Investments | 3 Months Ended |
Mar. 31, 2014 |
Investments, Debt and Equity Securities [Abstract] | ' |
Investments | ' |
Investments (excluding Consolidated Investment Entities) |
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Fixed Maturities and Equity Securities |
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Available-for-sale and fair value option ("FVO") fixed maturities and equity securities were as follows as of March 31, 2014: |
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| Amortized Cost | | Gross Unrealized Capital Gains | | Gross Unrealized Capital Losses | | Embedded Derivatives(2) | | Fair Value | | OTTI(3) | | | | | | | | |
Fixed maturities: | | | | | | | | | | | | | | | | | | | |
U.S. Treasuries | $ | 4,991.60 | | | $ | 315.6 | | | $ | 44.1 | | | $ | — | | | $ | 5,263.10 | | | $ | — | | | | | | | | | |
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U.S. Government agencies and authorities | 610.6 | | | 33.7 | | | 0.2 | | | — | | | 644.1 | | | — | | | | | | | | | |
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State, municipalities and political subdivisions | 276.5 | | | 17.5 | | | 0.4 | | | — | | | 293.6 | | | — | | | | | | | | | |
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U.S. corporate securities | 36,658.80 | | | 2,876.30 | | | 361.6 | | | — | | | 39,173.50 | | | 11.8 | | | | | | | | | |
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Foreign securities(1): | | | | | | | | | | | | | | | | | | | |
Government | 886.3 | | | 45 | | | 24.1 | | | — | | | 907.2 | | | — | | | | | | | | | |
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Other | 14,859.90 | | | 1,062.20 | | | 88.7 | | | — | | | 15,833.40 | | | — | | | | | | | | | |
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Total foreign securities | 15,746.20 | | | 1,107.20 | | | 112.8 | | | — | | | 16,740.60 | | | — | | | | | | | | | |
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Residential mortgage-backed securities: | | | | | | | | | | | | | | | | | | | |
Agency | 5,319.70 | | | 432.7 | | | 41.9 | | | 76.2 | | | 5,786.70 | | | 0.3 | | | | | | | | | |
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Non-Agency | 1,054.70 | | | 175.3 | | | 10.9 | | | 46.9 | | | 1,266.00 | | | 93.3 | | | | | | | | | |
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Total Residential mortgage-backed securities | 6,374.40 | | | 608 | | | 52.8 | | | 123.1 | | | 7,052.70 | | | 93.6 | | | | | | | | | |
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Commercial mortgage-backed securities | 3,472.80 | | | 323.9 | | | 0.6 | | | — | | | 3,796.10 | | | — | | | | | | | | | |
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Other asset-backed securities | 1,789.40 | | | 81.4 | | | 31.4 | | | — | | | 1,839.40 | | | 5 | | | | | | | | | |
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Total fixed maturities, including securities pledged | 69,920.30 | | | 5,363.60 | | | 603.9 | | | 123.1 | | | 74,803.10 | | | 110.4 | | | | | | | | | |
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Less: Securities pledged | 1,230.30 | | | 50.4 | | | 9.4 | | | — | | | 1,271.30 | | | — | | | | | | | | | |
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Total fixed maturities | 68,690.00 | | | 5,313.20 | | | 594.5 | | | 123.1 | | | 73,531.80 | | | 110.4 | | | | | | | | | |
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Equity securities: | | | | | | | | | | | | | | | | | | | |
Common stock | 194.3 | | | 2.3 | | | 0.2 | | | — | | | 196.4 | | | — | | | | | | | | | |
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Preferred stock | 50.5 | | | 29.7 | | | — | | | — | | | 80.2 | | | — | | | | | | | | | |
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Total equity securities | 244.8 | | | 32 | | | 0.2 | | | — | | | 276.6 | | | — | | | | | | | | | |
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Total fixed maturities and equity securities investments | $ | 68,934.80 | | | $ | 5,345.20 | | | $ | 594.7 | | | $ | 123.1 | | | $ | 73,808.40 | | | $ | 110.4 | | | | | | | | | |
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(1) Primarily U.S. dollar denominated. |
(2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. |
(3) Represents Other-than-Temporary-Impairments ("OTTI") reported as a component of Other comprehensive income. |
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Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2013: |
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| Amortized Cost | | Gross Unrealized Capital Gains | | Gross Unrealized Capital Losses | | Embedded Derivatives(2) | | Fair Value | | OTTI(3) | | | | | | | | |
