 
—

 
.7

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(25.4
)
 
—

 
(30.0
)
 
10.2

 
(45.2
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
.5

 
—

 
—

 
.5

Total liabilities for insurance products
(25.4
)
 
.5

 
(30.0
)
 
10.2

 
(44.7
)


The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2013 (dollars in millions):

 
September 30, 2013
 
 
Beginning balance as of December 31, 2012
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2013
 
Amount of total gains (losses) for the nine months ended September 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
355.5

 
$
14.0

 
$
(.3
)
 
$
(12.8
)
 
$
13.2

 
$
(12.3
)
 
$
357.3

 
$
—

States and political subdivisions
13.1

 
—

 
—

 
—

 
—

 
(13.1
)
 
—

 
—

Asset-backed securities
44.0

 
(4.5
)
 
.1

 
(3.1
)
 
—

 
—

 
36.5

 
—

Collateralized debt obligations
324.0

 
(70.5
)
 
.1

 
6.5

 
—

 
—

 
260.1

 
—

Commercial mortgage-backed securities
6.2

 
—

 
—

 
—

 
—

 
(6.2
)
 
—

 
—

Mortgage pass-through securities
1.9

 
(.2
)
 
—

 
—

 
—

 
—

 
1.7

 
—

Collateralized mortgage obligations
16.9

 
(.1
)
 
—

 
—

 
—

 
(16.7
)
 
.1

 
—

Total fixed maturities, available for sale
761.6

 
(61.3
)
 
(.1
)
 
(9.4
)
 
13.2

 
(48.3
)
 
655.7

 
—

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
.1

 
34.7

 
—

 
(11.0
)
 
—

 
—

 
23.8

 
—

Venture capital investments
2.8

 
—

 
—

 
.5

 
—

 
—

 
3.3

 
—

Total equity securities
2.9

 
34.7

 
—

 
(10.5
)
 
—

 
—

 
27.1

 
—

Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

States and political subdivisions
.6

 
—

 
—

 
—

 
—

 
(.6
)
 
—

 
—

Asset-backed securities
—

 
—

 
—

 
(.4
)
 
26.7

 
—

 
26.3

 
(.4
)
Collateralized debt obligations
7.3

 
(7.7
)
 
.6

 
(.2
)
 
—

 
—

 
—

 
(.2
)
Collateralized mortgage obligations
5.8

 
—

 
—

 
(.2
)
 
—

 
—

 
5.6

 
(.2
)
Total trading securities
13.7

 
(7.7
)
 
.6

 
(.8
)
 
26.7

 
(.6
)
 
31.9

 
(.8
)
Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(734.0
)
 
(141.0
)
 
32.1

 
—

 
—

 
—

 
(842.9
)
 
32.1

Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
(5.5
)
 
3.4

 
—

 
—

 
—

 
—

 
(2.1
)
 
—

Total liabilities for insurance products
(739.5
)
 
(137.6
)
 
32.1

 
—

 
—

 
—

 
(845.0
)
 
32.1

____________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2013 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
24.0

 
$
(10.0
)
 
$
—

 
$
—

 
$
14.0

Asset-backed securities
7.6

 
(12.1
)
 
—

 
—

 
(4.5
)
Collateralized debt obligations
6.0

 
(76.5
)
 
—

 
—

 
(70.5
)
Mortgage pass-through securities
—

 
(.2
)
 
—

 
—

 
(.2
)
Collateralized mortgage obligations
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
37.6

 
(98.9
)
 
—

 
—

 
(61.3
)
Equity securities - corporate securities
34.7

 
—

 
—

 
—

 
34.7

Trading securities - collateralized debt obligations
—

 
(7.7
)
 
—

 
—

 
(7.7
)
Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(78.2
)
 
1.4

 
(94.2
)
 
30.0

 
(141.0
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
3.4

 
—

 
—

 
3.4

Total liabilities for insurance products
(78.2
)
 
4.8

 
(94.2
)
 
30.0

 
(137.6
)



At September 30, 2014, 82 percent of our Level 3 fixed maturities, available for sale, were investment grade and 84 percent and nil percent of our Level 3 fixed maturities, available for sale, consisted of corporate securities and structured securities, respectively.

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

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

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

The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at September 30, 2014 (dollars in millions):

 
Fair value at September 30, 2014
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
262.9

 
Discounted cash flow analysis
 
Discount margins
 
1.55% - 5.11% (2.43%)
Asset-backed securities (b)
29.3

 
Discounted cash flow analysis
 
Discount margins
 
2.03% - 4.15% (2.94%)
Equity security (c)
27.1

 
Market approach
 
Projected cash flows
 
Not applicable
Other assets categorized as Level 3 (d)
145.8

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
465.1

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest-sensitive products (e)
992.2

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 6.63% (5.60%)
 
 
 
 
 
Discount rates
 
0.00 - 3.42% (2.03%)
 
 
 
 
 
Surrender rates
 
2.80% - 54.60% (14.39%)
________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value.
(d)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(e)
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.

The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at December 31, 2013 (dollars in millions):

 
Fair value at December 31, 2013
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
260.3

 
Discounted cash flow analysis
 
Discount margins
 
1.65% - 2.90% (2.36%)
Asset-backed securities (b)
35.1

 
Discounted cash flow analysis
 
Discount margins
 
2.03% - 4.20% (3.09%)
Collateralized debt obligations (c)
240.7

 
Discounted cash flow analysis
 
Recoveries
 
64% - 67% (65.8%)
 
 
 
 
 
Constant prepayment rate
 
20%
 
 
 
 
 
Discount margins
 
.95% - 2.00% (1.32%)
 
 
 
 
 
Annual default rate
 
1.14% - 5.57% (3.05%)
 
 
 
 
 
Portfolio CCC %
 
1.52% - 21.79% (12.57%)
Equity security (d)
24.5

 
Market approach
 
Projected cash flows
 
Not applicable
Other assets categorized as Level 3 (e)
114.0

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
674.6

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest-sensitive products (f)
905.5

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 6.63% (5.60%)
 
 
 
 
 
Discount rates
 
0.00 - 4.64% (2.47%)
 
 
 
 
 
Surrender rates
 
2.80% - 54.60% (14.39%)

________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
(d)
Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value.
(e)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(f)
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
FAIR VALUE MEASUREMENTS (Policies)
Fair Value Measurements
Realized and unrealized gains (losses) on Level 3 assets are primarily reported in either net investment income for policyholder and reinsurer accounts and other special-purpose portfolios, net realized investment gains (losses) or insurance policy benefits within the consolidated statement of operations or accumulated other comprehensive income within shareholders' equity based on the appropriate accounting treatment for the instrument.

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

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

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

Valuation Hierarchy

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

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

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

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

At each reporting date, we classify assets and liabilities into the three input levels based on the lowest level of input that is significant to the measurement of fair value for each asset and liability reported at fair value.  This classification is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions.  Our assessment of the significance of a particular input to the fair value measurement and the ultimate classification of each asset and liability requires judgment and is subject to change from period to period based on the observability of the valuation inputs. Any transfers between levels are reported as having occurred at the beginning of the period. There were no transfers between Level 1 and Level 2 in both the first nine months of 2014 and 2013.

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

For securities that are not priced by pricing services and may not be reliably priced using pricing models, we obtain broker quotes.  These broker quotes are non-binding and represent an exit price, but assumptions used to establish the fair value may not be observable and therefore represent Level 3 inputs.  Approximately 27 percent of our Level 3 fixed maturity securities were valued using unadjusted broker quotes or broker-provided valuation inputs.  The remaining Level 3 fixed maturity investments do not have readily determinable market prices and/or observable inputs.  For these securities, we use internally developed valuations.  Key assumptions used to determine fair value for these securities may include risk premiums, projected performance of underlying collateral and other factors involving significant assumptions which may not be reflective of an active market.  For certain investments, we use a matrix or model process to develop a security price where future cash flow expectations are discounted at an estimated market rate.  The pricing matrix incorporates term interest rates as well as a spread level based on the issuer's credit rating, other factors relating to the issuer, and the security's maturity.  In some instances issuer-specific spread adjustments, which can be positive or negative, are made based upon internal analysis of security specifics such as liquidity, deal size, and time to maturity.

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

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

The fair value measurements for derivative instruments, including embedded derivatives requiring bifurcation, are determined based on the consideration of several inputs including closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options; market interest rates; and non-performance risk.  For certain embedded derivatives, we use actuarial assumptions in the determination of fair value.
For those financial instruments disclosed at fair value, we use the following methods and assumptions to determine the estimated fair values:

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

Company-owned life insurance is backed by a series of mutual funds and is carried at cash surrender value which approximates estimated fair value.

Alternative investment funds are carried at their net asset values which approximates estimated fair value.

Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates estimated fair value.

Liabilities for policyholder account balances.  We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities.

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

AGREEMENT TO SELL SUBSIDIARY (Tables)
Schedule of Carrying Amount of CLIC Business Being Sold
The loss on the sale of CLIC in the nine months ended September 30, 2014, is summarized below (dollars in millions):

Net cash proceeds
 
$
222.0

Net assets being sold:
 
 
Investments
 
3,863.8

Cash and cash equivalents
 
164.7

Accrued investment income
 
42.7

Present value of future profits
 
15.5

Deferred acquisition costs
 
37.6

Reinsurance receivables
 
307.4

Income tax assets, net
 
84.4

Other assets
 
2.8

Liabilities for insurance products
 
(3,201.3
)
Other liabilities
 
(199.1
)
Investment borrowings
 
(383.4
)
Accumulated other comprehensive income
 
(240.5
)
Net assets being sold
 
494.6

Loss before taxes
 
(272.6
)
Tax expense related to tax gain on sale
 
21.6

Previously unrecognized tax benefit now recognized as a result of the gain
 
(7.4
)
Valuation allowance release related to the gain
 
(14.2
)
Valuation allowance increase related to the decrease in projected future taxable income
 
19.4

Net loss
 
$
(292.0
)
INVESTMENTS (TABLES)
Schedule of accumulated other comprehensive income (loss) 

Accumulated other comprehensive income is primarily comprised of the net effect of unrealized appreciation (depreciation) on our investments.  These amounts, included in shareholders' equity as of September 30, 2014 and December 31, 2013, were as follows (dollars in millions):

 
September 30,
2014
 
December 31,
2013
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
$
5.9

 
$
6.5

 
Net unrealized gains on all other investments
2,028.7

 
1,322.6

(b)
Adjustment to present value of future profits (a)
(151.9
)
 
(47.7
)
 
Adjustment to deferred acquisition costs
(380.7
)
 
(137.0
)
 
Adjustment to insurance liabilities
(160.9
)
 
—

 
Unrecognized net loss related to deferred compensation plan
(6.1
)
 
(7.1
)
 
Deferred income tax liabilities
(475.7
)
 
(405.5
)
 
Accumulated other comprehensive income
$
859.3

 
$
731.8

 
________
(a)
The present value of future profits is the value assigned to the right to receive future cash flows from contracts existing at September 10, 2003, the date Conseco, Inc., an Indiana corporation (our "Predecessor"), emerged from bankruptcy.
(b)
At December 31, 2013, net unrealized gains on all other investments included $226.2 million related to CLIC which was treated as held for sale effective January 1, 2014 and ultimately sold on July 1, 2014. The unrealized gains (losses) presented as a component of accumulated other comprehensive income for the nine months ended September 30, 2014 were reduced by $226.2 million for the unrealized gains on CLIC's portfolio as of January 1, 2014.
Schedule of fixed maturities for available for sale and equity securities 
At September 30, 2014, the amortized cost, gross unrealized gains and losses, estimated fair value, other-than-temporary impairments in accumulated other comprehensive income of fixed maturities, available for sale, and equity securities were as follows (dollars in millions):
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
 
Other-than-temporary impairments included in accumulated other comprehensive income
Corporate securities
$
12,378.0

 
$
1,593.3

 
$
(44.1
)
 
$
13,927.2

 
$
—

United States Treasury securities and obligations of United States government corporations and agencies
137.5

 
14.3

 
(.3
)
 
151.5

 
—

States and political subdivisions
1,977.4

 
232.1

 
(5.2
)
 
2,204.3

 
—

Debt securities issued by foreign governments
1.8

 
—

 
—

 
1.8

 
—

Asset-backed securities
1,228.4

 
83.7

 
(3.1
)
 
1,309.0

 
—

Collateralized debt obligations
323.7

 
3.9

 
(.7
)
 
326.9

 
—

Commercial mortgage-backed securities
1,210.3

 
78.7

 
(.6
)
 
1,288.4

 
—

Mortgage pass-through securities
7.7

 
.4

 
—

 
8.1

 
—

Collateralized mortgage obligations
1,305.2

 
89.5

 
(1.4
)
 
1,393.3

 
(3.3
)
Total fixed maturities, available for sale
$
18,570.0

 
$
2,095.9

 
$
(55.4
)
 
$
20,610.5

 
$
(3.3
)
Equity securities
$
360.8

 
$
13.0

 
$
(1.0
)
 
$
372.8

 
 
Schedule of investments classified by contractual maturity date 
In addition, structured securities (such as asset-backed securities, collateralized debt obligations, commercial mortgage-backed securities, mortgage pass-through securities and collateralized mortgage obligations, collectively referred to as "structured securities") frequently include provisions for periodic principal payments and permit periodic unscheduled payments.

 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due in one year or less
$
210.9

 
$
216.3

Due after one year through five years
1,829.0

 
2,017.4

Due after five years through ten years
2,847.4

 
3,077.5

Due after ten years
9,607.4

 
10,973.6

Subtotal
14,494.7

 
16,284.8

Structured securities
4,075.3

 
4,325.7

Total fixed maturities, available for sale
$
18,570.0

 
$
20,610.5

Schedule of realized gain (loss) on investments 
The following table sets forth the net realized investment gains (losses) for the periods indicated (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Fixed maturity securities, available for sale:
 
 
 
 
 
 
 
Gross realized gains on sale
$
8.3

 
$
12.9

 
$
54.7

 
$
40.3

Gross realized losses on sale
(2.6
)
 
(6.4
)
 
(11.1
)
 
(9.8
)
Impairments:
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
—

 
(1.6
)
 
—

 
(1.6
)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
—

 
—

 
—

 
—

Net impairment losses recognized
—

 
(1.6
)
 
—

 
(1.6
)
Net realized investment gains from fixed maturities
5.7

 
4.9

 
43.6

 
28.9

Equity securities
1.9

 
—

 
9.8

 
—

Commercial mortgage loans
(1.2
)
 
(1.7
)
 
(.1
)
 
(1.0
)
Impairments of mortgage loans and other investments
(2.8
)
 
(1.3
)
 
(14.7
)
 
(1.9
)
Other
.4

 
(2.0
)
 
1.2

 
(7.6
)
Net realized investment gains (losses)
$
4.0

 
$
(.1
)
 
$
39.8

 
$
18.4

Schedule of credit losses recognized in earnings 
The following table summarizes the amount of credit losses recognized in earnings on fixed maturity securities, available for sale, held at the beginning of the period, for which a portion of the other-than-temporary impairment was also recognized in accumulated other comprehensive income for the three and nine months ended September 30, 2014, and 2013 (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Credit losses on fixed maturity securities, available for sale, beginning of period
$
(1.2
)
 
$
(1.5
)
 
$
(1.3
)
 
$
(1.6
)
Add:  credit losses on other-than-temporary impairments not previously recognized
—

 
—

 
—

 
—

Less:  credit losses on securities sold
.1

 
.1

 
.2

 
.2

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

 
—

 
—

 
—

Add:  credit losses on previously impaired securities
—

 
—

 
—

 
—

Less:  increases in cash flows expected on previously impaired securities
—

 
—

 
—

 
—

Credit losses on fixed maturity securities, available for sale, end of period
$
(1.1
)
 
$
(1.4
)
 
$
(1.1
)
 
$
(1.4
)
__________
(a)
Represents securities for which the amount previously recognized in accumulated other comprehensive income was recognized in earnings because we intend to sell the security or we more likely than not will be required to sell the security before recovery of its amortized cost basis.
Schedule of unrealized loss on investments 
The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at September 30, 2014 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
1.0

 
$
—

 
$
18.3

 
$
(.3
)
 
$
19.3

 
$
(.3
)
States and political subdivisions
 
66.1

 
(1.0
)
 
90.6

 
(4.2
)
 
156.7

 
(5.2
)
Corporate securities
 
871.1

 
(20.7
)
 
311.7

 
(23.4
)
 
1,182.8

 
(44.1
)
Asset-backed securities
 
116.7

 
(1.1
)
 
69.5

 
(2.0
)
 
186.2

 
(3.1
)
Collateralized debt obligations
 
91.2

 
(.7
)
 
—

 
—

 
91.2

 
(.7
)
Commercial mortgage-backed securities
 
35.9

 
(.2
)
 
19.1

 
(.4
)
 
55.0

 
(.6
)
Mortgage pass-through securities
 
.9

 
—

 
.8

 
—

 
1.7

 
—

Collateralized mortgage obligations
 
113.6

 
(1.2
)
 
10.2

 
(.2
)
 
123.8

 
(1.4
)
Total fixed maturities, available for sale
 
$
1,296.5

 
$
(24.9
)
 
$
520.2

 
$
(30.5
)
 
$
1,816.7

 
$
(55.4
)
Equity securities
 
$
128.3

 
$
(1.0
)
 
$
.5

 
$
—

 
$
128.8

 
$
(1.0
)

The following table summarizes the gross unrealized losses and fair values of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that such securities have been in a continuous unrealized loss position, at December 31, 2013 (dollars in millions):

 
 
Less than 12 months
 
12 months or greater
 
Total
Description of securities
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
United States Treasury securities and obligations of United States government corporations and agencies
 
$
23.8

 
$
(.6
)
 
$
—

 
$
—

 
$
23.8

 
$
(.6
)
States and political subdivisions
 
473.6

 
(30.3
)
 
79.2

 
(8.7
)
 
552.8

 
(39.0
)
Corporate securities
 
2,432.4

 
(137.7
)
 
170.3

 
(20.8
)
 
2,602.7

 
(158.5
)
Asset-backed securities
 
308.4

 
(6.5
)
 
32.5

 
(.7
)
 
340.9

 
(7.2
)
Collateralized debt obligations
 
46.7

 
(.5
)
 
—

 
—

 
46.7

 
(.5
)
Commercial mortgage-backed securities
 
161.8

 
(5.8
)
 
—

 
—

 
161.8

 
(5.8
)
Mortgage pass-through securities
 
1.6

 
—

 
1.6

 
—

 
3.2

 
—

Collateralized mortgage obligations
 
121.8

 
(1.6
)
 
2.2

 
—

 
124.0

 
(1.6
)
Total fixed maturities, available for sale
 
$
3,570.1

 
$
(183.0
)
 
$
285.8

 
$
(30.2
)
 
$
3,855.9

 
$
(213.2
)
Equity securities
 
$
.5

 
$
—

 
$
—

 
$
—

 
$
.5

 
$
—

EARNINGS PER SHARE (Tables)
Schedule of earnings per share reconciliation
A reconciliation of net income and shares used to calculate basic and diluted earnings per share is as follows (dollars in millions and shares in thousands):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss) for basic earnings per share
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
372.0

Add:  interest expense on 7.0% Senior Debentures due 2016 (the "7.0% Debentures"), net of income taxes
—

 
—

 
—

 
1.6

Net income (loss) for diluted earnings per share
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
373.6

Shares:
 

 
 

 
 
 
 
Weighted average shares outstanding for basic earnings per share
210,525

 
222,876

 
215,790

 
221,819

Effect of dilutive securities on weighted average shares:
 

 
 

 
 
 
 
7.0% Debentures
—

 
839

 
—

 
7,707

Stock options, restricted stock and performance units
2,447

 
2,858

 
—

 
2,699

Warrants (a)
2,486

 
2,774

 
—

 
2,344

Dilutive potential common shares
4,933

 
6,471

 
—

 
12,750

Weighted average shares outstanding for diluted earnings per share
215,458

 
229,347

 
215,790

 
234,569


________
(a)
All outstanding warrants were repurchased in September 2014 as further discussed in the note to the consolidated financial statements entitled "Changes in Common Stock." Accordingly, the warrants will have no dilutive effect in periods beginning after September 30, 2014.

BUSINESS SEGMENTS (TABLES)
Schedule of segment reporting information by segment 
Operating information by segment was as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy income:
 
 
 
 
 
 
 
Annuities
$
6.6

 
$
5.6

 
$
21.8

 
$
22.1

Health
319.4

 
323.3

 
970.4

 
990.0

Life
90.4

 
78.5

 
248.6

 
232.4

Net investment income (a)
231.2

 
235.4

 
703.2

 
723.7

Fee revenue and other income (a)
7.0

 
5.8

 
18.1

 
13.5

Total Bankers Life revenues
654.6

 
648.6

 
1,962.1

 
1,981.7

Washington National:
 

 
 

 
 
 
 
Insurance policy income:
 

 
 

 
 
 
 
Annuities
.9

 
6.5

 
3.3

 
9.7

Health
147.1

 
147.0

 
444.8

 
438.2

Life
6.0

 
5.7

 
18.2

 
17.3

Net investment income (a)
65.2

 
72.9

 
206.0

 
220.6

Fee revenue and other income (a)
.3

 
.3

 
.7

 
.7

Total Washington National revenues
219.5

 
232.4

 
673.0

 
686.5

Colonial Penn:
 

 
 

 
 
 
 
Insurance policy income:
 

 
 

 
 
 
 
Health
.8

 
1.1

 
2.7

 
3.3

Life
60.9

 
57.0

 
181.2

 
169.7

Net investment income (a)
10.3

 
10.2

 
31.5

 
30.0

Fee revenue and other income (a)
.2

 
.2

 
.7

 
.6

Total Colonial Penn revenues
72.2

 
68.5

 
216.1

 
203.6

Other CNO Business:
 

 
 

 
 
 
 
Insurance policy income - health
—

 
5.9

 
—

 
18.2

Net investment income (a)
—

 
8.0

 
—

 
24.8

Total Other CNO Business revenues
—

 
13.9

 
—

 
43.0

Corporate operations:
 

 
 

 
 
 
 
Net investment income
(1.0
)
 
11.0

 
11.7

 
25.6

Fee and other income
1.9

 
1.7

 
4.6

 
4.9

Total corporate revenues
0.9

 
12.7

 
16.3

 
30.5

Total revenues
947.2

 
976.1

 
2,867.5

 
2,945.3


(continued on next page)

(continued from previous page)
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Expenses:
 
 
 
 
 
 
 
Bankers Life:
 
 
 
 
 
 
 
Insurance policy benefits
$
394.9

 
$
427.3

 
$
1,237.8

 
$
1,331.9

Amortization
47.1

 
39.7

 
140.7

 
139.9

Interest expense on investment borrowings
2.0

 
1.8

 
5.8

 
4.9

Other operating costs and expenses
98.8

 
93.5

 
294.4

 
277.5

Total Bankers Life expenses
542.8

 
562.3

 
1,678.7

 
1,754.2

Washington National:
 

 
 

 
 
 
 
Insurance policy benefits
129.5

 
141.6

 
394.1

 
409.6

Amortization
14.8

 
14.4

 
47.1

 
47.7

Interest expense on investment borrowings
.4

 
.5

 
1.3

 
1.5

Other operating costs and expenses
47.2

 
42.9

 
139.5

 
124.9

Total Washington National expenses
191.9

 
199.4

 
582.0

 
583.7

Colonial Penn:
 

 
 

 
 
 
 
Insurance policy benefits
41.1

 
39.8

 
129.0

 
124.0

Amortization
3.7

 
3.7

 
11.5

 
11.1

Other operating costs and expenses
27.0

 
29.2

 
77.6

 
76.9

Total Colonial Penn expenses
71.8

 
72.7

 
218.1

 
212.0

Other CNO Business:
 

 
 

 
 
 
 
Insurance policy benefits
—

 
13.5

 
—

 
44.4

Other operating costs and expenses
—

 
6.1

 
—

 
18.8

Total Other CNO Business expenses
—

 
19.6

 
—

 
63.2

Corporate operations:
 

 
 

 
 
 
 
Interest expense on corporate debt
10.9

 
11.7

 
33.1

 
39.9

Interest expense on investment borrowings
—

 
—

 
—

 
.1

Other operating costs and expenses
10.0

 
3.3

 
46.9

 
15.6

Total corporate expenses
20.9

 
15.0

 
80.0

 
55.6

Total expenses
827.4

 
869.0

 
2,558.8

 
2,668.7

Pre-tax operating earnings by segment:
 

 
 

 
 
 
 
Bankers Life
111.8

 
86.3

 
283.4

 
227.5

Washington National
27.6

 
33.0

 
91.0

 
102.8

Colonial Penn
.4

 
(4.2
)
 
(2.0
)
 
(8.4
)
Other CNO Business
—

 
(5.7
)
 
—

 
(20.2
)
Corporate operations
(20.0
)
 
(2.3
)
 
(63.7
)
 
(25.1
)
Pre-tax operating earnings
$
119.8

 
$
107.1

 
$
308.7

 
$
276.6

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

Reconciliation of operating profit (loss) from segments to consolidated 
A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income (loss) is as follows (dollars in millions):

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Total segment revenues                                                                                            
$
947.2

 
$
976.1

 
$
2,867.5

 
$
2,945.3

Net realized investment gains (losses)                                           
4.0

 
(1.7
)
 
37.0

 
13.1

Revenues related to certain non-strategic investments and earnings attributable to VIEs
8.3

 
9.0

 
21.9

 
24.1

Fee revenue related to transition and support services agreements
7.5

 
—

 
7.5

 
—

Revenues of CLIC prior to being sold
—

 
110.4

 
210.8

 
335.4

Consolidated revenues                                                                                       
967.0

 
1,093.8

 
3,144.7

 
3,317.9

 
 
 
 
 
 
 
 
Total segment expenses                                                                                            
827.4

 
869.0

 
2,558.8

 
2,668.7

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

 
(4.9
)
 
25.3

 
(37.0
)
Amortization related to fair value changes in embedded derivative liabilities
.1

 
1.5

 
(6.8
)
 
13.0

Amortization related to net realized investment gains
.1

 
.1

 
.6

 
1.3

Expenses related to certain non-strategic investments and earnings attributable to VIEs
10.9

 
11.8

 
30.7

 
31.7

Loss on extinguishment or modification of debt
—

 
—

 
.6

 
65.4

Net loss on sale of CLIC and gain on reinsurance transactions
(32.1
)
 
—

 
242.7

 
—

Expenses related to transition and support services agreements
6.2

 
—

 
6.2

 
—

Expenses of CLIC prior to being sold
—

 
101.9

 
187.4

 
311.1

Consolidated expenses                                                                                       
812.6

 
979.4

 
3,045.5

 
3,054.2

Income before tax
154.4

 
114.4

 
99.2

 
263.7

Income tax expense:
 
 
 
 
 
 
 
Tax expense on period income
53.8

 
38.1

 
133.1

 
113.9

Valuation allowance for deferred tax assets and other tax items
(16.8
)
 
(206.7
)
 
(1.4
)
 
(222.2
)
Net income (loss)
$
117.4

 
$
283.0

 
$
(32.5
)
 
$
372.0



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

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Current tax expense
$
5.4

 
$
3.4

 
$
11.5

 
$
8.8

Deferred tax expense
48.4

 
34.7

 
121.6

 
106.5

Valuation allowance applicable to current year income
(3.0
)
 
(9.8
)
 
(3.0
)
 
(9.8
)
Income tax expense calculated based on estimated annual effective tax rate
50.8

 
28.3

 
130.1

 
105.5

Income tax expense (benefit) on discrete items:
 
 
 
 
 
 
 
Related to the sale of CLIC:
 
 
 
 
 
 
 
Tax expense related to tax gain on sale
—

 
—

 
21.6

 
—

Previously unrecognized tax benefit recognized as a result of the gain
—

 
—

 
(7.4
)
 
—

Valuation allowance release related to the gain
—

 
—

 
(14.2
)
 
—

Valuation allowance increase related to the decrease in projected future taxable income
—

 
—

 
19.4

 
—

Valuation allowance reduction resulting from the realization of capital gains and utilization of loss carryforwards
(.4
)
 
(118.0
)
 
(4.4
)
 
(133.5
)
Valuation allowance reduction applicable to the settlement with the IRS regarding the classification of a portion of the cancellation of indebtedness income
—

 
(71.8
)
 
—

 
(71.8
)
Valuation allowance reduction related to the increase in projected future taxable income
(12.6
)
 
—

 
(12.6
)
 
—

Deferred tax benefit related to loss on extinguishment or modification of debt
—

 
—

 
—

 
(1.4
)
Other items
(.8
)
 
(7.1
)
 
(.8
)
 
(7.1
)
Total income tax expense
$
37.0

 
$
(168.6
)
 
$
131.7

 
$
(108.3
)
Schedule of effective income tax rate reconciliation 
A reconciliation of the U.S. statutory corporate tax rate to the estimated annual effective rate, before discrete items, reflected in the consolidated statement of operations is as follows:
 
 
Nine months ended
 
September 30,
 
2014
 
2013
U.S. statutory corporate rate
35.0
 %
 
35.0
 %
Valuation allowance
(.7
)
 
(3.5
)
Non-taxable income and nondeductible benefits, net
(.8
)
 
(.9
)
State taxes
1.5

 
1.4

Estimated annual effective tax rate
35.0
 %
 
32.0
 %
Schedule of deferred tax assets and liabilities 
The components of the Company's income tax assets and liabilities are summarized below (dollars in millions):

 
September 30,
2014
 
December 31,
2013
Deferred tax assets:
 
 
 
Net federal operating loss carryforwards
$
1,097.6

 
$
1,240.2

Net state operating loss carryforwards
17.2

 
20.0

Tax credits
44.2

 
43.9

Capital loss carryforwards
—

 
13.4

Deductible temporary differences:


 


Investments
62.3

 
74.3

Insurance liabilities
566.5

 
723.8

Other
56.2

 
64.7

Gross deferred tax assets
1,844.0

 
2,180.3

Deferred tax liabilities:
 

 
 

Present value of future profits and deferred acquisition costs
(319.1
)
 
(306.8
)
Accumulated other comprehensive income
(475.7
)
 
(405.5
)
Gross deferred tax liabilities
(794.8
)
 
(712.3
)
Net deferred tax assets before valuation allowance
1,049.2

 
1,468.0

Valuation allowance
(280.0
)
 
(294.8
)
Net deferred tax assets
769.2

 
1,173.2

Current income taxes accrued
(38.1
)
 
(26.0
)
Income tax assets, net
$
731.1

 
$
1,147.2

Summary of operating loss carryforwards 
As of September 30, 2014, we had $3.1 billion of federal NOLs. The following table summarizes the expiration dates of our loss carryforwards assuming the IRS ultimately agrees with the position we have taken with respect to the loss on our investment in CSHI (dollars in millions):

Year of expiration
 
Net operating loss carryforwards
 
Total loss
 
 
Life
 
Non-life
 
carryforwards
2018
 
$
47.3

 
$
—

 
$
47.3

2021
 
30.0

 
—

 
30.0

2022
 
152.0

 
—

 
152.0

2023
 
742.6

 
2,073.3

 
2,815.9

2025
 
—

 
115.5

 
115.5

2027
 
—

 
202.6

 
202.6

2028
 
—

 
67.3

 
67.3

2029
 
—

 
205.5

 
205.5

2032
 
—

 
44.0

 
44.0

Subtotal
 
971.9

 
2,708.2

 
3,680.1

Less:
 
 
 
 
 
 
Unrecognized tax benefits
 
(342.9
)
 
(201.2
)
 
(544.1
)
Total
 
$
629.0

 
$
2,507.0

 
$
3,136.0



NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS (TABLES)
Schedule of long-term debt instruments 
The following notes payable were direct corporate obligations of the Company as of September 30, 2014 and December 31, 2013 (dollars in millions):

 
September 30,
2014
 
December 31,
2013
Senior Secured Credit Agreement (as defined below)
$
541.9

 
$
581.5

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

 
275.0

7.0% Debentures
—

 
3.5

Unamortized discount on Senior Secured Credit Agreement
(2.9
)
 
(3.6
)
Direct corporate obligations
$
814.0

 
$
856.4

Schedule of maturities of long-term debt 
The scheduled repayment of our direct corporate obligations was as follows at September 30, 2014 (dollars in millions):

Year ending September 30,
 
2015
$
79.2

2016
79.2

2017
4.3

2018
379.2

2019
—

Thereafter
275.0

 
$
816.9

INVESTMENT BORROWINGS (Tables)
Schedule of terms of federal home loan bank borrowing
The following summarizes the terms of the borrowings from the FHLB by Washington National and Bankers Life (dollars in millions):

Amount
 
Maturity
 
Interest rate at
borrowed
 
date
 
September 30, 2014
$
50.0

 
October 2015
 
Variable rate – 0.504%
100.0

 
June 2016
 
Variable rate – 0.595%
75.0

 
June 2016
 
Variable rate – 0.393%
100.0

 
October 2016
 
Variable rate – 0.412%
50.0

 
November 2016
 
Variable rate – 0.504%
50.0

 
November 2016
 
Variable rate – 0.624%
57.7

 
June 2017
 
Variable rate – 0.586%
50.0

 
August 2017
 
Variable rate – 0.434%
75.0

 
August 2017
 
Variable rate – 0.385%
100.0

 
October 2017
 
Variable rate – 0.666%
50.0

 
November 2017
 
Variable rate – 0.745%
50.0

 
January 2018
 
Variable rate – 0.584%
50.0

 
January 2018
 
Variable rate – 0.573%
50.0

 
February 2018
 
Variable rate – 0.547%
50.0

 
February 2018
 
Variable rate – 0.321%
22.0

 
February 2018
 
Variable rate – 0.568%
100.0

 
May 2018
 
Variable rate – 0.602%
50.0

 
July 2018
 
Variable rate – 0.705%
50.0

 
August 2018
 
Variable rate – 0.354%
50.0

 
January 2019
 
Variable rate – 0.653%
50.0

 
February 2019
 
Variable rate – 0.321%
100.0

 
March 2019
 
Variable rate – 0.634%
21.8

 
July 2019
 
Variable rate – 0.644%
21.8

 
June 2020
 
Fixed rate – 1.960%
28.3

 
August 2021
 
Fixed rate – 2.550%
26.9

 
March 2023
 
Fixed rate – 2.160%
20.5

 
June 2025
 
Fixed rate – 2.940%
$
1,499.0

 
 
 
 
CHANGES IN COMMON STOCK (Tables)
Schedule of options activity
Changes in the number of shares of common stock outstanding were as follows (shares in thousands):

Balance, December 31, 2013
220,324

 
Treasury stock purchased and retired
(14,118
)
 
Stock options exercised
893

 
Restricted and performance stock vested
541

(a)
Balance, September 30, 2014
207,640

 
____________________
(a)
Such amount was reduced by 230 thousand shares which were tendered to the Company for the payment of required federal and state tax withholdings owed on the vesting of restricted and performance stock.
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS (Tables)
Schedule of offsetting call options 
The following table summarizes information related to call options as of September 30, 2014 and December 31, 2013 (dollars in millions):

 
 
 
 
 
 
 
 
 
Gross amounts not offset in the balance sheet
 
 
 
 
 
Gross amounts of recognized assets
 
Gross amounts offset in the balance sheet
 
Net amounts of assets presented in the balance sheet
 
Financial instruments
 
Cash collateral received
 
Net amount
September 30, 2014:
 
 
 
Call Options
 
$
98.3

 
$
—

 
$
98.3

 
$
—

 
$
—

 
$
98.3

December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
Call Options
 
156.2

 
—

 
156.2

 
—

 
—

 
156.2



Schedule of Repurchase Agreements 
The following table summarizes information related to repurchase agreements as of September 30, 2014 (dollars in millions):

 
 
 
 
 
 
 
 
 
Gross amounts not offset in the balance sheet
 
 
 
 
 
Gross amounts of recognized liabilities
 
Gross amounts offset in the balance sheet
 
Net amounts of liabilities presented in the balance sheet
 
Financial instruments
 
Cash collateral pledged
 
Net amount
September 30, 2014:
 
 
 
Repurchase agreements (a)
 
$
20.4

 
$
—

 
$
20.4

 
$
—

 
$
—

 
$
20.4


_________________
(a)
As of September 30, 2014, these agreements were collateralized by investment securities with a fair value of $25.5 million. There were no repurchase agreements outstanding at December 31, 2013.
CONSOLIDATED STATEMENT CASH FLOWS (TABLES)
Schedule of the reconciliation for net income provided by operating activities 
The following reconciles net income to net cash provided by operating activities (dollars in millions):

 
Nine months ended
 
September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(32.5
)
 
$
372.0

Adjustments to reconcile net income to net cash from operating activities:
 
 
 

Amortization and depreciation
218.2

 
241.1

Income taxes
128.9

 
(112.6
)
Insurance liabilities
228.9

 
298.8

Accrual and amortization of investment income
(112.3
)
 
(189.4
)
Deferral of policy acquisition costs
(176.6
)
 
(161.8
)
Net realized investment gains
(39.8
)
 
(18.4
)
Payment to reinsurer pursuant to long-term care business reinsured
(590.3
)
 
—

Net loss on sale of CLIC and gain on reinsurance transactions
242.7

 
—

Loss on extinguishment or modification of debt
.6

 
65.4

Other
8.3

 
(23.0
)
Net cash from operating activities
$
(123.9
)
(a)
$
472.1


______________________
(a)
Cash flows from operating activities reflect outflows in the 2014 period due to the payment to reinsurer to transfer certain long-term care business.
Effects of Reinsurance 
On July 1, 2014, Bankers Life recaptured the life business written by Bankers Life that was reinsured by Wilton Re in 2009. The following summarizes the impact of the recapture (dollars in millions):
Investments
$
139.4

(a) (b)
Cash
7.7

 
Present value of future profits and deferred acquisition costs
29.0

(b)
Reinsurance receivables
(155.9
)
(b)
Other liabilities
5.9

(b)
Gain on reinsurance transaction (classified as "Net loss on sale of subsidiary and gain on reinsurance transactions")
26.1

 
Income tax expense
9.2

 
Gain on reinsurance transaction (net of income taxes)
$
16.9

 
___________________
(a)    Such amount has been reduced by a $28.0 million recapture fee.
(b)    Such non-cash amounts have been excluded from the consolidated statement of cash flows.
Schedule of other significant noncash transactions 
Other non-cash items not reflected in the investing and financing activities sections of the consolidated statement of cash flows (dollars in millions):

 
Nine months ended
 
September 30,
 
2014
 
2013
Stock options, restricted stock and performance units
$
11.6

 
$
10.8

INVESTMENTS IN VARIABLE INTEREST ENTITIES (TABLES)
Schedule of impact on balance sheet of consolidating variable interest entities 
The following table provides supplemental information about the assets and liabilities of the VIEs which have been consolidated in accordance with authoritative guidance (dollars in millions):
 
September 30, 2014
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
1,343.0

 
$
—

 
$
1,343.0

Notes receivable of VIEs held by insurance subsidiaries
—

 
(148.2
)
 
(148.2
)
Cash and cash equivalents held by variable interest entities
150.7

 
—

 
150.7

Accrued investment income
3.1

 
—

 
3.1

Income tax assets, net
12.9

 
(2.3
)
 
10.6

Other assets
18.2

 
(1.3
)
 
16.9

Total assets
$
1,527.9

 
$
(151.8
)
 
$
1,376.1

Liabilities:
 

 
 

 
 

Other liabilities
$
104.5

 
$
(3.7
)
 
$
100.8

Borrowings related to variable interest entities
1,295.0

 
—

 
1,295.0

Notes payable of VIEs held by insurance subsidiaries
152.2

 
(152.2
)
 
—

Total liabilities
$
1,551.7

 
$
(155.9
)
 
$
1,395.8


 
December 31, 2013
 
VIEs
 
Eliminations
 
Net effect on
consolidated
balance sheet
Assets:
 
 
 
 
 
Investments held by variable interest entities
$
1,046.7

 
$
—

 
$
1,046.7

Notes receivable of VIEs held by insurance subsidiaries
—

 
(108.5
)
 
(108.5
)
Cash and cash equivalents held by variable interest entities
104.3

 
—

 
104.3

Accrued investment income
1.9

 
—

 
1.9

Income tax assets, net
5.4

 
(2.5
)
 
2.9

Other assets
22.6

 
(.9
)
 
21.7

Total assets
$
1,180.9

 
$
(111.9
)
 
$
1,069.0

Liabilities:
 

 
 

 
 

Other liabilities
$
66.0

 
$
(4.0
)
 
$
62.0

Borrowings related to variable interest entities
1,012.3

 
—

 
1,012.3

Notes payable of VIEs held by insurance subsidiaries
112.5

 
(112.5
)
 
—

Total liabilities
$
1,190.8

 
$
(116.5
)
 
$
1,074.3

Summary of variable interest entities by contractual maturity 
The following table sets forth the amortized cost and estimated fair value of the investments held by the VIEs at September 30, 2014, by contractual maturity.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
 
Amortized
cost
 
Estimated
fair
value
 
(Dollars in millions)
Due after one year through five years
$
389.0

 
$
385.5

Due after five years through ten years
970.7

 
957.5

Total
$
1,359.7

 
$
1,343.0

FAIR VALUE MEASUREMENTS (TABLES)
Schedule of financial instruments carried at fair value categorized by input level 
The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at September 30, 2014 is as follows (dollars in millions):

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

 
$
13,592.4

 
$
334.8

 
$
13,927.2

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

 
151.5

 
—

 
151.5

States and political subdivisions
—

 
2,204.3

 
—

 
2,204.3

Debt securities issued by foreign governments
—

 
1.8

 
—

 
1.8

Asset-backed securities
—

 
1,246.7

 
62.3

 
1,309.0

Collateralized debt obligations
—

 
326.9

 
—

 
326.9

Commercial mortgage-backed securities
—

 
1,287.3

 
1.1

 
1,288.4

Mortgage pass-through securities
—

 
7.0

 
1.1

 
8.1

Collateralized mortgage obligations
—

 
1,393.2

 
.1

 
1,393.3

Total fixed maturities, available for sale
—

 
20,211.1

 
399.4

 
20,610.5

Equity securities - corporate securities
172.7

 
173.0

 
27.1

 
372.8

Trading securities:
 

 
 

 
 

 
 

Corporate securities
—

 
24.0

 
—

 
24.0

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

 
3.7

 
—

 
3.7

Asset-backed securities
—

 
26.6

 
—

 
26.6

Commercial mortgage-backed securities
—

 
119.7

 
28.7

 
148.4

Mortgage pass-through securities
—

 
.1

 
—

 
.1

Collateralized mortgage obligations
—

 
24.3

 
6.0

 
30.3

Equity securities
1.9

 
—

 
—

 
1.9

Total trading securities
1.9

 
198.4

 
34.7

 
235.0

Investments held by variable interest entities - corporate securities
—

 
1,339.1

 
3.9

 
1,343.0

Other invested assets - derivatives
.9

 
98.3

 
—

 
99.2

Assets held in separate accounts
—

 
6.9

 
—

 
6.9

Total assets carried at fair value by category
$
175.5

 
$
22,026.8

 
$
465.1

 
$
22,667.4

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

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

 
$
—

 
$
992.2

 
$
992.2

Total liabilities for insurance products
—

 
—

 
992.2

 
992.2

Total liabilities carried at fair value by category
$
—

 
$
—

 
$
992.2

 
$
992.2



The categorization of fair value measurements, by input level, for our financial instruments carried at fair value on a recurring basis at December 31, 2013 is as follows (dollars in millions):

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

 
$
15,340.1

 
$
359.6

 
$
15,699.7

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

 
73.1

 
—

 
73.1

States and political subdivisions
—

 
2,204.4

 
—

 
2,204.4

Asset-backed securities
—

 
1,419.9

 
42.2

 
1,462.1

Collateralized debt obligations
—

 
47.3

 
246.7

 
294.0

Commercial mortgage-backed securities
—

 
1,609.0

 
—

 
1,609.0

Mortgage pass-through securities
—

 
11.8

 
1.6

 
13.4

Collateralized mortgage obligations
—

 
1,848.9

 
—

 
1,848.9

Total fixed maturities, available for sale
—

 
22,554.5

 
650.1

 
23,204.6

Equity securities - corporate securities
79.6

 
118.9

 
24.5

 
223.0

Trading securities:
 

 
 

 
 

 
 

Corporate securities
—

 
45.2

 
—

 
45.2

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

 
4.6

 
—

 
4.6

States and political subdivisions
—

 
14.1

 
—

 
14.1

Asset-backed securities
—

 
24.3

 
—

 
24.3

Commercial mortgage-backed securities
—

 
125.8

 
—

 
125.8

Mortgage pass-through securities
—

 
.1

 
—

 
.1

Collateralized mortgage obligations
—

 
31.1

 
—

 
31.1

Equity securities
2.4

 
—

 
—

 
2.4

Total trading securities
2.4

 
245.2

 
—

 
247.6

Investments held by variable interest entities - corporate securities
—

 
1,046.7

 
—

 
1,046.7

Other invested assets - derivatives
.6

 
156.2

 
—

 
156.8

Assets held in separate accounts
—

 
10.3

 
—

 
10.3

Total assets carried at fair value by category
$
82.6

 
$
24,131.8

 
$
674.6

 
$
24,889.0

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

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

 
$
—

 
$
903.7

 
$
903.7

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

 
—

 
1.8

 
1.8

Total liabilities for insurance products
—

 
—

 
905.5

 
905.5

Total liabilities carried at fair value by category
$
—

 
$
—

 
$
905.5

 
$
905.5

Schedule of assets and liabilities measured on a recurring fair value basis 
The fair value measurements for our financial instruments disclosed at fair value on a recurring basis are as follows (dollars in millions):
 
September 30, 2014
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
Mortgage loans
$
—

 
$
—

 
$
1,675.5

 
$
1,675.5

 
$
1,621.8

Policy loans
—

 
—

 
106.2

 
106.2

 
106.2

Other invested assets:
 
 
 
 
 
 
 
 
 
Company-owned life insurance
—

 
146.2

 
—

 
146.2

 
146.2

Alternative investment funds
—

 
84.7

 
—

 
84.7

 
84.7

Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
Unrestricted
344.1

 
108.0

 
—

 
452.1

 
452.1

Held by variable interest entities
150.7

 
—

 
—

 
150.7

 
150.7

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholder account balances (a)
—

 
—

 
10,659.2

 
10,659.2

 
10,659.2

Investment borrowings
—

 
1,519.7

 
—

 
1,519.7

 
1,519.4

Borrowings related to variable interest entities
—

 
941.7

 
—

 
941.7

 
1,295.0

Notes payable – direct corporate obligations
—

 
828.7

 
—

 
828.7

 
814.0


 
December 31, 2013
 
Quoted prices in active markets for identical assets or liabilities
(Level 1)
 
Significant other observable inputs
 (Level 2)
 
Significant unobservable inputs 
(Level 3)
 
Total estimated fair value
 
Total carrying amount
Assets:
 
 
 
 
 
 
 
 
 
Mortgage loans
$
—

 
$
—

 
$
1,749.5

 
$
1,749.5

 
$
1,729.5

Policy loans
—

 
—

 
277.0

 
277.0

 
277.0

Other invested assets:
 
 
 
 
 
 
 
 
 
Company-owned life insurance
—

 
144.8

 
—

 
144.8

 
144.8

Alternative investment funds
—

 
67.6

 
—

 
67.6

 
67.6

Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
Unrestricted
457.8

 
241.2

 
—

 
699.0

 
699.0

Held by variable interest entities
104.3

 
—

 
—

 
104.3

 
104.3

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholder account balances (a)
—

 
—

 
12,776.4

 
12,776.4

 
12,776.4

Investment borrowings
—

 
1,948.5

 
—

 
1,948.5

 
1,900.0

Borrowings related to variable interest entities
—

 
993.7

 
—

 
993.7

 
1,012.3

Notes payable – direct corporate obligations
—

 
872.5

 
—

 
872.5

 
856.4


____________________
(a)
The estimated fair value of insurance liabilities for policyholder account balances was approximately equal to its carrying value at September 30, 2014 and December 31, 2013.  This was because interest rates credited on the vast majority of account balances approximate current rates paid on similar products and because these rates are not generally guaranteed beyond one year.

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2014 (dollars in millions):
 
 
September 30, 2014
 
 
 
 
Beginning balance as of June 30, 2014
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2014
 
Amount of total gains (losses) for the three months ended September 30, 2014 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
389.8

 
$
6.6

 
$
—

 
$
(.9
)
 
$
37.5

 
$
(98.2
)
 
$
334.8

 
$
—

States and political subdivisions
 
28.7

 
—

 
—

 
—

 
—

 
(28.7
)
 
—

 
—

Asset-backed securities
 
52.7

 
(.1
)
 
—

 
.2

 
9.5

 
—

 
62.3

 
—

Collateralized debt obligations
 
14.2

 
—

 
—

 
—

 
—

 
(14.2
)
 
—

 
—

Commercial mortgage-backed securities
 
—

 
1.1

 
—

 
—

 
—

 
—

 
1.1

 
—

Mortgage pass-through securities
 
1.3

 
(.2
)
 
—

 
—

 
—

 
—

 
1.1

 
—

Collateralized mortgage obligations
 
.1

 
—

 
—

 
—

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
 
486.8

 
7.4

 
—

 
(.7
)
 
47.0

 
(141.1
)
 
399.4

 
—

Equity securities - corporate securities
 
26.2

 
.9

 
—

 
—

 
—

 
—

 
27.1

 
—

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial mortgage-backed securities
 
—

 
—

 
—

 
(.4
)
 
29.1

 
—

 
28.7

 
(.4
)
Collateralized mortgage obligations
 
5.9

 
—

 
—

 
.1

 
—

 
—

 
6.0

 
.1

Total trading securities
 
5.9

 
—

 
—

 
(.3
)
 
29.1

 
—

 
34.7

 
(.3
)
Investments held by variable interest entities - corporate securities
 
—

 
3.0

 
—

 
(.1
)
 
1.0

 
—

 
3.9

 
—

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
 
(980.3
)
 
(12.2
)
 
.3

 
—

 
—

 
—

 
(992.2
)
 
.3

Total liabilities for insurance products
 
(980.3
)
 
(12.2
)
 
.3

 
—

 
—

 
—

 
(992.2
)
 
.3

_________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2014 (dollars in millions):
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
15.7

 
$
(9.1
)
 
$
—

 
$
—

 
$
6.6

Asset-backed securities
1.9

 
(2.0
)
 
—

 
—

 
(.1
)
Commercial mortgage-backed securities
1.1

 
—

 
—

 
—

 
1.1

Mortgage pass-through securities
—

 
(.2
)
 
—

 
—

 
(.2
)
Total fixed maturities, available for sale
18.7

 
(11.3
)
 
—

 
—

 
7.4

Equity securities - corporate securities
.9

 
—

 
—

 
—

 
.9

Investments held by variable interest entities - corporate securities
3.0

 
—

 
—

 
—

 
3.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(29.2
)
 
3.9

 
(.5
)
 
13.6

 
(12.2
)
Total liabilities for insurance products
(29.2
)
 
3.9

 
(.5
)
 
13.6

 
(12.2
)

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2014 (dollars in millions):
 
 
September 30, 2014
 
 
 
 
Beginning balance as of December 31, 2013
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Assets of CLIC sold
 
Ending balance as of September 30, 2014
 
Amount of total gains (losses) for the nine months ended September 30, 2014 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
359.6

 
$
44.9

 
$
—

 
$
11.6

 
$
52.7

 
$
(82.8
)
 
$
(51.2
)
 
$
334.8

 
$
—

States and political subdivisions
 
—

 
—

 
—

 
.1

 
2.1

 
—

 
(2.2
)
 
—

 
—

Asset-backed securities
 
42.2

 
8.9

 
—

 
4.0

 
16.9

 
—

 
(9.7
)
 
62.3

 
—

Collateralized debt obligations
 
246.7

 
—

 
—

 
—

 
—

 
(246.7
)
 
—

 
—

 
—

Commercial mortgage-backed securities
 
—

 
1.1

 
—

 
—

 
—

 
—

 
—

 
1.1

 
—

Mortgage pass-through securities
 
1.6

 
(.5
)
 
—

 
—

 
—

 
—

 
—

 
1.1

 
—

Collateralized mortgage obligations
 
—

 
(.1
)
 
—

 
—

 
.2

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
 
650.1

 
54.3

 
—

 
15.7

 
71.9

 
(329.5
)
 
(63.1
)
 
399.4

 
—

Equity securities - corporate securities
 
24.5

 
2.6

 
—

 
—

 
—

 
—

 
—

 
27.1

 
—

Trading securities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Commercial mortgage-backed securities
 
—

 
29.1

 
—

 
(.4
)
 
—

 
—

 
—

 
28.7

 
(.4
)
Collateralized mortgage obligations
 
—

 
—

 
—

 
.2

 
5.8

 
—

 
—

 
6.0

 
.2

Total trading securities
 
—

 
29.1

 
—

 
(.2
)
 
5.8

 
—

 
—

 
34.7

 
(.2
)
Investments held by variable interest entities - corporate securities
 
—

 
3.0

 
—

 
(.1
)
 
1.0

 
—

 
—

 
3.9

 
—

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Liabilities for insurance products:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
 
(903.7
)
 
(62.0
)
 
(26.5
)
 
—

 
—

 
—

 
—

 
(992.2
)
 
(26.5
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
 
(1.8
)
 
1.8

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total liabilities for insurance products
 
(905.5
)
 
(60.2
)
 
(26.5
)
 
—

 
—

 
—

 
—

 
(992.2
)
 
(26.5
)
_________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2014 (dollars in millions):
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
47.7

 
$
(2.8
)
 
$
—

 
$
—

 
$
44.9

Asset-backed securities
11.8

 
(2.9
)
 
—

 
—

 
8.9

Commercial mortgage-backed securities
1.1

 
—

 
—

 
—

 
1.1

Mortgage pass-through securities
1.1

 
(1.6
)
 
—

 
—

 
(.5
)
Collateralized mortgage obligations
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
61.7

 
(7.4
)
 
—

 
—

 
54.3

Equity securities - corporate securities
2.6

 
—

 
—

 
—

 
2.6

Trading securities - commercial mortgage-backed securities
29.1

 
—

 
—

 
—

 
29.1

Investments held by variable interest entities - corporate securities
3.0

 
—

 
—

 
—

 
3.0

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(86.9
)
 
7.5

 
(25.1
)
 
42.5

 
(62.0
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
3.4

 
(1.6
)
 
—

 
1.8

Total liabilities for insurance products
(86.9
)
 
10.9

 
(26.7
)
 
42.5

 
(60.2
)


The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the three months ended September 30, 2013 (dollars in millions):

 
September 30, 2013
 
 
Beginning balance as of June 30, 2013
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2013
 
Amount of total gains (losses) for the three months ended September 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
393.1

 
$
(2.1
)
 
$
—

 
$
1.4

 
$
12.9

 
$
(48.0
)
 
$
357.3

 
$
—

Asset-backed securities
45.4

 
(7.2
)
 
—

 
.3

 
—

 
(2.0
)
 
36.5

 
—

Collateralized debt obligations
287.6

 
(18.0
)
 
—

 
.6

 
—

 
(10.1
)
 
260.1

 
—

Commercial mortgage-backed securities
3.3

 
—

 
—

 
—

 
—

 
(3.3
)
 
—

 
—

Mortgage pass-through securities
1.8

 
(.1
)
 
—

 
—

 
—

 
—

 
1.7

 
—

Collateralized mortgage obligations
.1

 
—

 
—

 
—

 
—

 
—

 
.1

 
—

Total fixed maturities, available for sale
731.3

 
(27.4
)
 
—

 
2.3

 
12.9

 
(63.4
)
 
655.7

 
—

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
.1

 
.7

 
—

 
—

 
23.0

 
—

 
23.8

 
—

Venture capital investments
3.1

 
—

 
—

 
.2

 
—

 
—

 
3.3

 
—

Total equity securities
3.2

 
.7

 
—

 
.2

 
23.0

 
—

 
27.1

 
—

Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Asset-backed securities
—

 
—

 
—

 
.6

 
25.7

 
—

 
26.3

 
.6

Collateralized mortgage obligations
10.4

 
—

 
—

 
—

 
—

 
(4.8
)
 
5.6

 
—

Total trading securities
10.4

 
—

 
—

 
.6

 
25.7

 
(4.8
)
 
31.9

 
.6

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(796.3
)
 
(45.2
)
 
(1.4
)
 
—

 
—

 
—

 
(842.9
)
 
(1.4
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
(2.6
)
 
.5

 
—

 
—

 
—

 
—

 
(2.1
)
 
—

Total liabilities for insurance products
(798.9
)
 
(44.7
)
 
(1.4
)
 
—

 
—

 
—

 
(845.0
)
 
(1.4
)
____________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the three months ended September 30, 2013 (dollars in millions):

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

 
$
(2.1
)
 
$
—

 
$
—

 
$
(2.1
)
Asset-backed securities
—

 
(7.2
)
 
—

 
—

 
(7.2
)
Collateralized debt obligations
5.9

 
(23.9
)
 
—

 
—

 
(18.0
)
Mortgage pass-through securities
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
5.9

 
(33.3
)
 
—

 
—

 
(27.4
)
Equity securities - corporate securities
.7

 
—

 
—

 
—

 
.7

Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(25.4
)
 
—

 
(30.0
)
 
10.2

 
(45.2
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
.5

 
—

 
—

 
.5

Total liabilities for insurance products
(25.4
)
 
.5

 
(30.0
)
 
10.2

 
(44.7
)


The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value for the nine months ended September 30, 2013 (dollars in millions):

 
September 30, 2013
 
 
Beginning balance as of December 31, 2012
 
Purchases, sales, issuances and settlements, net (b)
 
Total realized and unrealized gains (losses) included in net income
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
Transfers into Level 3 (a)
 
Transfers out of Level 3 (a)
 
Ending balance as of September 30, 2013
 
Amount of total gains (losses) for the nine months ended September 30, 2013 included in our net income relating to assets and liabilities still held as of the reporting date
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
$
355.5

 
$
14.0

 
$
(.3
)
 
$
(12.8
)
 
$
13.2

 
$
(12.3
)
 
$
357.3

 
$
—

States and political subdivisions
13.1

 
—

 
—

 
—

 
—

 
(13.1
)
 
—

 
—

Asset-backed securities
44.0

 
(4.5
)
 
.1

 
(3.1
)
 
—

 
—

 
36.5

 
—

Collateralized debt obligations
324.0

 
(70.5
)
 
.1

 
6.5

 
—

 
—

 
260.1

 
—

Commercial mortgage-backed securities
6.2

 
—

 
—

 
—

 
—

 
(6.2
)
 
—

 
—

Mortgage pass-through securities
1.9

 
(.2
)
 
—

 
—

 
—

 
—

 
1.7

 
—

Collateralized mortgage obligations
16.9

 
(.1
)
 
—

 
—

 
—

 
(16.7
)
 
.1

 
—

Total fixed maturities, available for sale
761.6

 
(61.3
)
 
(.1
)
 
(9.4
)
 
13.2

 
(48.3
)
 
655.7

 
—

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
.1

 
34.7

 
—

 
(11.0
)
 
—

 
—

 
23.8

 
—

Venture capital investments
2.8

 
—

 
—

 
.5

 
—

 
—

 
3.3

 
—

Total equity securities
2.9

 
34.7

 
—

 
(10.5
)
 
—

 
—

 
27.1

 
—

Trading securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

States and political subdivisions
.6

 
—

 
—

 
—

 
—

 
(.6
)
 
—

 
—

Asset-backed securities
—

 
—

 
—

 
(.4
)
 
26.7

 
—

 
26.3

 
(.4
)
Collateralized debt obligations
7.3

 
(7.7
)
 
.6

 
(.2
)
 
—

 
—

 
—

 
(.2
)
Collateralized mortgage obligations
5.8

 
—

 
—

 
(.2
)
 
—

 
—

 
5.6

 
(.2
)
Total trading securities
13.7

 
(7.7
)
 
.6

 
(.8
)
 
26.7

 
(.6
)
 
31.9

 
(.8
)
Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Liabilities for insurance products:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(734.0
)
 
(141.0
)
 
32.1

 
—

 
—

 
—

 
(842.9
)
 
32.1

Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
(5.5
)
 
3.4

 
—

 
—

 
—

 
—

 
(2.1
)
 
—

Total liabilities for insurance products
(739.5
)
 
(137.6
)
 
32.1

 
—

 
—

 
—

 
(845.0
)
 
32.1

____________
(a)
Transfers into Level 3 are the result of unobservable inputs utilized within valuation methodologies for assets that were previously valued using observable inputs. Transfers out of Level 3 are due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company is able to validate.
(b)
Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.  Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts.  The following summarizes such activity for the nine months ended September 30, 2013 (dollars in millions):

 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Purchases, sales, issuances and settlements, net
Assets:
 
 
 
 
 
 
 
 
 
Fixed maturities, available for sale:
 
 
 
 
 
 
 
 
 
Corporate securities
$
24.0

 
$
(10.0
)
 
$
—

 
$
—

 
$
14.0

Asset-backed securities
7.6

 
(12.1
)
 
—

 
—

 
(4.5
)
Collateralized debt obligations
6.0

 
(76.5
)
 
—

 
—

 
(70.5
)
Mortgage pass-through securities
—

 
(.2
)
 
—

 
—

 
(.2
)
Collateralized mortgage obligations
—

 
(.1
)
 
—

 
—

 
(.1
)
Total fixed maturities, available for sale
37.6

 
(98.9
)
 
—

 
—

 
(61.3
)
Equity securities - corporate securities
34.7

 
—

 
—

 
—

 
34.7

Trading securities - collateralized debt obligations
—

 
(7.7
)
 
—

 
—

 
(7.7
)
Liabilities:
 
 
 
 
 
 
 
 
 
Liabilities for insurance products:
 
 
 
 
 
 
 
 
 
Interest-sensitive products - embedded derivatives associated with fixed index annuity products
(78.2
)
 
1.4

 
(94.2
)
 
30.0

 
(141.0
)
Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement
—

 
3.4

 
—

 
—

 
3.4

Total liabilities for insurance products
(78.2
)
 
4.8

 
(94.2
)
 
30.0

 
(137.6
)
Schedule of fair value measurement inputs 
The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at September 30, 2014 (dollars in millions):

 
Fair value at September 30, 2014
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
262.9

 
Discounted cash flow analysis
 
Discount margins
 
1.55% - 5.11% (2.43%)
Asset-backed securities (b)
29.3

 
Discounted cash flow analysis
 
Discount margins
 
2.03% - 4.15% (2.94%)
Equity security (c)
27.1

 
Market approach
 
Projected cash flows
 
Not applicable
Other assets categorized as Level 3 (d)
145.8

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
465.1

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest-sensitive products (e)
992.2

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 6.63% (5.60%)
 
 
 
 
 
Discount rates
 
0.00 - 3.42% (2.03%)
 
 
 
 
 
Surrender rates
 
2.80% - 54.60% (14.39%)
________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value.
(d)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(e)
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.

The following table provides additional information about the significant unobservable (Level 3) inputs developed internally by the Company to determine fair value for certain assets and liabilities carried at fair value at December 31, 2013 (dollars in millions):

 
Fair value at December 31, 2013
 
Valuation technique(s)
 
Unobservable inputs
 
Range (weighted average)
Assets:
 
 
 
 
 
 
 
Corporate securities (a)
$
260.3

 
Discounted cash flow analysis
 
Discount margins
 
1.65% - 2.90% (2.36%)
Asset-backed securities (b)
35.1

 
Discounted cash flow analysis
 
Discount margins
 
2.03% - 4.20% (3.09%)
Collateralized debt obligations (c)
240.7

 
Discounted cash flow analysis
 
Recoveries
 
64% - 67% (65.8%)
 
 
 
 
 
Constant prepayment rate
 
20%
 
 
 
 
 
Discount margins
 
.95% - 2.00% (1.32%)
 
 
 
 
 
Annual default rate
 
1.14% - 5.57% (3.05%)
 
 
 
 
 
Portfolio CCC %
 
1.52% - 21.79% (12.57%)
Equity security (d)
24.5

 
Market approach
 
Projected cash flows
 
Not applicable
Other assets categorized as Level 3 (e)
114.0

 
Unadjusted third-party price source
 
Not applicable
 
Not applicable
Total
674.6

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest-sensitive products (f)
905.5

 
Discounted projected embedded derivatives
 
Projected portfolio yields
 
5.35% - 6.63% (5.60%)
 
 
 
 
 
Discount rates
 
0.00 - 4.64% (2.47%)
 
 
 
 
 
Surrender rates
 
2.80% - 54.60% (14.39%)

________________________________
(a)
Corporate securities - The significant unobservable input used in the fair value measurement of our corporate securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(b)
Asset-backed securities - The significant unobservable input used in the fair value measurement of these asset-backed securities is discount margin added to a riskless market yield. Significant increases (decreases) in discount margin in isolation would result in a significantly lower (higher) fair value measurement.
(c)
Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
(d)
Equity security - This equity security represents an investment in a company that is constructing a manufacturing facility. The significant unobservable input is the cash flows that will be generated upon completion of the manufacturing facility. Given the nature of this investment, the best current indicator of value is the cost basis of the investment, which we believe approximates market value.
(e)
Other assets categorized as Level 3 - For these assets, there were no adjustments to quoted market prices obtained from third-party pricing sources.
(f)
Interest-sensitive products - The significant unobservable inputs used in the fair value measurement of our interest-sensitive products are projected portfolio yields, discount rates and surrender rates. Increases (decreases) in projected portfolio yields in isolation would lead to a higher (lower) fair value measurement. The discount rate is based on the Treasury rate adjusted by a margin. Increases (decreases) in the discount rates would lead to a lower (higher) fair value measurement. Assumed surrender rates are used to project how long the contracts remain in force. Generally, the longer the contracts are assumed to be in force the higher the fair value of the embedded derivative.
AGREEMENT TO SELL SUBSIDIARY - NARRATIVE (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 0 Months Ended
Jul. 1, 2014
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Conseco Life Insurance Company [Member]
Sep. 30, 2014
Conseco Life Insurance Company [Member]
Mar. 31, 2014
Conseco Life Insurance Company [Member]
Jul. 1, 2014
Wilton Reassurance Company [Member]
Bankers Life [Member]
Jul. 1, 2014
Transition Services for the Year Ended June 30, 2015 [Member]
Wilton Reassurance Company [Member]
Conseco Life Insurance Company [Member]
Jul. 1, 2014
Transition Services for the Year Ended June 30, 2016 [Member]
Wilton Reassurance Company [Member]
Conseco Life Insurance Company [Member]
Jul. 1, 2014
Transition Services for the the Three Years Ended June 30, 2019 [Member]
Wilton Reassurance Company [Member]
Conseco Life Insurance Company [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Net cash proceeds
 
 
 
 
 
$ 222.0 
 
 
 
 
 
 
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax
 
 
 
 
 
 
6 
(298)
 
 
 
 
Purchase Commitment, Remaining Minimum Amount Committed
 
 
 
 
 
 
 
 
 
30.0 
20.0 
0.2 
Tax (expense) benefit related to tax gain on sale
 
0 
0 
(21.6)
0 
(21.6)
 
 
 
 
 
 
Previously unrecognized tax benefit now recognized as a result of the gain
 
0 
0 
7.4 
0 
7.4 
 
 
 
 
 
 
Valuation allowance release related to the gain
 
0 
0 
(14.2)
0 
14.2 
 
 
 
 
 
 
Valuation allowance increase related to the decrease in projected future taxable income
 
0 
0 
(19.4)
0 
19.4 
 
 
 
 
 
 
Reinsurance recapture fee paid
 
 
 
 
 
 
 
 
28.0 
 
 
 
Gain related to other reinsurance transaction
$ 16.9 
 
 
 
 
 
 
 
$ 16.9 
 
 
 
AGREEMEENT TO SELL SUBSIDIARY - ESTIMATED LOSS ON SALE (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Net assets being sold:
 
 
 
 
Loss before taxes
$ 32.1 
$ 0 
$ (242.7)
$ 0 
Tax expense related to tax gain on sale
0 
0 
21.6 
0 
Previously unrecognized tax benefit now recognized as a result of the gain
0 
0 
(7.4)
0 
Valuation allowance release related to the gain
0 
0 
14.2 
0 
Valuation allowance increase related to the decrease in projected future taxable income
0 
0 
(19.4)
0 
Conseco Life Insurance Company [Member]
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
Net cash proceeds
222.0 
 
222.0 
 
Net assets being sold:
 
 
 
 
Investments
3,863.8 
 
3,863.8 
 
Cash and cash equivalents
164.7 
 
164.7 
 
Accrued investment income
42.7 
 
42.7 
 
Present value of future profits
15.5 
 
15.5 
 
Deferred acquisition costs
37.6 
 
37.6 
 
Reinsurance receivables
307.4 
 
307.4 
 
Income tax assets, net
84.4 
 
84.4 
 
Other assets
2.8 
 
2.8 
 
Liabilities for insurance products
(3,201.3)
 
(3,201.3)
 
Other liabilities
(199.1)
 
(199.1)
 
Investment borrowings
(383.4)
 
(383.4)
 
Accumulated other comprehensive income
(240.5)
 
(240.5)
 
Net assets being sold
494.6 
 
494.6 
 
Loss before taxes
 
 
(272.6)
 
Tax expense related to tax gain on sale
 
 
21.6 
 
Previously unrecognized tax benefit now recognized as a result of the gain
 
 
(7.4)
 
Valuation allowance release related to the gain
 
 
(14.2)
 
Valuation allowance increase related to the decrease in projected future taxable income
 
 
19.4 
 
Net loss
 
 
$ (292.0)
 
OUT OF PERIOD ADJUSTMENTS (Details) (Out of period adjustment, USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Mar. 31, 2013
Sep. 30, 2014
Out of period adjustment
 
 
 
Out of period adjustment, increase in other operating costs and expenses
 
 
$ 2.4 
Out of period adjustment, decrease (increase) in tax expense
(2.2)
3.2 
0.8 
Out of period adjustment, effect on net loss
 
6.0 
1.6 
Out of period adjustment, effect on earnings per diluted share (in dollars per share)
$ (0.01)
$ (0.02)
$ (0.01)
Out of period adjustment, increase in insurance policy benefits
 
6.7 
 
Out of period adjustment, increase in amortization expense
 
$ (2.5)
 
INVESTMENTS - NARRATIVE (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Trading securities
$ 235.0 
 
$ 235.0 
 
$ 247.6 
Premium deficiencies adjustments to present value of future profits
(130.3)
 
(130.3)
 
 
Reduction to deferred acquisition costs due to unrealized gains that would result in premium deficiency if unrealized gains were realized
(142.4)
 
(142.4)
 
 
Accumulated Other Comprehensive Income Adjustment to Insurance Liabilities Due to Unrealized Gains That Would Result in Premium Deficiency if Unrealized Gains Were Realized
(160.9)
 
(160.9)
 
0 
Increase to deferred tax assets due to unrealized gains that would result in premium deficiency if unrealized gains were realized
154.2 
 
154.2 
 
 
Net realized investment gains (losses)
4.0 
(0.1)
39.8 
18.4 
 
Net realized investment gains, excluding impairment losses
6.8 
2.8 
54.5 
21.9 
 
Sales of investments
 
 
1,695.0 
1,697.0 
 
Other than temporary impairments recorded
 
 
14.7 
3.5 
 
Value of available for sale securities sold
 
 
213.1 
 
 
Impairment losses related to writedown of mortgage loans which losses major tenants
 
 
3.9 
 
 
Impairment losses related to private company investments did not meet expectations of previous valuations
 
 
10.8 
 
 
Other-than-temporary impairments included in accumulated other comprehensive income
 
 
3.3 
 
 
Total fixed maturities, available for sale [Member]
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Net realized investment gains (losses)
5.7 
4.9 
43.6 
28.9 
 
Available-for-sale Securities, Gross Realized Losses
2.6 
6.4 
11.1 
9.8 
 
US states and political subdivisions debt securities [Member]
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Available-for-sale Securities, Gross Realized Losses
 
 
0.7 
 
 
Corporate debt securities [Member]
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Available-for-sale Securities, Gross Realized Losses
 
 
10.4 
 
 
Embedded derivative financial instruments [Member]
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Embedded Derivative, Gain on Embedded Derivative
 
 
6.1 
8.8 
 
Marketable securities [Member]
 
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
 
Net realized investment gains, excluding impairment losses
 
 
$ 48.4 
$ 30.7 
 
INVESTMENTS - SCHEDULE OF UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS INCLUDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Net unrealized appreciation (depreciation) on fixed maturity securities, available for sale, on which an other-than-temporary impairment loss has been recognized
$ 5.9 
$ 6.5 
Net unrealized gains on all other investments
2,028.7 1
1,322.6 1
Adjustment to present value of future profits
(151.9)2
(47.7)2
Adjustment to deferred acquisition costs
(380.7)
(137.0)
Adjustment to insurance liabilities
(160.9)
0 
Unrecognized net loss related to deferred compensation plan
(6.1)
(7.1)
Deferred income tax liabilities
(475.7)
(405.5)
Accumulated other comprehensive income
859.3 
731.8 
Assets Held-for-sale [Member] |
Conseco Life Insurance Company [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Net unrealized gains on all other investments
 
226.2 
Decrease in net unrealized holding gain
$ (226.2)
 
INVESTMENTS - SCHEDULE OF AMORTIZED COST, GROSS UNREALIZED GAINS AND LOSSES, ESTIMATED FAIR VALUE, AND OTHER-THAN-TEMPORARY IMPAIRMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
$ 18,570.0 
$ 21,891.8 
Other-than-temporary impairments included in accumulated other comprehensive income
(3.3)
 
Corporate debt securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
12,378.0 
 
Gross unrealized gains
1,593.3 
 
Gross unrealized losses
(44.1)
 
Estimated fair value
13,927.2 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
US Treasury and Government [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
137.5 
 
Gross unrealized gains
14.3 
 
Gross unrealized losses
(0.3)
 
Estimated fair value
151.5 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
US states and political subdivisions debt securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
1,977.4 
 
Gross unrealized gains
232.1 
 
Gross unrealized losses
(5.2)
 
Estimated fair value
2,204.3 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Foreign Government Debt Securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
1.8 
 
Gross unrealized gains
0 
 
Gross unrealized losses
0 
 
Estimated fair value
1.8 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Asset-backed securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
1,228.4 
 
Gross unrealized gains
83.7 
 
Gross unrealized losses
(3.1)
 
Estimated fair value
1,309.0 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Collateralized debt obligations [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
323.7 
 
Gross unrealized gains
3.9 
 
Gross unrealized losses
(0.7)
 
Estimated fair value
326.9 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Commercial mortgage backed securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
1,210.3 
 
Gross unrealized gains
78.7 
 
Gross unrealized losses
(0.6)
 
Estimated fair value
1,288.4 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Mortgage pass through securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
7.7 
 
Gross unrealized gains
0.4 
 
Gross unrealized losses
0 
 
Estimated fair value
8.1 
 
Other-than-temporary impairments included in accumulated other comprehensive income
0 
 
Collateralized mortgage obligations [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
1,305.2 
 
Gross unrealized gains
89.5 
 
Gross unrealized losses
(1.4)
 
Estimated fair value
1,393.3 
 
Other-than-temporary impairments included in accumulated other comprehensive income
(3.3)
 
Total fixed maturities, available for sale [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
18,570.0 
 
Gross unrealized gains
2,095.9 
 
Gross unrealized losses
(55.4)
 
Estimated fair value
20,610.5 
 
Other-than-temporary impairments included in accumulated other comprehensive income
(3.3)
 
Equity securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
360.8 
 
Gross unrealized gains
13.0 
 
Gross unrealized losses
(1.0)
 
Estimated fair value
$ 372.8 
 
INVESTMENTS - SUMMARY OF INVESTMENTS BY CONTRACTUAL MATURITY (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Amortized Cost
 
 
Due in one year or less
$ 210.9 
 
Due after one year through five years
1,829.0 
 
Due after five years through ten years
2,847.4 
 
Due after ten years
9,607.4 
 
Subtotal
14,494.7 
 
Structured securities
4,075.3 
 
Amortized cost
18,570.0 
21,891.8 
Estimated Fair Value
 
 
Due in one year or less
216.3 
 
Due after one year through five years
2,017.4 
 
Due after five years through ten years
3,077.5 
 
Due after ten years
10,973.6 
 
Subtotal
16,284.8 
 
Structured securities
4,325.7 
 
Total fixed maturities, available for sale
$ 20,610.5 
$ 23,204.6 
INVESTMENTS - NET REALIZED INVESTMENT GAINS (LOSSES) (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Gain (Loss) on Investments [Line Items]
 
 
 
 
Total other-than-temporary impairment losses
$ (2.8)
$ (2.9)
$ (14.7)
$ (3.5)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
0 
0 
0 
0 
Net impairment losses recognized
(2.8)
(2.9)
(14.7)
(3.5)
Total realized gains (losses)
4.0 
(0.1)
39.8 
18.4 
Total fixed maturities, available for sale [Member]
 
 
 
 
Gain (Loss) on Investments [Line Items]
 
 
 
 
Realized gains on sale
8.3 
12.9 
54.7 
40.3 
Gross realized losses on sale
(2.6)
(6.4)
(11.1)
(9.8)
Total other-than-temporary impairment losses
0 
(1.6)
0 
(1.6)
Other-than-temporary impairment losses recognized in accumulated other comprehensive income
0 
0 
0 
0 
Net impairment losses recognized
0 
(1.6)
0 
(1.6)
Total realized gains (losses)
5.7 
4.9 
43.6 
28.9 
Equity securities [Member]
 
 
 
 
Gain (Loss) on Investments [Line Items]
 
 
 
 
Total realized gains (losses)
1.9 
0 
9.8 
0 
Commercial mortgage loans [Member]
 
 
 
 
Gain (Loss) on Investments [Line Items]
 
 
 
 
Total realized gains (losses)
(1.2)
(1.7)
(0.1)
(1.0)
Impairments of mortgage loans and other investments [Member]
 
 
 
 
Gain (Loss) on Investments [Line Items]
 
 
 
 
Total realized gains (losses)
(2.8)
(1.3)
(14.7)
(1.9)
Other securities [Member]
 
 
 
 
Gain (Loss) on Investments [Line Items]
 
 
 
 
Total realized gains (losses)
$ 0.4 
$ (2.0)
$ 1.2 
$ (7.6)
INVESTMENTS - SCHEDULE OF OTHER THAN TEMPORARY IMPAIRMENT (DETAILS) (Available-for-sale securities [Member], USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Available-for-sale securities [Member]
 
 
 
 
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
 
 
 
 
Credit losses on fixed maturity securities, available for sale, beginning of period
$ (1.2)
$ (1.5)
$ (1.3)
$ (1.6)
Add: credit losses on other-than-temporary impairments not previously recognized
0 
0 
0 
0 
Less: credit losses on securities sold
0.1 
0.1 
0.2 
0.2 
Less: credit losses on securities impaired due to intent to sell
0 1
0 1
0 1
0 1
Add: credit losses on previously impaired securities
0 
0 
0 
0 
Less: increases in cash flows expected on previously impaired securities
0 
0 
0 
0 
Credit losses on fixed maturity securities, available for sale, end of period
$ (1.1)
$ (1.4)
$ (1.1)
$ (1.4)
INVESTMENTS - SUMMARY OF INVESTMENTS WITH UNREALIZED LOSSES BY INVESTMENT CATEGORY (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
$ 1,296.5 
$ 3,570.1 
Unrealized losses, less than 12 months
(24.9)
(183.0)
Fair value, twelve months or longer
520.2 
285.8 
Unrealized losses, 12 months or longer
(30.5)
(30.2)
Fair value, total
1,816.7 
3,855.9 
Unrealized losses, total
(55.4)
(213.2)
US treasury and government [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
1.0 
23.8 
Unrealized losses, less than 12 months
0 
(0.6)
Fair value, twelve months or longer
18.3 
0 
Unrealized losses, 12 months or longer
(0.3)
0 
Fair value, total
19.3 
23.8 
Unrealized losses, total
(0.3)
(0.6)
US states and political subdivisions debt securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
66.1 
473.6 
Unrealized losses, less than 12 months
(1.0)
(30.3)
Fair value, twelve months or longer
90.6 
79.2 
Unrealized losses, 12 months or longer
(4.2)
(8.7)
Fair value, total
156.7 
552.8 
Unrealized losses, total
(5.2)
(39.0)
Corporate debt securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
871.1 
2,432.4 
Unrealized losses, less than 12 months
(20.7)
(137.7)
Fair value, twelve months or longer
311.7 
170.3 
Unrealized losses, 12 months or longer
(23.4)
(20.8)
Fair value, total
1,182.8 
2,602.7 
Unrealized losses, total
(44.1)
(158.5)
Asset-backed securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
116.7 
308.4 
Unrealized losses, less than 12 months
(1.1)
(6.5)
Fair value, twelve months or longer
69.5 
32.5 
Unrealized losses, 12 months or longer
(2.0)
(0.7)
Fair value, total
186.2 
340.9 
Unrealized losses, total
(3.1)
(7.2)
Collateralized debt obligations [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
91.2 
46.7 
Unrealized losses, less than 12 months
(0.7)
(0.5)
Fair value, twelve months or longer
0 
0 
Unrealized losses, 12 months or longer
0 
0 
Fair value, total
91.2 
46.7 
Unrealized losses, total
(0.7)
(0.5)
Commercial mortgage backed securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
35.9 
161.8 
Unrealized losses, less than 12 months
(0.2)
(5.8)
Fair value, twelve months or longer
19.1 
0 
Unrealized losses, 12 months or longer
(0.4)
0 
Fair value, total
55.0 
161.8 
Unrealized losses, total
(0.6)
(5.8)
Mortgage pass through securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
0.9 
1.6 
Unrealized losses, less than 12 months
0 
0 
Fair value, twelve months or longer
0.8 
1.6 
Unrealized losses, 12 months or longer
0 
0 
Fair value, total
1.7 
3.2 
Unrealized losses, total
0 
0 
Collateralized mortgage obligations [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
113.6 
121.8 
Unrealized losses, less than 12 months
(1.2)
(1.6)
Fair value, twelve months or longer
10.2 
2.2 
Unrealized losses, 12 months or longer
(0.2)
0 
Fair value, total
123.8 
124.0 
Unrealized losses, total
(1.4)
(1.6)
Equity securities [Member]
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Fair value, less than twelve months
128.3 
0.5 
Unrealized losses, less than 12 months
(1.0)
0 
Fair value, twelve months or longer
0.5 
0 
Unrealized losses, 12 months or longer
0 
0 
Fair value, total
128.8 
0.5 
Unrealized losses, total
$ (1.0)
$ 0 
EARNINGS PER SHARE (Details) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Convertible subordinated debt [Member]
May 30, 2014
Convertible subordinated debt [Member]
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
 
 
 
 
 
 
Net income (loss) for basic earnings per share
$ 117.4 
$ 283.0 
$ (32.5)
$ 372.0 
 
 
Add: interest expense on 7.0% Senior Debentures due 2016 (the 7.0% Debentures), net of income taxes
0 
0 
0 
1.6 
 
 
Interest rate
 
 
 
 
7.00% 
7.00% 
Net income (loss) for diluted earnings per share
$ 117.4 
$ 283.0 
$ (32.5)
$ 373.6 
 
 
Shares:
 
 
 
 
 
 
Weighted average shares outstanding for basic earnings per share (in shares)
210,525 
222,876 
215,790 
221,819 
 
 
Effect of dilutive securities on weighted average shares:
 
 
 
 
 
 
7.0% Debentures (in shares)
0 
839 
0 
7,707 
 
 
Stock options, restricted stock and performance units (in shares)
2,447 
2,858 
0 
2,699 
 
 
Warrants (in shares)
2,486 
2,774 
0 
2,344 
 
 
Dilutive potential common shares (in shares)
4,933 
6,471 
0 
12,750 
 
 
Weighted average shares outstanding for diluted earnings per share (in shares)
215,458 
229,347 
215,790 
234,569 
 
 
EARNINGS PER SHARE - NARRATIVE (Details) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
9 Months Ended 9 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Rate
Sep. 30, 2014
Convertible subordinated debt [Member]
May 30, 2014
Convertible subordinated debt [Member]
Sep. 30, 2014
Stock Options, Restricted Stock and Performance Units [Member]
Sep. 30, 2014
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
 
 
Common shares excluded from diluted shares (in shares)
5,435 
 
 
 
2,458 
2,977 
Conversion rate per $1000 principal amount of 7.0% convertible debentures, shares (in shares)
 
182.1494 
 
 
 
 
Par value of each 7.0% convertible debenture
 
$ 1,000 
 
 
 
 
Conversion price (in dollars per share)
 
$ 5.49 
 
 
 
 
Interest rate
 
 
7.00% 
7.00% 
 
 
BUSINESS SEGMENTS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Revenues:
 
 
 
 
Fee revenue and other income
$ 16.0 
$ 8.1 
$ 29.4 
$ 21.0 
Total revenues
947.2 
976.1 
2,867.5 
2,945.3 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
565.5 
702.2 
1,946.9 
2,129.5 
Other operating costs and expenses
191.5 
190.0 
587.1 
559.4 
Total expenses
827.4 
869.0 
2,558.8 
2,668.7 
Pre-tax operating earnings
119.8 
107.1 
308.7 
276.6 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
947.2 
976.1 
2,867.5 
2,945.3 
Net realized investment gains (losses)
4.0 
(1.7)
37.0 
13.1 
Revenues related to certain non-strategic investments and earnings attributable to VIEs
8.3 
9.0 
21.9 
24.1 
Fee revenue related to transition and support services agreements
7.5 
0 
7.5 
0 
Revenues of CLIC prior to being sold
0 
110.4 
210.8 
335.4 
Total revenues
967.0 
1,093.8 
3,144.7 
3,317.9 
Total segment expenses
827.4 
869.0 
2,558.8 
2,668.7 
Insurance policy benefits - fair value changes in embedded derivative liabilities
0 
(4.9)
25.3 
(37.0)
Amortization related to fair value changes in embedded derivative liabilities
0.1 
1.5 
(6.8)
13.0 
Amortization related to net realized investment gains
0.1 
0.1 
0.6 
1.3 
Expenses related to certain non-strategic investments and earnings attributable to VIEs
10.9 
11.8 
30.7 
31.7 
Loss on extinguishment or modification of debt
0 
0 
0.6 
65.4 
Net loss on sale of subsidiary and gain on reinsurance transactions
(32.1)
0 
242.7 
0 
Expenses related to transition and support services agreements
6.2 
0 
6.2 
0 
Expenses of CLIC prior to being sold
0 
101.9 
187.4 
311.1 
Total benefits and expenses
812.6 
979.4 
3,045.5 
3,054.2 
Income (loss) before income taxes
154.4 
114.4 
99.2 
263.7 
Tax expense on period income
53.8 
38.1 
133.1 
113.9 
Valuation allowance for deferred tax assets and other tax items
(16.8)
(206.7)
(1.4)
(222.2)
Net income (loss)
117.4 
283.0 
(32.5)
372.0 
Bankers Life [Member]
 
 
 
 
Revenues:
 
 
 
 
Annuities
6.6 
5.6 
21.8 
22.1 
Health
319.4 
323.3 
970.4 
990.0 
Life
90.4 
78.5 
248.6 
232.4 
Net investment income (loss)
231.2 1
235.4 1
703.2 1
723.7 1
Fee revenue and other income
7.0 1
5.8 1
18.1 1
13.5 1
Total revenues
654.6 
648.6 
1,962.1 
1,981.7 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
394.9 
427.3 
1,237.8 
1,331.9 
Amortization
47.1 
39.7 
140.7 
139.9 
Interest expense on investment borrowings
2.0 
1.8 
5.8 
4.9 
Other operating costs and expenses
98.8 
93.5 
294.4 
277.5 
Total expenses
542.8 
562.3 
1,678.7 
1,754.2 
Pre-tax operating earnings
111.8 
86.3 
283.4 
227.5 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
654.6 
648.6 
1,962.1 
1,981.7 
Total segment expenses
542.8 
562.3 
1,678.7 
1,754.2 
Washington National [Member]
 
 
 
 
Revenues:
 
 
 
 
Annuities
0.9 
6.5 
3.3 
9.7 
Health
147.1 
147.0 
444.8 
438.2 
Life
6.0 
5.7 
18.2 
17.3 
Net investment income (loss)
65.2 1
72.9 1
206.0 1
220.6 1
Fee revenue and other income
0.3 1
0.3 1
0.7 1
0.7 1
Total revenues
219.5 
232.4 
673.0 
686.5 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
129.5 
141.6 
394.1 
409.6 
Amortization
14.8 
14.4 
47.1 
47.7 
Interest expense on investment borrowings
0.4 
0.5 
1.3 
1.5 
Other operating costs and expenses
47.2 
42.9 
139.5 
124.9 
Total expenses
191.9 
199.4 
582.0 
583.7 
Pre-tax operating earnings
27.6 
33.0 
91.0 
102.8 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
219.5 
232.4 
673.0 
686.5 
Total segment expenses
191.9 
199.4 
582.0 
583.7 
Colonial Penn [Member]
 
 
 
 
Revenues:
 
 
 
 
Health
0.8 
1.1 
2.7 
3.3 
Life
60.9 
57.0 
181.2 
169.7 
Net investment income (loss)
10.3 1
10.2 1
31.5 1
30.0 1
Fee revenue and other income
0.2 1
0.2 1
0.7 1
0.6 1
Total revenues
72.2 
68.5 
216.1 
203.6 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
41.1 
39.8 
129.0 
124.0 
Amortization
3.7 
3.7 
11.5 
11.1 
Other operating costs and expenses
27.0 
29.2 
77.6 
76.9 
Total expenses
71.8 
72.7 
218.1 
212.0 
Pre-tax operating earnings
0.4 
(4.2)
(2.0)
(8.4)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
72.2 
68.5 
216.1 
203.6 
Total segment expenses
71.8 
72.7 
218.1 
212.0 
Other CNO Business [Member]
 
 
 
 
Revenues:
 
 
 
 
Health
0 
5.9 
0 
18.2 
Net investment income (loss)
0 1
8.0 1
0 1
24.8 1
Total revenues
0 
13.9 
0 
43.0 
Benefits and expenses:
 
 
 
 
Insurance policy benefits
0 
13.5 
0 
44.4 
Other operating costs and expenses
0 
6.1 
0 
18.8 
Total expenses
0 
19.6 
0 
63.2 
Pre-tax operating earnings
0 
(5.7)
0 
(20.2)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
0 
13.9 
0 
43.0 
Total segment expenses
0 
19.6 
0 
63.2 
Corporate operations [Member]
 
 
 
 
Revenues:
 
 
 
 
Net investment income (loss)
(1.0)
11.0 
11.7 
25.6 
Fee revenue and other income
1.9 
1.7 
4.6 
4.9 
Total revenues
0.9 
12.7 
16.3 
30.5 
Benefits and expenses:
 
 
 
 
Interest expense on corporate debt
10.9 
11.7 
33.1 
39.9 
Interest expense on investment borrowings
0 
0 
0 
0.1 
Other operating costs and expenses
10.0 
3.3 
46.9 
15.6 
Total expenses
20.9 
15.0 
80.0 
55.6 
Pre-tax operating earnings
(20.0)
(2.3)
(63.7)
(25.1)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
Total segment revenues
0.9 
12.7 
16.3 
30.5 
Total segment expenses
$ 20.9 
$ 15.0 
$ 80.0 
$ 55.6 
ACCOUNTING FOR DERIVATIVES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Jun. 30, 2014
Sep. 30, 2014
Dec. 31, 2013
Sep. 30, 2014
Equity swap [Member]
Dec. 31, 2013
Equity swap [Member]
Sep. 30, 2014
Equity swap [Member]
Investment income [Member]
Sep. 30, 2013
Equity swap [Member]
Investment income [Member]
Sep. 30, 2014
Embedded derivative financial instruments [Member]
Sep. 30, 2013
Embedded derivative financial instruments [Member]
Sep. 30, 2014
Embedded derivative financial instruments [Member]
Sep. 30, 2013
Embedded derivative financial instruments [Member]
Dec. 31, 2013
Embedded derivative financial instruments [Member]
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in earnings due to sale of trading portfolio
 
 
 
 
 
$ 42.3 
$ 102.8 
$ 0.1 
$ 3.4 
$ 18.5 
$ 24.0 
 
Estimated fair value
 
 
 
98.3 
156.2 
 
 
 
 
 
 
 
Fair value of derivatives
 
 
 
 
 
 
 
992.2 
 
992.2 
 
903.7 
Gain (Loss) on Reinsurance Transaction
3.8 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities that contain embedded derivatives classified as trading securities
 
$ 204.8 
$ 180.6 
 
 
 
 
 
 
 
 
 
REINSURANCE (Details) (USD $)
1 Months Ended 3 Months Ended 9 Months Ended
Dec. 31, 2013
Sep. 30, 2014
Jun. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
 
 
 
 
Ceded premiums written
 
$ 34,100,000 
 
$ 51,100,000 
$ 141,600,000 
$ 158,200,000 
Ceded insurance policy benefits
 
35,100,000 
 
51,900,000 
155,900,000 
144,600,000 
Assumed premiums written
 
10,000,000 
 
4,000,000 
24,700,000 
33,100,000 
Ceded long-term reserves
495,000,000 
 
 
 
 
 
Additional premiums paid by subsidiaries to enter into coinsurance agreement
96,900,000 
 
 
 
 
 
Over-collateralization rate of market-value trusts
7.00% 
 
 
 
 
 
Gain (Loss) on Reinsurance Transaction
 
 
3,800,000 
 
 
 
Coventry health care marketing and quota share agreements [Member]
 
 
 
 
 
 
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
 
 
 
 
 
 
Assumed premiums written
 
 
 
 
$ 6,800,000.0 
$ 19,700,000 
INCOME TAXES - COMPONENTS OF TAX EXPENSE (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Income Tax Disclosure [Abstract]
 
 
 
 
Current tax expense
$ 5.4 
$ 3.4 
$ 11.5 
$ 8.8 
Deferred tax expense
48.4 
34.7 
121.6 
106.5 
Valuation allowance applicable to current year income
(3.0)
(9.8)
(3.0)
(9.8)
Income tax expense calculated based on estimated annual effective tax rate
50.8 
28.3 
130.1 
105.5 
Tax expense related to tax gain on sale
0 
0 
21.6 
0 
Previously unrecognized tax benefit now recognized as a result of the gain
0 
0 
(7.4)
0 
Valuation allowance release related to the gain
0 
0 
(14.2)
0 
Valuation allowance increase related to the decrease in projected future taxable income
0 
0 
19.4 
0 
Valuation allowance reduction resulting from the realization of capital gains and utilization of loss carryforwards
(0.4)
(118.0)
(4.4)
(133.5)
Valuation allowance reduction applicable to the settlement with the IRS regarding the classification of a portion of the cancellation of indebtedness income
0 
(71.8)
0 
(71.8)
Valuation allowance reduction related to the increase in projected future taxable income
(12.6)
0 
(12.6)
0 
Deferred tax benefit related to loss on extinguishment or modification of debt
0 
0 
0 
(1.4)
Other items
(0.8)
(7.1)
(0.8)
(7.1)
Total income tax expense
$ 37.0 
$ (168.6)
$ 131.7 
$ (108.3)
INCOME TAXES - RECONCILIATION OF CORPORATE TAX RATE (Details)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Income Tax Disclosure [Abstract]
 
 
U.S. statutory corporate rate
35.00% 
35.00% 
Valuation allowance
(0.70%)
(3.50%)
Non-taxable income and nondeductible benefits, net
(0.80%)
(0.90%)
State taxes
1.50% 
1.40% 
Estimated annual effective tax rate
35.00% 
32.00% 
INCOME TAXES - DEFERRED ASSETS AND LIABILIITES (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Net federal operating loss carryforwards
$ 1,097.6 
$ 1,240.2 
Net state operating loss carryforwards
17.2 
20.0 
Tax credits
44.2 
43.9 
Capital loss carryforwards
0 
13.4 
Investments
62.3 
74.3 
Insurance liabilities
566.5 
723.8 
Other
56.2 
64.7 
Gross deferred tax assets
1,844.0 
2,180.3 
Deferred tax liabilities:
 
 
Present value of future profits and deferred acquisition costs
(319.1)
(306.8)
Accumulated other comprehensive income
(475.7)
(405.5)
Gross deferred tax liabilities
(794.8)
(712.3)
Net deferred tax assets before valuation allowance
1,049.2 
1,468.0 
Valuation allowance
(280.0)
(294.8)
Net deferred tax assets
769.2 
1,173.2 
Current income taxes accrued
(38.1)
(26.0)
Income tax assets, net
$ 731.1 
$ 1,147.2 
INCOME TAXES - NET OPERATING LOSSES (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Operating Loss Carryforwards [Line Items]
 
Total loss carryforwards
$ 3,680.1 
Total loss carryforwards, unrecognized tax benefit
(544.1)
Total loss carryforwards, net of unrecognized tax benefits
3,136.0 
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
971.9 
Net operating loss carryforward, unrecognized tax benefit
(342.9)
Net operating loss carryforwards, net of unrecognized tax benefits
629.0 
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
2,708.2 
Net operating loss carryforward, unrecognized tax benefit
(201.2)
Net operating loss carryforwards, net of unrecognized tax benefits
2,507.0 
Carryforward Expiration 2018 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2018 
Total loss carryforwards
47.3 
Carryforward Expiration 2018 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
47.3 
Carryforward Expiration 2018 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2021 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2021 
Total loss carryforwards
30.0 
Carryforward Expiration 2021 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
30.0 
Carryforward Expiration 2021 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2022 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2022 
Total loss carryforwards
152.0 
Carryforward Expiration 2022 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
152.0 
Carryforward Expiration 2022 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2023 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2023 
Total loss carryforwards
2,815.9 
Carryforward Expiration 2023 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
742.6 
Carryforward Expiration 2023 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
2,073.3 
Carryforward Expiration 2025 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2025 
Total loss carryforwards
115.5 
Carryforward Expiration 2025 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2025 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
115.5 
Carryforward Expiration 2027 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2027 
Total loss carryforwards
202.6 
Carryforward Expiration 2027 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2027 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
202.6 
Carryforward Expiration 2028 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2028 
Total loss carryforwards
67.3 
Carryforward Expiration 2028 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2028 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
67.3 
Carryforward Expiration 2029 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2029 
Total loss carryforwards
205.5 
Carryforward Expiration 2029 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2029 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
205.5 
Carryforward Expiration 2032 [Member]
 
Operating Loss Carryforwards [Line Items]
 
Year of expiration
Dec. 31, 2032 
Total loss carryforwards
44.0 
Carryforward Expiration 2032 [Member] |
Life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
0 
Carryforward Expiration 2032 [Member] |
Non life insurance companies [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
$ 44.0 
INCOME TAXES - NARRATIVE (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Jun. 30, 2014
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Dec. 31, 2008
Sep. 30, 2014
Internal Revenue Service [Member]
Dec. 31, 2008
Non life insurance companies [Member]
Sep. 30, 2014
Non life insurance companies [Member]
Dec. 31, 2008
Life insurance companies [Member]
Sep. 30, 2014
Life insurance companies [Member]
Sep. 30, 2014
Conseco Life Insurance Company [Member]
Sep. 30, 2014
Conseco Life Insurance Company [Member]
Sep. 30, 2014
Taxable Income Exceeding Valuation Model [Member]
Conseco Life Insurance Company [Member]
Dec. 31, 2014
Scenario, Forecast [Member]
Conseco Life Insurance Company [Member]
Operating Loss Carryforwards [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss on sale of subsidiary and gain on reinsurance transactions
$ (32.1)
$ 0 
 
$ 242.7 
$ 0 
 
 
 
 
 
 
 
 
$ 272.6 
 
 
Gain (Loss) on extinguishment or modification of debt
0 
0 
 
(0.6)
(65.4)
 
 
 
 
 
 
 
 
 
 
 
Deferred tax assets more likely than not to be realized through future taxable earnings
769.2 
 
 
769.2 
 
1,173.2 
 
 
 
 
 
 
 
 
 
 
Valuation allowance increase related to the decrease in projected future taxable income
0 
0 
 
(19.4)
0 
 
 
 
 
 
 
 
 
19.4 
 
 
Valuation allowance, deferred tax asset, increase (decrease) amount
(12.6)
 
 
 
 
 
 
 
 
 
 
 
 
 
(4.0)
 
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount
 
 
 
 
 
 
 
 
 
 
 
 
(3.0)
 
 
(1.0)
Valuation allowance historical input period
 
 
 
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
Assumed growth rate for the next five years included in deferred tax valuation analysis
4.00% 
 
 
4.00% 
 
3.00% 
 
 
 
 
 
 
 
 
 
 
Assumed Growth Rate For the Next Five Years, Included in Deferred Tax Valuation Analysis, Period Increase
 
 
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
Valuation allowance model, forecast period of Model
 
 
 
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated normalized annual taxable income for the current year
 
 
315 
320 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated Normalized Annual Taxable Income For Current Year, Non-life Taxable Income
 
 
 
50 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated Normalized Annual Taxable Income For Current Year, Life Income
 
 
 
270 
 
 
 
 
 
 
 
 
 
 
 
 
Loss limitation based on income of life insurance company, percent
35.00% 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Loss limitation based on loss of non-life entities, percent
35.00% 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Federal long-term tax exempt rate
3.06% 
 
 
3.06% 
 
 
 
 
 
 
 
 
 
 
 
 
Ownership change threshold restricting NOL usage
50.00% 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating loss carryforwards
 
 
 
 
 
 
 
3,100.0 
 
2,708.2 
 
971.9 
 
 
 
 
Net state operating loss carryforwards
17.2 
 
 
17.2 
 
20.0 
 
 
 
 
 
 
 
 
 
 
Loss on investment in senior health
 
 
 
 
 
 
878 
 
136 
 
742 
 
 
 
 
 
Income Tax Examination, Expired Capital Loss Carryforwards if IRS position is correct
 
 
 
 
 
473 
 
 
 
 
 
 
 
 
 
 
Unrecognized tax benefit related to loss on investment in Senior Health
 
 
 
166.0 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in valuation allowance if unrecognized tax benefit is recognized
$ 41.0 
 
 
$ 41.0 
 
 
 
 
 
 
 
 
 
 
 
 
NOTES PAYABLE - Schedule of long-term debt instruments (DETAILS) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Sep. 28, 2012
Debt Instruments [Abstract]
 
 
 
Direct corporate obligations
$ 814,000,000 
$ 856,400,000 
 
Senior secured credit agreement [Member]
 
 
 
Debt Instruments [Abstract]
 
 
 
Direct corporate obligations
541,900,000 
581,500,000 
 
Unamortized Discount
(2,900,000)
(3,600,000)
 
Senior secured note 6.375 percent [Member]
 
 
 
Debt Instruments [Abstract]
 
 
 
Interest rate
6.375% 
 
 
Debentures [Member]
 
 
 
Debt Instruments [Abstract]
 
 
 
Direct corporate obligations
0 
3,500,000 
 
Senior notes [Member] |
Senior secured note 6.375 percent [Member]
 
 
 
Debt Instruments [Abstract]
 
 
 
Direct corporate obligations
$ 275,000,000 
$ 275,000,000 
$ 275,000,000 
Interest rate
 
 
6.375% 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS NOTES PAYABLE - Senior Secured Credit Agreement (DETAILS) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Jul. 1, 2014
Bankers Life [Member]
Wilton Reassurance Company [Member]
May 30, 2014
Secured Debt [Member]
Conseco Life Insurance Company [Member]
Sep. 28, 2012
Line of Credit [Member]
Revolving credit facility [Member]
Sep. 28, 2012
Line of Credit [Member]
Swingline Loan [Member]
Sep. 28, 2012
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 30, 2014
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 28, 2012
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 30, 2014
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Eurodollar [Member]
Sep. 30, 2014
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Eurodollar [Member]
Minimum [Member]
Sep. 30, 2014
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Base rate [Member]
Sep. 30, 2014
Term Loan Facility, Six-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Base rate [Member]
Minimum [Member]
Sep. 28, 2012
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 28, 2012
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Eurodollar [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Eurodollar [Member]
Minimum [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Base rate [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Secured Debt [Member]
Base rate [Member]
Minimum [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Revolving credit facility [Member]
Eurodollar [Member]
Sep. 30, 2014
Term Loan Facility, Four-Year [Member]
Line of Credit [Member]
Revolving credit facility [Member]
Base rate [Member]
Sep. 28, 2012
Revolving Credit Facility, Three Year [Member]
Line of Credit [Member]
Revolving credit facility [Member]
Sep. 28, 2012
Revolving Credit Facility, Three Year [Member]
Line of Credit [Member]
Revolving credit facility [Member]
Sep. 30, 2014
Senior secured note 6.375 percent [Member]
Sep. 30, 2014
Senior secured note 6.375 percent [Member]
Senior notes [Member]
Dec. 31, 2013
Senior secured note 6.375 percent [Member]
Senior notes [Member]
Sep. 28, 2012
Senior secured note 6.375 percent [Member]
Senior notes [Member]
Sep. 30, 2014
Senior secured note 6.375 percent [Member]
Senior notes [Member]
Maximum [Member]
Sep. 30, 2014
Senior secured credit agreement [Member]
Dec. 31, 2013
Senior secured credit agreement [Member]
Jun. 30, 2014
Senior secured credit agreement [Member]
Secured Debt [Member]
Sep. 30, 2014
Senior secured credit agreement [Member]
Line of Credit [Member]
Secured Debt [Member]
Sep. 30, 2014
Senior secured credit agreement [Member]
Line of Credit [Member]
Secured Debt [Member]
Minimum [Member]
Sep. 28, 2014
Senior secured credit agreement [Member]
Line of Credit [Member]
Secured Debt [Member]
Maximum [Member]
Sep. 30, 2014
Senior secured credit agreement [Member]
Line of Credit [Member]
Secured Debt [Member]
Maximum [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable – direct corporate obligations
$ 814,000,000 
 
$ 814,000,000 
 
$ 856,400,000 
 
 
 
 
 
 
$ 425,000,000 
 
 
 
 
 
 
$ 250,000,000 
 
 
 
 
 
 
 
 
 
$ 275,000,000 
$ 275,000,000 
$ 275,000,000 
 
$ 541,900,000 
$ 581,500,000 
 
 
 
 
 
Debt instrument, term
 
 
 
 
 
 
 
 
 
6 years 
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt
816,900,000 
 
816,900,000 
 
 
 
 
 
 
 
391,900,000 
 
 
 
 
 
 
150,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.375% 
 
 
6.375% 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
5,000,000 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Annual amortization percentage of loan in first and second year
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual amortization percentage of loan in third and fourth year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000,000 
 
Basis spread on variable rate
 
 
 
 
 
 
 
 
 
 
 
 
2.75% 
1.00% 
1.75% 
2.25% 
 
 
 
2.25% 
0.75% 
1.25% 
2.00% 
3.00% 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, Interest Rate at Period End
 
 
 
 
 
 
 
 
 
 
 
 
3.75% 
 
 
 
 
 
 
3.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional debt repayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39,600,000 
 
 
 
Mandatory prepayment required to be made with net proceeds exceeding a certain amount from sale of subsidiary
 
 
 
 
 
 
125,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) on Extinguishment of Debt
0 
0 
(600,000)
(65,400,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(400,000)
 
 
 
 
Reinsurance recapture fee paid
 
 
 
 
 
28,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of net cash proceeds from asset sales and casualty events
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Percentage of net cash proceeds received for restricted subsidiaries from debt issuances
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Percentage of restricted payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
Debt to capitalization ratio, threshold requiring equal debt repayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17.50% 
 
 
 
 
20.00% 
 
25.00% 
Mandatory prepayments, reduced percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33.33% 
 
 
 
Debt to capitalization ratio, maximum threshold for repayment requirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.00% 
 
 
 
Debt to capitalization ratio, percentage required for no mandatory prepayment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.00% 
Debt to capitalization ratio required
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27.50% 
Debt to capitalization ratio at period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17.60% 
 
 
 
Interest coverage ratio required
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.50 
 
 
Lesser of interest coverage ratio required
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16.62 
 
 
 
Aggregate adjusted capital to company action level risk-based capital ratio, after stated date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250.00% 
 
 
Aggregate adjusted capital to company action level risk based capital ratio at period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
425.00% 
 
 
 
Minimum combined statutory capital and surplus
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,300,000,000 
 
 
Combined statutory capital and surplus at period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1,806,000,000 
 
 
 
NOTES PAYABLE - 6.375% Notes (DETAILS) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Sep. 28, 2012
Debt Instrument [Line Items]
 
 
 
Notes payable – direct corporate obligations
$ 814,000,000 
$ 856,400,000 
 
Senior secured note 6.375 percent [Member]
 
 
 
Debt Instrument [Line Items]
 
 
 
Interest rate
6.375% 
 
 
Senior secured note 6.375 percent [Member] |
Senior notes [Member]
 
 
 
Debt Instrument [Line Items]
 
 
 
Notes payable – direct corporate obligations
275,000,000 
275,000,000 
275,000,000 
Interest rate
 
 
6.375% 
Debt Instrument, Terms, Restricted Payments Based on a Percentage of Net Excess Cash Flow, Percentage
 
 
50.00% 
Limit of restricted payments permitted, amount
 
 
175,000,000 
Limit of restricted payments permitted, amount of allowed additional payments
172,000,000 
 
 
Senior secured note 6.375 percent [Member] |
Senior notes [Member] |
Minimum [Member]
 
 
 
Debt Instrument [Line Items]
 
 
 
Minimum pro forma risk-based capital ratio for restricted payments
225.00% 
 
 
Limit of restricted payments permitted, cash dividends to common stock
30,000,000 
 
 
Senior secured note 6.375 percent [Member] |
Senior notes [Member] |
Maximum [Member]
 
 
 
Debt Instrument [Line Items]
 
 
 
Debt to capitalization ratio, threshold requiring equal debt repayment
17.50% 
 
 
Secured Debt [Member] |
Term Loan Facility, Four-Year [Member] |
Line of Credit [Member]
 
 
 
Debt Instrument [Line Items]
 
 
 
Notes payable – direct corporate obligations
 
 
$ 250,000,000 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS NOTES PAYABLE - 7.0% DEBENTURES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
May 30, 2014
Convertible subordinated debt [Member]
Sep. 30, 2014
Convertible subordinated debt [Member]
May 30, 2014
Convertible subordinated debt [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
Debt Instrument, Repurchased Face Amount
 
 
 
 
 
 
$ 3.5 
Interest rate
 
 
 
 
 
7.00% 
7.00% 
Debt Instrument, Repurchase Amount
 
 
 
 
 
 
3.7 
Gains (Losses) on Extinguishment of Debt
$ 0 
$ 0 
$ (0.6)
$ (65.4)
$ (0.2)
 
 
NOTES PAYABLE - DIRECT CORPORATE OBLIGATIONS NOTES PAYABLE - SCHEDULED REPAYMENT (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Debt Disclosure [Abstract]
 
2015
$ 79.2 
2016
79.2 
2017
4.3 
2018
379.2 
2019
0 
Thereafter
275.0 
Long-term Debt
$ 816.9 
INVESTMENT BORROWINGS (Details) (USD $)
9 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Sep. 30, 2014
Federal Home Loan Bank advances [Member]
Sep. 30, 2013
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due October 2015 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due June 2016 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due June 2016 rate two [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due October 2016 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due November 2016 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due November 2016 rate two [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due June 2017 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due August 2017 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due August 2017 rate two [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due October 2017 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due November 2017 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due January 2018 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due January 2018 rate two [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due February 2018 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due February 2018 rate two [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due February 2018 rate three [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due May 2018 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due July 2018 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due August 2018 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due January 2019 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due February 2019 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due March 2019 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due July 2019 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due June 2020 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings Due August 2021 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due March 2023 [Member]
Federal Home Loan Bank advances [Member]
Sep. 30, 2014
Borrowings due June 2025 [Member]
Federal Home Loan Bank advances [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank stock
 
 
$ 73,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment borrowings
1,519,400,000 
1,900,000,000 
1,499,000,000 
 
50,000,000 
100,000,000 
75,000,000 
100,000,000 
50,000,000 
50,000,000 
57,700,000 
50,000,000 
75,000,000 
100,000,000 
50,000,000 
50,000,000 
50,000,000 
50,000,000 
50,000,000 
22,000,000 
100,000,000 
50,000,000 
50,000,000 
50,000,000 
50,000,000 
100,000,000 
21,800,000 
21,800,000 
28,300,000 
26,900,000 
20,500,000 
Federal Home Loan Bank, Advances, collateral pledged
 
 
1,800,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity date
 
 
 
 
Oct. 31, 2015 
Jun. 30, 2016 
Jun. 30, 2016 
Oct. 31, 2016 
Nov. 30, 2016 
Nov. 30, 2016 
Jun. 30, 2017 
Aug. 31, 2017 
Aug. 31, 2017 
Oct. 31, 2017 
Nov. 30, 2017 
Jan. 31, 2018 
Jan. 31, 2018 
Feb. 28, 2018 
Feb. 28, 2018 
Feb. 28, 2018 
May 30, 2018 
Jul. 31, 2018 
Aug. 31, 2018 
Jan. 31, 2019 
Feb. 28, 2019 
Mar. 31, 2019 
Jul. 31, 2019 
Jun. 30, 2020 
Aug. 31, 2021 
Mar. 31, 2023 
Jun. 30, 2025 
Interest rate
 
 
 
 
0.504% 
0.595% 
0.393% 
0.412% 
0.504% 
0.624% 
0.586% 
0.434% 
0.385% 
0.666% 
0.745% 
0.584% 
0.573% 
0.547% 
0.321% 
0.568% 
0.602% 
0.705% 
0.354% 
0.653% 
0.321% 
0.634% 
0.644% 
1.96% 
2.55% 
2.16% 
2.94% 
Aggregate Fee to Prepay All Fixed Rate FHLB Borrowings
 
 
300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense on FHLB Borrowings
 
 
16,200,000 
20,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured Debt, Repurchase Agreements
$ 20,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CHANGES IN COMMON STOCK (Details) (USD $)
1 Months Ended 3 Months Ended 9 Months Ended 23 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2014
Mar. 31, 2014
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Sep. 30, 2014
Common stock [Member]
Sep. 30, 2014
Common stock [Member]
Stock options [Member]
Sep. 30, 2014
Common stock [Member]
Restricted and Performance Stock [Member]
May 31, 2011
Common share repurchase program [Member]
Mar. 31, 2014
Previously reported [Member]
Number of common shares outstanding
 
 
 
 
 
 
 
 
 
 
Balance, beginning of year (in shares)
 
220,323,823 
220,323,823 
 
 
220,324,000 
 
 
 
 
Treasury stock purchased and retired (in shares)
 
 
 
 
 
(14,118,000)
 
 
 
 
Shares issued under employee benefit compensation plans (in shares)
 
 
 
 
 
 
893,000 
541,000 1
 
 
Balance, end of year (in shares)
207,640,050 
 
207,640,050 
 
220,323,823 
207,640,000 
 
 
 
 
Number of stock tendered for payment of federal and state taxes owed
 
 
230,000 
 
 
 
 
 
 
 
Stock repurchase program, authorized amount
 
 
 
 
 
 
 
 
$ 100,000,000.0 
 
Stock repurchase program, increase in authorized amount
 
 
 
 
800,000,000 
 
 
 
 
 
Payments for Repurchase of Common Stock
 
 
244,100,000 
 
 
 
 
 
 
 
Payments for Repurchase of Warrants
57,400,000 
 
 
 
 
 
 
 
 
 
Stock repurchase program, remaining repurchase authorized amount
95,900,000 
 
95,900,000 
 
 
 
 
 
 
 
Common stock dividends paid
 
 
$ 39,000,000 
$ 17,900,000 
 
 
 
 
 
 
Dividends (in dollars per share)
 
 
$ 0.18 
 
 
 
 
 
 
 
Dividends (in dollars per share)
 
$ 0.06 
 
 
 
 
 
 
 
$ 0.03 
SALES INDUCEMENTS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Deferred Sales Inducements [Abstract]
 
 
 
 
 
Deferred sales inducements
$ 0.9 
$ 1.4 
$ 4.0 
$ 3.9 
 
Deferred sales inducements, amortization expense
3.6 
3.7 
13.0 
17.0 
 
Unamortized deferred sales inducements
65.7 
 
65.7 
 
108.6 
Insurance liabilities for persistency bonus benefits
$ 1.7 
 
$ 1.7 
 
$ 28.9 
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS (Details) (Call option [Member], USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Call option [Member]
 
 
Offsetting Assets [Line Items]
 
 
Gross amounts of recognized assets
$ 98.3 
$ 156.2 
Gross amounts offset in the balance sheet
0 
0 
Net amounts of assets presented in the balance sheet
98.3 
156.2 
Gross amounts not offset in the balance sheet, Financial instruments
0 
0 
Gross amounts not offset in the balance sheet, Cash collateral received
0 
0 
Net amount
$ 98.3 
$ 156.2 
ASSETS AND LIABILITIES SUBJECT TO OFFSETTING DISCLOSURE REQUIREMENTS Schedule of Repurchase Agreements (Details) (USD $)
Sep. 30, 2014
Dec. 31, 2013
Offsetting [Abstract]
 
 
Gross amounts of recognized liabilities
$ 20,400,000 1
 
Gross amounts offset in the balance sheet
0 1
 
Net amounts of liabilities presented in the balance sheet
20,400,000 1
 
Gross amounts not offset in the balance sheet, Financial instruments
0 1
 
Gross amounts not offset in the balance sheet, Cash collateral pledged
0 1
 
Net amount
20,400,000 1
 
Securities sold under agreements to repurchase, fair value of collateral
$ 25,500,000 
$ 0 
CONSOLIDATED STATEMENT CASH FLOWS (DETAILS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Cash flows from operating activities:
 
 
 
 
Net income (loss)
$ 117.4 
$ 283.0 
$ (32.5)
$ 372.0 
Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
Amortization and depreciation
 
 
218.2 
241.1 
Income taxes
 
 
128.9 
(112.6)
Insurance liabilities
 
 
228.9 
298.8 
Accrual and amortization of investment income
 
 
(112.3)
(189.4)
Deferral of policy acquisition costs
 
 
(176.6)
(161.8)
Net realized investment gains
 
 
(39.8)
(18.4)
Payment to reinsurer pursuant to long-term care business reinsured
 
 
(590.3)
0 
Net loss on sale of CLIC and gain on reinsurance transactions
(32.1)
0 
242.7 
0 
Loss on extinguishment or modification of debt
0 
0 
0.6 
65.4 
Other
 
 
8.3 
(23.0)
Net cash from operating activities
 
 
(123.9)1
472.1 
Other Noncash Investing and Financing Items [Abstract]
 
 
 
 
Stock options, restricted stock and performance units
 
 
$ 11.6 
$ 10.8 
CONSOLIDATED STATEMENT CASH FLOWS Impact of Recapture (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended
Jul. 1, 2014
Effects of Reinsurance [Line Items]
 
Gain on reinsurance transaction (net of income taxes)
$ 16.9 
Wilton Reassurance Company [Member] |
Bankers Life [Member]
 
Effects of Reinsurance [Line Items]
 
Gain on reinsurance transaction (classified as Net loss on sale of subsidiary and gain on reinsurance transactions)
26.1 
Income tax expense
9.2 
Gain on reinsurance transaction (net of income taxes)
16.9 
Reinsurance recapture fee paid
28.0 
Wilton Reassurance Company [Member] |
Bankers Life [Member] |
Investments [Member]
 
Effects of Reinsurance [Line Items]
 
Reinsurance Recapture Amounts
139.4 1 2
Wilton Reassurance Company [Member] |
Bankers Life [Member] |
Cash [Member]
 
Effects of Reinsurance [Line Items]
 
Reinsurance Recapture Amounts
7.7 
Wilton Reassurance Company [Member] |
Bankers Life [Member] |
Present value of future profits and deferred acquisition costs [Member]
 
Effects of Reinsurance [Line Items]
 
Reinsurance Recapture Amounts
29.0 1
Wilton Reassurance Company [Member] |
Bankers Life [Member] |
Reinsurance receivables [Member]
 
Effects of Reinsurance [Line Items]
 
Reinsurance Recapture Amounts
(155.9)1
Wilton Reassurance Company [Member] |
Bankers Life [Member] |
Other liabilities [Member]
 
Effects of Reinsurance [Line Items]
 
Reinsurance Recapture Amounts
$ 5.9 1
INVESTMENTS IN VARIABLE INTEREST ENTITIES - NARRATIVE (DETAILS) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Less than twelve months [Member]
Dec. 31, 2013
Less than twelve months [Member]
Sep. 30, 2014
Greater than twelve months [Member]
Dec. 31, 2013
Greater than twelve months [Member]
Variable Interest Entity [Line Items]
 
 
 
 
 
 
Variable interest entity amortized cost securities held
$ 1,359.7 
 
 
 
 
 
Variable interest entity, gross unrealized gains fixed maturity securities
0.7 
 
 
 
 
 
Variable interest entity gross unrealized losses fixed maturity securities
17.4 
 
 
 
 
 
Variable Interest Entity, Fixed Maturity Securities Fair Value
1,343.0 
 
 
 
 
 
Variable interest entities net realized gain (loss) on investments
(2.2)
(1.4)
 
 
 
 
Variable Interest Entities Net Gains (Losses) From Sale Of Fixed Maturity Investments
 
(0.3)
 
 
 
 
Total Other Than Temporary Impairment Losses on Investments Held by Variable Interest Entities
 
1.1 
 
 
 
 
Variable interest entities, investments sold
38.7 
9.3 
 
 
 
 
Variable interest entity, gross investment losses from sale
2.4 
0.6 
 
 
 
 
Fair value investments held by variable interest entity that had been in an unrealized loss position
 
 
1,051.7 
355.5 
142.3 
7.9 
Gross Unrealized Losses On Investments Held By Variable Interest Entity
 
 
14.1 
3.1 
3.3 
0.1 
Investments held in limited partnerships
26.2 
 
 
 
 
 
Unfunded commitments to limited partnerships
$ 69.1 
 
 
 
 
 
INVESTMENTS IN VARIABLE INTEREST ENTITIES - BALANCE SHEET ITEMS (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Variable Interest Entity [Line Items]
 
 
Investments held by variable interest entities
$ 1,343.0 
$ 1,046.7 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
Borrowings related to variable interest entities
1,295.0 
1,012.3 
VIEs [Member]
 
 
Variable Interest Entity [Line Items]
 
 
Investments held by variable interest entities
1,343.0 
1,046.7 
Notes receivable of VIEs held by insurance subsidiaries
0 
0 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
Accrued investment income
3.1 
1.9 
Income tax assets, net
12.9 
5.4 
Other assets
18.2 
22.6 
Total assets
1,527.9 
1,180.9 
Other liabilities
104.5 
66.0 
Borrowings related to variable interest entities
1,295.0 
1,012.3 
Notes payable of VIEs held by insurance subsidiaries
152.2 
112.5 
Total liabilities
1,551.7 
1,190.8 
Eliminations [Member]
 
 
Variable Interest Entity [Line Items]
 
 
Investments held by variable interest entities
0 
0 
Notes receivable of VIEs held by insurance subsidiaries
(148.2)
(108.5)
Cash and cash equivalents held by variable interest entities
0 
0 
Accrued investment income
0 
0 
Income tax assets, net
(2.3)
(2.5)
Other assets
(1.3)
(0.9)
Total assets
(151.8)
(111.9)
Other liabilities
(3.7)
(4.0)
Borrowings related to variable interest entities
0 
0 
Notes payable of VIEs held by insurance subsidiaries
(152.2)
(112.5)
Total liabilities
(155.9)
(116.5)
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Variable Interest Entity [Line Items]
 
 
Investments held by variable interest entities
1,343.0 
1,046.7 
Notes receivable of VIEs held by insurance subsidiaries
(148.2)
(108.5)
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
Accrued investment income
3.1 
1.9 
Income tax assets, net
10.6 
2.9 
Other assets
16.9 
21.7 
Total assets
1,376.1 
1,069.0 
Other liabilities
100.8 
62.0 
Borrowings related to variable interest entities
1,295.0 
1,012.3 
Notes payable of VIEs held by insurance subsidiaries
0 
0 
Total liabilities
$ 1,395.8 
$ 1,074.3 
INVESTMENTS IN VARIABLE INTEREST ENTITIES - SCHEDULE OF VIEs (DETAILS) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Investment Holdings [Line Items]
 
Total amortized cost
$ 1,359.7 
Total fair value
1,343.0 
Amortized cost [Member]
 
Investment Holdings [Line Items]
 
Due after one year through five years
389.0 
Due after five years through ten years
970.7 
Total amortized cost
1,359.7 
Estimated fair value [Member]
 
Investment Holdings [Line Items]
 
Due after one year through five years
385.5 
Due after five years through ten years
957.5 
Total fair value
$ 1,343.0 
FAIR VALUE MEASUREMENTS - MEASUREMENTS BY INPUT LEVEL (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
$ 20,610.5 
$ 23,204.6 
Trading securities
235.0 
247.6 
Investments held by variable interest entities - corporate securities
1,343.0 
1,046.7 
Assets held in separate accounts
6.9 
10.3 
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
1.9 
2.4 
Investments held by variable interest entities - corporate securities
0 
0 
Assets held in separate accounts
0 
0 
Total assets carried at fair value by category
175.5 
82.6 
Total liabilities for insurance products
0 
0 
Total liabilities carried at fair value by category
0 
0 
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
198.4 
245.2 
Investments held by variable interest entities - corporate securities
1,339.1 
1,046.7 
Assets held in separate accounts
6.9 
10.3 
Total assets carried at fair value by category
22,026.8 
24,131.8 
Total liabilities for insurance products
0 
0 
Total liabilities carried at fair value by category
0 
0 
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
34.7 
0 
Investments held by variable interest entities - corporate securities
3.9 
0 
Assets held in separate accounts
0 
0 
Total assets carried at fair value by category
465.1 
674.6 
Total liabilities for insurance products
992.2 
905.5 
Total liabilities carried at fair value by category
992.2 
905.5 
Corporate debt securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Equity securities - corporate securities
172.7 
79.6 
Trading securities
0 
0 
Corporate debt securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
13,592.4 
15,340.1 
Equity securities - corporate securities
173.0 
118.9 
Trading securities
24.0 
45.2 
Corporate debt securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
334.8 
359.6 
Equity securities - corporate securities
27.1 
24.5 
Trading securities
0 
0 
US treasury and government [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
US treasury and government [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
151.5 
73.1 
Trading securities
3.7 
4.6 
US treasury and government [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
US states and political subdivisions debt securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
 
0 
US states and political subdivisions debt securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
2,204.3 
2,204.4 
Trading securities
 
14.1 
US states and political subdivisions debt securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
 
0 
Foreign Government Debt Securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
 
Foreign Government Debt Securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1.8 
 
Foreign Government Debt Securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
 
Asset-backed securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
Asset-backed securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,246.7 
1,419.9 
Trading securities
26.6 
24.3 
Asset-backed securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
62.3 
42.2 
Trading securities
0 
0 
Collateralized debt obligations [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Collateralized debt obligations [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
326.9 
47.3 
Collateralized debt obligations [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
246.7 
Commercial mortgage backed securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
Commercial mortgage backed securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,287.3 
1,609.0 
Trading securities
119.7 
125.8 
Commercial mortgage backed securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1.1 
0 
Trading securities
28.7 
0 
Mortgage pass through securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
Mortgage pass through securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
7.0 
11.8 
Trading securities
0.1 
0.1 
Mortgage pass through securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1.1 
1.6 
Trading securities
0 
0 
Collateralized mortgage obligations [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Trading securities
0 
0 
Collateralized mortgage obligations [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,393.2 
1,848.9 
Trading securities
24.3 
31.1 
Collateralized mortgage obligations [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0.1 
0 
Trading securities
6.0 
0 
Total fixed maturities, available for sale [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
0 
0 
Total fixed maturities, available for sale [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
20,211.1 
22,554.5 
Total fixed maturities, available for sale [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
399.4 
650.1 
Equity securities [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
1.9 
2.4 
Equity securities [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
0 
0 
Equity securities [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
0 
0 
Derivatives [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Other invested assets - derivatives
0.9 
0.6 
Derivatives [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Other invested assets - derivatives
98.3 
156.2 
Derivatives [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Other invested assets - derivatives
0 
0 
Embedded derivatives associated with fixed index annuity products [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
0 
0 
Embedded derivatives associated with fixed index annuity products [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
0 
0 
Embedded derivatives associated with fixed index annuity products [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
992.2 
903.7 
Embedded derivative associated with modified coinsurance agreement [Member] |
Level 1 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
 
0 
Embedded derivative associated with modified coinsurance agreement [Member] |
Level 2 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
 
0 
Embedded derivative associated with modified coinsurance agreement [Member] |
Level 3 [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
 
1.8 
Estimate of fair value measurement [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
235.0 
247.6 
Investments held by variable interest entities - corporate securities
1,343.0 
1,046.7 
Assets held in separate accounts
6.9 
10.3 
Total assets carried at fair value by category
22,667.4 
24,889.0 
Total liabilities for insurance products
992.2 
905.5 
Total liabilities carried at fair value by category
992.2 
905.5 
Estimate of fair value measurement [Member] |
Corporate debt securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
13,927.2 
15,699.7 
Equity securities - corporate securities
372.8 
223.0 
Trading securities
24.0 
45.2 
Estimate of fair value measurement [Member] |
US treasury and government [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
151.5 
73.1 
Trading securities
3.7 
4.6 
Estimate of fair value measurement [Member] |
US states and political subdivisions debt securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
2,204.3 
2,204.4 
Trading securities
 
14.1 
Estimate of fair value measurement [Member] |
Foreign Government Debt Securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1.8 
 
Estimate of fair value measurement [Member] |
Asset-backed securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,309.0 
1,462.1 
Trading securities
26.6 
24.3 
Estimate of fair value measurement [Member] |
Collateralized debt obligations [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
326.9 
294.0 
Estimate of fair value measurement [Member] |
Commercial mortgage backed securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,288.4 
1,609.0 
Trading securities
148.4 
125.8 
Estimate of fair value measurement [Member] |
Mortgage pass through securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
8.1 
13.4 
Trading securities
0.1 
0.1 
Estimate of fair value measurement [Member] |
Collateralized mortgage obligations [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
1,393.3 
1,848.9 
Trading securities
30.3 
31.1 
Estimate of fair value measurement [Member] |
Total fixed maturities, available for sale [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total fixed maturities, available for sale
20,610.5 
23,204.6 
Estimate of fair value measurement [Member] |
Equity securities [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Trading securities
1.9 
2.4 
Estimate of fair value measurement [Member] |
Derivatives [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Other invested assets - derivatives
99.2 
156.8 
Estimate of fair value measurement [Member] |
Embedded derivatives associated with fixed index annuity products [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
992.2 
903.7 
Estimate of fair value measurement [Member] |
Embedded derivative associated with modified coinsurance agreement [Member] |
Fair value, measurements, recurring [Member]
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Total liabilities for insurance products
 
$ 1.8 
FAIR VALUE MEASUREMENTS - RECURRING BASIS (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Sep. 30, 2013
Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Cash and cash equivalents - unrestricted
$ 452.1 
$ 699.0 
$ 376.7 
$ 582.5 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
 
 
Fair value, measurements, recurring [Member]
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Mortgage loans
1,621.8 
1,729.5 
 
 
Policy loans
106.2 
277.0 
 
 
Company-owned life insurance
146.2 
144.8 
 
 
Alternative investment funds
84.7 
67.6 
 
 
Cash and cash equivalents - unrestricted
452.1 
699.0 
 
 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
 
 
Policyholder account balances
10,659.2 1
12,776.4 1
 
 
Investment borrowings
1,519.4 
1,900.0 
 
 
Borrowings related to variable interest entities
1,295.0 
1,012.3 
 
 
Notes payable – direct corporate obligations
814.0 
856.4 
 
 
Fair value, measurements, recurring [Member] |
Level 1 [Member]
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Mortgage loans
0 
0 
 
 
Policy loans
0 
0 
 
 
Company-owned life insurance
0 
0 
 
 
Alternative investment funds
0 
0 
 
 
Cash and cash equivalents - unrestricted
344.1 
457.8 
 
 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
 
 
Policyholder account balances
0 1
0 1
 
 
Investment borrowings
0 
0 
 
 
Borrowings related to variable interest entities
0 
0 
 
 
Notes payable – direct corporate obligations
0 
0 
 
 
Fair value, measurements, recurring [Member] |
Level 2 [Member]
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Mortgage loans
0 
0 
 
 
Policy loans
0 
0 
 
 
Company-owned life insurance
146.2 
144.8 
 
 
Alternative investment funds
84.7 
67.6 
 
 
Cash and cash equivalents - unrestricted
108.0 
241.2 
 
 
Cash and cash equivalents held by variable interest entities
0 
0 
 
 
Policyholder account balances
0 1
0 1
 
 
Investment borrowings
1,519.7 
1,948.5 
 
 
Borrowings related to variable interest entities
941.7 
993.7 
 
 
Notes payable – direct corporate obligations
828.7 
872.5 
 
 
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Mortgage loans
1,675.5 
1,749.5 
 
 
Policy loans
106.2 
277.0 
 
 
Company-owned life insurance
0 
0 
 
 
Alternative investment funds
0 
0 
 
 
Cash and cash equivalents - unrestricted
0 
0 
 
 
Cash and cash equivalents held by variable interest entities
0 
0 
 
 
Policyholder account balances
10,659.2 1
12,776.4 1
 
 
Investment borrowings
0 
0 
 
 
Borrowings related to variable interest entities
0 
0 
 
 
Notes payable – direct corporate obligations
0 
0 
 
 
Estimate of fair value measurement [Member] |
Fair value, measurements, recurring [Member]
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
Mortgage loans
1,675.5 
1,749.5 
 
 
Policy loans
106.2 
277.0 
 
 
Company-owned life insurance
146.2 
144.8 
 
 
Alternative investment funds
84.7 
67.6 
 
 
Cash and cash equivalents - unrestricted
452.1 
699.0 
 
 
Cash and cash equivalents held by variable interest entities
150.7 
104.3 
 
 
Policyholder account balances
10,659.2 1
12,776.4 1
 
 
Investment borrowings
1,519.7 
1,948.5 
 
 
Borrowings related to variable interest entities
941.7 
993.7 
 
 
Notes payable – direct corporate obligations
$ 828.7 
$ 872.5 
 
 
FAIR VALUE MEASUREMENTS - BALANCE SHEET RECURRING (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Liabilities:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
$ (980.3)
$ (798.9)
$ (905.5)
$ (739.5)
Purchases, sales, issuances and settlements, net
(12.2)1
(44.7)2
(60.2)3
(137.6)4
Total realized and unrealized gains (losses) included in net income
0.3 
(1.4)
(26.5)
32.1 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0 
0 
0 
Transfers into level 3
0 5
0 5
0 5
0 5
Transfers out of level 3
0 5
0 5
0 5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
(992.2)
(845.0)
(992.2)
(845.0)
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0.3 
(1.4)
(26.5)
32.1 
Available-for-sale securities [Member] |
Corporate debt securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
6.6 
(2.1)
44.9 
14.0 
Available-for-sale securities [Member] |
Corporate debt securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
389.8 
393.1 
359.6 
355.5 
Purchases, sales, issuances and settlements, net
6.6 1
(2.1)2
44.9 3
14.0 4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
(0.3)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.9)
1.4 
11.6 
(12.8)
Transfers into level 3
37.5 5
12.9 5
52.7 5
13.2 5
Transfers out of level 3
(98.2)5
(48.0)5
(82.8)5
(12.3)5
Assets of CLIC sold
 
 
(51.2)
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
334.8 
357.3 
334.8 
357.3 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
US states and political subdivisions debt securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
28.7 
 
0 
13.1 
Purchases, sales, issuances and settlements, net
0 1
 
0 3
0 4
Total realized and unrealized gains (losses) included in net income
0 
 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
 
0.1 
0 
Transfers into level 3
0 5
 
2.1 5
0 5
Transfers out of level 3
(28.7)5
 
0 5
(13.1)5
Assets of CLIC sold
 
 
(2.2)
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
0 
0 
0 
0 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
 
0 
0 
Available-for-sale securities [Member] |
Asset-backed Securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
(0.1)
(7.2)
8.9 
(4.5)
Available-for-sale securities [Member] |
Asset-backed Securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
52.7 
45.4 
42.2 
44.0 
Purchases, sales, issuances and settlements, net
(0.1)1
(7.2)2
8.9 3
(4.5)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0.1 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0.2 
0.3 
4.0 
(3.1)
Transfers into level 3
9.5 5
0 5
16.9 5
0 5
Transfers out of level 3
0 5
(2.0)5
0 5
0 5
Assets of CLIC sold
 
 
(9.7)
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
62.3 
36.5 
62.3 
36.5 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
Collateralized debt obligations [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
 
(18.0)
 
(70.5)
Available-for-sale securities [Member] |
Collateralized debt obligations [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
14.2 
287.6 
246.7 
324.0 
Purchases, sales, issuances and settlements, net
0 1
(18.0)2
0 3
(70.5)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0.1 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0.6 
0 
6.5 
Transfers into level 3
0 5
0 5
0 5
0 5
Transfers out of level 3
(14.2)5
(10.1)5
(246.7)5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
0 
260.1 
0 
260.1 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
Commercial mortgage backed securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
1.1 
 
1.1 
 
Available-for-sale securities [Member] |
Commercial mortgage backed securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
0 
3.3 
0 
6.2 
Purchases, sales, issuances and settlements, net
1.1 1
0 2
1.1 3
0 4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0 
0 
0 
Transfers into level 3
0 5
0 5
0 5
0 5
Transfers out of level 3
0 5
(3.3)5
0 5
(6.2)5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
1.1 
0 
1.1 
0 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
Mortgage pass through securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
(0.2)
(0.1)
(0.5)
(0.2)
Available-for-sale securities [Member] |
Mortgage pass through securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
1.3 
1.8 
1.6 
1.9 
Purchases, sales, issuances and settlements, net
(0.2)1
(0.1)2
(0.5)3
(0.2)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0 
0 
0 
Transfers into level 3
0 5
0 5
0 5
0 5
Transfers out of level 3
0 5
0 5
0 5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
1.1 
1.7 
1.1 
1.7 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
Collateralized mortgage obligations [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
 
 
(0.1)
(0.1)
Available-for-sale securities [Member] |
Collateralized mortgage obligations [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
0.1 
0.1 
0 
16.9 
Purchases, sales, issuances and settlements, net
0 1
0 2
(0.1)3
(0.1)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0 
0 
0 
Transfers into level 3
0 5
0 5
0.2 5
0 5
Transfers out of level 3
0 5
0 5
0 5
(16.7)5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
0.1 
0.1 
0.1 
0.1 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Available-for-sale securities [Member] |
Total fixed maturities, available for sale [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
7.4 
(27.4)
54.3 
(61.3)
Available-for-sale securities [Member] |
Total fixed maturities, available for sale [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
486.8 
731.3 
650.1 
761.6 
Purchases, sales, issuances and settlements, net
7.4 1
(27.4)2
54.3 3
(61.3)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
(0.1)
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.7)
2.3 
15.7 
(9.4)
Transfers into level 3
47.0 5
12.9 5
71.9 5
13.2 5
Transfers out of level 3
(141.1)5
(63.4)5
(329.5)5
(48.3)5
Assets of CLIC sold
 
 
(63.1)
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
399.4 
655.7 
399.4 
655.7 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
0 
0 
0 
Equity securities classification [Member] |
Corporate debt securities [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
0.1 
 
0.1 
Purchases, sales, issuances and settlements, net
0.9 
0.7 2
2.6 
34.7 4
Total realized and unrealized gains (losses) included in net income
 
0 
 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0 
 
(11.0)
Transfers into level 3
 
23.0 5
 
0 5
Transfers out of level 3
 
0 5
 
0 5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
23.8 
 
23.8 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
0 
 
0 
Equity securities classification [Member] |
Corporate debt securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
26.2 
 
24.5 
 
Purchases, sales, issuances and settlements, net
0.9 1
 
2.6 3
 
Total realized and unrealized gains (losses) included in net income
0 
 
0 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
 
0 
 
Transfers into level 3
0 5
 
0 5
 
Transfers out of level 3
0 5
 
0 5
 
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
27.1 
 
27.1 
 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
 
0 
 
Equity securities classification [Member] |
Asset-backed Securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
 
 
29.1 
 
Equity securities classification [Member] |
Venture capital funds [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
3.1 
 
2.8 
Purchases, sales, issuances and settlements, net
 
0 2
 
0 4
Total realized and unrealized gains (losses) included in net income
 
0 
 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.2 
 
0.5 
Transfers into level 3
 
0 5
 
0 5
Transfers out of level 3
 
0 5
 
0 5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
3.3 
 
3.3 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
0 
 
0 
Equity securities classification [Member] |
Equity securities [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
3.2 
 
2.9 
Purchases, sales, issuances and settlements, net
 
0.7 2
 
34.7 4
Total realized and unrealized gains (losses) included in net income
 
0 
 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.2 
 
(10.5)
Transfers into level 3
 
23.0 5
 
0 5
Transfers out of level 3
 
0 5
 
0 5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
27.1 
 
27.1 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
0 
 
0 
Trading Securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
5.9 
10.4 
0 
13.7 
Purchases, sales, issuances and settlements, net
0 1
0 2
29.1 3
(7.7)4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0.6 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.3)
0.6 
(0.2)
(0.8)
Transfers into level 3
29.1 5
25.7 5
5.8 5
26.7 5
Transfers out of level 3
0 5
(4.8)5
0 5
(0.6)5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
34.7 
31.9 
34.7 
31.9 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
(0.3)
0.6 
(0.2)
(0.8)
Trading Securities [Member] |
Collateralized debt obligations [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
 
 
 
(7.7)
Investments Held By Variable Interest Entities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
 
0 
 
Purchases, sales, issuances and settlements, net
 
 
3.0 3
 
Total realized and unrealized gains (losses) included in net income
 
 
0 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
 
(0.1)
 
Transfers into level 3
 
 
1.0 5
 
Transfers out of level 3
 
 
0 5
 
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
3.9 
 
3.9 
 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
 
0 
 
Investments Held By Variable Interest Entities [Member] |
Corporate Securities Held By Variable Interest Entities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases, sales, issuances and settlements, net
3.0 
 
3.0 
 
Investments Held By Variable Interest Entities [Member] |
Corporate Securities Held By Variable Interest Entities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
0 
 
 
 
Purchases, sales, issuances and settlements, net
3.0 1
 
 
 
Total realized and unrealized gains (losses) included in net income
0 
 
 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.1)
 
 
 
Transfers into level 3
1.0 5
 
 
 
Transfers out of level 3
0 5
 
 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
3.9 
 
3.9 
 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0 
 
 
 
Asset-backed Securities [Member] |
Trading Securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
0 
 
0 
Purchases, sales, issuances and settlements, net
 
0 2
 
0 4
Total realized and unrealized gains (losses) included in net income
 
0 
 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0.6 
 
(0.4)
Transfers into level 3
 
25.7 5
 
26.7 5
Transfers out of level 3
 
0 5
 
0 5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
26.3 
 
26.3 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
0.6 
 
(0.4)
Collateralized mortgage obligations [Member] |
Trading Securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
5.9 
10.4 
0 
5.8 
Purchases, sales, issuances and settlements, net
0 1
0 2
0 3
0 4
Total realized and unrealized gains (losses) included in net income
0 
0 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0.1 
0 
0.2 
(0.2)
Transfers into level 3
0 5
0 5
5.8 5
0 5
Transfers out of level 3
0 5
(4.8)5
0 5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
6.0 
5.6 
6.0 
5.6 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0.1 
0 
0.2 
(0.2)
Commercial mortgage backed securities [Member] |
Trading Securities [Member] |
Fair value, measurements, recurring [Member] |
Level 3 [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
0 
 
0 
 
Purchases, sales, issuances and settlements, net
0 1
 
29.1 3
 
Total realized and unrealized gains (losses) included in net income
0 
 
0 
 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
(0.4)
 
(0.4)
 
Transfers into level 3
29.1 5
 
0 5
 
Transfers out of level 3
0 5
 
0 5
 
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
28.7 
 
28.7 
 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
(0.4)
 
(0.4)
 
Collateralized debt obligations [Member] |
Trading Securities [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
 
 
7.3 
Purchases, sales, issuances and settlements, net
 
 
 
(7.7)4
Total realized and unrealized gains (losses) included in net income
 
 
 
0.6 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
 
 
(0.2)
Transfers into level 3
 
 
 
0 5
Transfers out of level 3
 
 
 
0 5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
0 
 
0 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
 
 
(0.2)
US states and political subdivisions debt securities [Member] |
Trading Securities [Member]
 
 
 
 
Assets:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
 
 
0.6 
Purchases, sales, issuances and settlements, net
 
 
 
0 4
Total realized and unrealized gains (losses) included in net income
 
 
 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
 
 
0 
Transfers into level 3
 
 
 
0 5
Transfers out of level 3
 
 
 
(0.6)5
Fair value, measurement with unobservable inputs reconciliation, ending balance
 
0 
 
0 
Liabilities:
 
 
 
 
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
 
 
0 
Interest sensitive products [Member]
 
 
 
 
Liabilities:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
(980.3)
(796.3)
(903.7)
(734.0)
Purchases, sales, issuances and settlements, net
(12.2)1
(45.2)2
(62.0)3
(141.0)4
Total realized and unrealized gains (losses) included in net income
0.3 
(1.4)
(26.5)
32.1 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
0 
0 
0 
0 
Transfers into level 3
0 5
0 5
0 5
0 5
Transfers out of level 3
0 5
0 5
0 5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
(992.2)
(842.9)
(992.2)
(842.9)
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
0.3 
(1.4)
(26.5)
32.1 
Interest Sensitive Products Modified Coinsurance Agreement [Member]
 
 
 
 
Liabilities:
 
 
 
 
Fair value, measurement with unobservable inputs reconciliation, beginning balance
 
(2.6)
(1.8)
(5.5)
Purchases, sales, issuances and settlements, net
 
0.5 2
1.8 3
3.4 4
Total realized and unrealized gains (losses) included in net income
 
0 
0 
0 
Total realized and unrealized gains (losses) included in accumulated other comprehensive income (loss)
 
0 
0 
0 
Transfers into level 3
 
0 5
0 5
0 5
Transfers out of level 3
 
0 5
0 5
0 5
Assets of CLIC sold
 
 
0 
 
Fair value, measurement with unobservable inputs reconciliation, ending balance
0 
(2.1)
0 
(2.1)
Amount of total gains (losses) included in our net income relating to assets and liabilities still held as of the reporting date
 
$ 0 
$ 0 
$ 0 
[1] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2014 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$15.7 $(9.1) $— $— $6.6Asset-backed securities1.9 (2.0) — — (.1)Commercial mortgage-backed securities1.1 — — — 1.1Mortgage pass-through securities— (.2) — — (.2)Total fixed maturities, available for sale18.7 (11.3) — — 7.4Equity securities - corporate securities.9 — — — .9Investments held by variable interest entities - corporate securities3.0 — — — 3.0Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(29.2) 3.9 (.5) 13.6 (12.2)Total liabilities for insurance products(29.2) 3.9 (.5) 13.6 (12.2)
[2] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2013 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$— $(2.1) $— $— $(2.1)Asset-backed securities— (7.2) — — (7.2)Collateralized debt obligations5.9 (23.9) — — (18.0)Mortgage pass-through securities— (.1) — — (.1)Total fixed maturities, available for sale5.9 (33.3) — — (27.4)Equity securities - corporate securities.7 — — — .7Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(25.4) — (30.0) 10.2 (45.2)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— .5 — — .5Total liabilities for insurance products(25.4) .5 (30.0) 10.2 (44.7)
[3] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2014 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$47.7 $(2.8) $— $— $44.9Asset-backed securities11.8 (2.9) — — 8.9Commercial mortgage-backed securities1.1 — — — 1.1Mortgage pass-through securities1.1 (1.6) — — (.5)Collateralized mortgage obligations— (.1) — — (.1)Total fixed maturities, available for sale61.7 (7.4) — — 54.3Equity securities - corporate securities2.6 — — — 2.6Trading securities - commercial mortgage-backed securities29.1 — — — 29.1Investments held by variable interest entities - corporate securities3.0 — — — 3.0Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(86.9) 7.5 (25.1) 42.5 (62.0)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— 3.4 (1.6) — 1.8Total liabilities for insurance products(86.9) 10.9 (26.7) 42.5 (60.2)
[4] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2013 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$24.0 $(10.0) $— $— $14.0Asset-backed securities7.6 (12.1) — — (4.5)Collateralized debt obligations6.0 (76.5) — — (70.5)Mortgage pass-through securities— (.2) — — (.2)Collateralized mortgage obligations— (.1) — — (.1)Total fixed maturities, available for sale37.6 (98.9) — — (61.3)Equity securities - corporate securities34.7 — — — 34.7Trading securities - collateralized debt obligations— (7.7) — — (7.7)Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(78.2) 1.4 (94.2) 30.0 (141.0)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— 3.4 — — 3.4Total liabilities for insurance products(78.2) 4.8 (94.2) 30.0 (137.6)
FAIR VALUE MEASUREMENTS - FAIR VALUE ACTIVITY (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Liabilities:
 
 
 
 
Purchases
$ (29.2)
$ (25.4)
$ (86.9)
$ (78.2)
Sales
3.9 
0.5 
10.9 
4.8 
Issuances
(0.5)
(30.0)
(26.7)
(94.2)
Settlements
13.6 
10.2 
42.5 
30.0 
Purchases, sales, issuances and settlements, net
(12.2)1
(44.7)2
(60.2)3
(137.6)4
Collateralized debt obligations [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
 
5.9 
 
6.0 
Sales
 
(23.9)
 
(76.5)
Issuances
 
0 
 
0 
Settlements
 
0 
 
0 
Purchases, sales, issuances and settlements, net
 
(18.0)
 
(70.5)
Collateralized debt obligations [Member] |
Trading Securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
 
 
 
0 
Sales
 
 
 
(7.7)
Issuances
 
 
 
0 
Settlements
 
 
 
0 
Purchases, sales, issuances and settlements, net
 
 
 
(7.7)
Corporate debt securities [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
15.7 
0 
47.7 
24.0 
Sales
(9.1)
(2.1)
(2.8)
(10.0)
Issuances
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Purchases, sales, issuances and settlements, net
6.6 
(2.1)
44.9 
14.0 
Corporate debt securities [Member] |
Equity securities classification [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
0.9 
0.7 
2.6 
34.7 
Sales
0 
0 
0 
0 
Issuances
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Purchases, sales, issuances and settlements, net
0.9 
0.7 2
2.6 
34.7 4
Asset-backed Securities [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
1.9 
0 
11.8 
7.6 
Sales
(2.0)
(7.2)
(2.9)
(12.1)
Issuances
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Purchases, sales, issuances and settlements, net
(0.1)
(7.2)
8.9 
(4.5)
Asset-backed Securities [Member] |
Equity securities classification [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
 
 
29.1 
 
Sales
 
 
0 
 
Issuances
 
 
0 
 
Settlements
 
 
0 
 
Purchases, sales, issuances and settlements, net
 
 
29.1 
 
Commercial mortgage backed securities [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
1.1 
 
1.1 
 
Sales
0 
 
0 
 
Issuances
0 
 
0 
 
Settlements
0 
 
0 
 
Purchases, sales, issuances and settlements, net
1.1 
 
1.1 
 
Mortgage pass through securities [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
0 
0 
1.1 
0 
Sales
(0.2)
(0.1)
(1.6)
(0.2)
Issuances
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Purchases, sales, issuances and settlements, net
(0.2)
(0.1)
(0.5)
(0.2)
Collateralized mortgage obligations [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
 
 
0 
0 
Sales
 
 
(0.1)
(0.1)
Issuances
 
 
0 
0 
Settlements
 
 
0 
0 
Purchases, sales, issuances and settlements, net
 
 
(0.1)
(0.1)
Total fixed maturities, available for sale [Member] |
Available-for-sale securities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
18.7 
5.9 
61.7 
37.6 
Sales
(11.3)
(33.3)
(7.4)
(98.9)
Issuances
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Purchases, sales, issuances and settlements, net
7.4 
(27.4)
54.3 
(61.3)
Corporate Securities Held By Variable Interest Entities [Member] |
Investments Held By Variable Interest Entities [Member]
 
 
 
 
Assets:
 
 
 
 
Purchases
3.0 
 
3.0 
 
Sales
0 
 
0 
 
Issuances
0 
 
0 
 
Settlements
0 
 
0 
 
Purchases, sales, issuances and settlements, net
3.0 
 
3.0 
 
Interest sensitive products [Member]
 
 
 
 
Liabilities:
 
 
 
 
Purchases
(29.2)
(25.4)
(86.9)
(78.2)
Sales
3.9 
0 
7.5 
1.4 
Issuances
(0.5)
(30.0)
(25.1)
(94.2)
Settlements
13.6 
10.2 
42.5 
30.0 
Purchases, sales, issuances and settlements, net
(12.2)1
(45.2)2
(62.0)3
(141.0)4
Interest Sensitive Products Modified Coinsurance Agreement [Member]
 
 
 
 
Liabilities:
 
 
 
 
Purchases
 
0 
0 
0 
Sales
 
0.5 
3.4 
3.4 
Issuances
 
0 
(1.6)
0 
Settlements
 
0 
0 
0 
Purchases, sales, issuances and settlements, net
 
$ 0.5 2
$ 1.8 3
$ 3.4 4
[1] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2014 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$15.7 $(9.1) $— $— $6.6Asset-backed securities1.9 (2.0) — — (.1)Commercial mortgage-backed securities1.1 — — — 1.1Mortgage pass-through securities— (.2) — — (.2)Total fixed maturities, available for sale18.7 (11.3) — — 7.4Equity securities - corporate securities.9 — — — .9Investments held by variable interest entities - corporate securities3.0 — — — 3.0Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(29.2) 3.9 (.5) 13.6 (12.2)Total liabilities for insurance products(29.2) 3.9 (.5) 13.6 (12.2)
[2] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the three months ended September 30, 2013 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$— $(2.1) $— $— $(2.1)Asset-backed securities— (7.2) — — (7.2)Collateralized debt obligations5.9 (23.9) — — (18.0)Mortgage pass-through securities— (.1) — — (.1)Total fixed maturities, available for sale5.9 (33.3) — — (27.4)Equity securities - corporate securities.7 — — — .7Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(25.4) — (30.0) 10.2 (45.2)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— .5 — — .5Total liabilities for insurance products(25.4) .5 (30.0) 10.2 (44.7)
[3] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2014 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$47.7 $(2.8) $— $— $44.9Asset-backed securities11.8 (2.9) — — 8.9Commercial mortgage-backed securities1.1 — — — 1.1Mortgage pass-through securities1.1 (1.6) — — (.5)Collateralized mortgage obligations— (.1) — — (.1)Total fixed maturities, available for sale61.7 (7.4) — — 54.3Equity securities - corporate securities2.6 — — — 2.6Trading securities - commercial mortgage-backed securities29.1 — — — 29.1Investments held by variable interest entities - corporate securities3.0 — — — 3.0Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(86.9) 7.5 (25.1) 42.5 (62.0)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— 3.4 (1.6) — 1.8Total liabilities for insurance products(86.9) 10.9 (26.7) 42.5 (60.2)
[4] Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity and equity securities and changes to embedded derivative instruments related to insurance products resulting from the issuance of new contracts, or changes to existing contracts. The following summarizes such activity for the nine months ended September 30, 2013 (dollars in millions): Purchases Sales Issuances Settlements Purchases, sales, issuances and settlements, netAssets: Fixed maturities, available for sale: Corporate securities$24.0 $(10.0) $— $— $14.0Asset-backed securities7.6 (12.1) — — (4.5)Collateralized debt obligations6.0 (76.5) — — (70.5)Mortgage pass-through securities— (.2) — — (.2)Collateralized mortgage obligations— (.1) — — (.1)Total fixed maturities, available for sale37.6 (98.9) — — (61.3)Equity securities - corporate securities34.7 — — — 34.7Trading securities - collateralized debt obligations— (7.7) — — (7.7)Liabilities: Liabilities for insurance products: Interest-sensitive products - embedded derivatives associated with fixed index annuity products(78.2) 1.4 (94.2) 30.0 (141.0)Interest-sensitive products - embedded derivatives associated with modified coinsurance agreement— 3.4 — — 3.4Total liabilities for insurance products(78.2) 4.8 (94.2) 30.0 (137.6)
FAIR VALUE MEASUREMENTS - FAIR VALUE INPUTS (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended 12 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
$ 24,683.9 
$ 27,151.7 
Other invested assets
394.6 
423.3 
Policyholder account balances
10,659.2 
12,776.4 
Level 3 [Member] |
Interest sensitive products [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Weighted average projected portfolio yields
5.60% 
5.60% 
Weighted average discount rates
2.03% 
2.47% 
Weighted average surrender rates
14.39% 
14.39% 
Level 3 [Member] |
Corporate debt securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Weighted average discount rate
2.43% 
2.36% 
Level 3 [Member] |
Asset-backed securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Weighted average discount rate
2.94% 
3.09% 
Level 3 [Member] |
Collateralized debt obligations [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Weighted average discount rate
 
1.32% 
Weighted average recoveries
 
65.80% 
Weighted average constant prepayment rate
 
20.00% 
Weighted average annual default rate
 
3.05% 
Weighted average portfolio CCC percent
 
12.57% 
Minimum [Member] |
Level 3 [Member] |
Interest sensitive products [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Projected Portfolio Yields
5.35% 
5.35% 
Discount rates
0.00% 
0.00% 
Surrender rates
2.80% 
2.80% 
Minimum [Member] |
Level 3 [Member] |
Corporate debt securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
1.55% 
1.65% 
Minimum [Member] |
Level 3 [Member] |
Asset-backed securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
2.03% 
2.03% 
Minimum [Member] |
Level 3 [Member] |
Collateralized debt obligations [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
 
0.95% 
Debt obligation, recovery rate
 
64.00% 
Annual default rate
 
1.14% 
Portfolio CCC Percent
 
1.52% 
Maximum [Member] |
Level 3 [Member] |
Interest sensitive products [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Projected Portfolio Yields
6.63% 
6.63% 
Discount rates
3.42% 
4.64% 
Surrender rates
54.60% 
54.60% 
Maximum [Member] |
Level 3 [Member] |
Corporate debt securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
5.11% 
2.90% 
Maximum [Member] |
Level 3 [Member] |
Asset-backed securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
4.15% 
4.20% 
Maximum [Member] |
Level 3 [Member] |
Collateralized debt obligations [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Discount rate
 
2.00% 
Debt obligation, recovery rate
 
67.00% 
Annual default rate
 
5.57% 
Portfolio CCC Percent
 
21.79% 
Estimate of fair value measurement [Member] |
Level 3 [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
465.1 
674.6 
Other invested assets
145.8 1
114.0 1
Policyholder account balances
992.2 2
905.5 2
Estimate of fair value measurement [Member] |
Level 3 [Member] |
Corporate debt securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
262.9 3
260.3 3
Estimate of fair value measurement [Member] |
Level 3 [Member] |
Asset-backed securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
29.3 4
35.1 4
Estimate of fair value measurement [Member] |
Level 3 [Member] |
Collateralized debt obligations [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
 
240.7 5
Estimate of fair value measurement [Member] |
Level 3 [Member] |
Equity securities [Member]
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
Investments
$ 27.1 6
$ 24.5 6
[5] Collateralized debt obligations - The significant unobservable inputs used in the fair value measurement of our collateralized debt obligations relate to collateral performance, including default rate, recoveries and constant prepayment rate, as well as discount margins of the underlying collateral. Significant increases (decreases) in default rate in isolation would result in a significantly lower (higher) fair value measurement. Generally, a significant increase (decrease) in the constant prepayment rate and recoveries in isolation would result in a significantly higher (lower) fair value measurement. Generally a significant increase (decrease) in discount margin in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the annual default rate is accompanied by a directionally similar change in the assumption used for discount margins and portfolio CCC % and a directionally opposite change in the assumption used for constant prepayment rate and recoveries. A tranche's payment priority and investment cost basis could alter generalized fair value outcomes.
FAIR VALUE MEASUREMENTS - NARRATIVE (Details)
9 Months Ended
Sep. 30, 2014
Fair Value Disclosures [Abstract]
 
Fair value of level 3 fixed maturity securities valued using broker quotes, percentage
27.00% 
Available for sale fixed maturities classified as level 3, investment grade, percent
82.00% 
Available for Sale Maturities with Significant Unobservable Inputs, Corporate Securities, Percent
84.00% 
Available for sale maturities with significant unobservable inputs, structured securities, percent
0.00%