Fixed maturities: | | | | | | | | | | | | | | | | | | | |
U.S. Treasuries | $ | 5,094.00 | | | $ | 174 | | | $ | 86.8 | | | $ | — | | | $ | 5,181.20 | | | $ | — | | | | | | | | | |
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U.S. Government agencies and authorities | 598 | | | 22.3 | | | 1.4 | | | — | | | 618.9 | | | — | | | | | | | | | |
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State, municipalities and political subdivisions | 272 | | | 10.6 | | | 1.5 | | | — | | | 281.1 | | | — | | | | | | | | | |
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U.S. corporate securities | 36,010.30 | | | 2,174.50 | | | 706.2 | | | — | | | 37,478.60 | | | 12.8 | | | | | | | | | |
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Foreign securities(1): | | | | | | | | | | | | | | | | | | | |
Government | 1,044.00 | | | 49.6 | | | 42.2 | | | — | | | 1,051.40 | | | — | | | | | | | | | |
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Other | 14,617.40 | | | 864.2 | | | 176.5 | | | — | | | 15,305.10 | | | — | | | | | | | | | |
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Total foreign securities | 15,661.40 | | | 913.8 | | | 218.7 | | | — | | | 16,356.50 | | | — | | | | | | | | | |
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Residential mortgage-backed securities: | | | | | | | | | | | | | | | | | | | |
Agency | 5,379.20 | | | 431.1 | | | 62.1 | | | 79.2 | | | 5,827.40 | | | 0.4 | | | | | | | | | |
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Non-Agency | 1,101.10 | | | 166.2 | | | 18.3 | | | 47.3 | | | 1,296.30 | | | 103.2 | | | | | | | | | |
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Total Residential mortgage-backed securities | 6,480.30 | | | 597.3 | | | 80.4 | | | 126.5 | | | 7,123.70 | | | 103.6 | | | | | | | | | |
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Commercial mortgage-backed securities | 3,427.90 | | | 327.7 | | | 3.5 | | | — | | | 3,752.10 | | | 4.4 | | | | | | | | | |
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Other asset-backed securities | 1,883.10 | | | 81.6 | | | 38 | | | — | | | 1,926.70 | | | 5.2 | | | | | | | | | |
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Total fixed maturities, including securities pledged | 69,427.00 | | | 4,301.80 | | | 1,136.50 | | | 126.5 | | | 72,718.80 | | | 126 | | | | | | | | | |
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Less: Securities pledged | 1,457.90 | | | 24.6 | | | 16.8 | | | — | | | 1,465.70 | | | — | | | | | | | | | |
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Total fixed maturities | 67,969.10 | | | 4,277.20 | | | 1,119.70 | | | 126.5 | | | 71,253.10 | | | 126 | | | | | | | | | |
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Equity securities: | | | | | | | | | | | | | | | | | | | |
Common stock | 214.3 | | | 5.1 | | | 0.9 | | | — | | | 218.5 | | | — | | | | | | | | | |
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Preferred stock | 53.1 | | | 43.4 | | | 0.6 | | | — | | | 95.9 | | | — | | | | | | | | | |
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Total equity securities | 267.4 | | | 48.5 | | | 1.5 | | | — | | | 314.4 | | | — | | | | | | | | | |
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Total fixed maturities and equity securities investments | $ | 68,236.50 | | | $ | 4,325.70 | | | $ | 1,121.20 | | | $ | 126.5 | | | $ | 71,567.50 | | | $ | 126 | | | | | | | | | |
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(1) Primarily U.S. dollar denominated. |
(2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. |
(3) Represents OTTI reported as a component of Other comprehensive income. |
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The amortized cost and fair value of fixed maturities, including securities pledged, as of March 31, 2014, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date. |
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| Amortized | | Fair | | | | | | | | | | | | | | | | | | | | | | | | |
Cost | Value | | | | | | | | | | | | | | | | | | | | | | | | |
Due to mature: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One year or less | $ | 1,999.30 | | | $ | 2,032.50 | | | | | | | | | | | | | | | | | | | | | | | | | |
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After one year through five years | 13,858.50 | | | 14,748.50 | | | | | | | | | | | | | | | | | | | | | | | | | |
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After five years through ten years | 21,329.90 | | | 22,070.10 | | | | | | | | | | | | | | | | | | | | | | | | | |
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After ten years | 21,096.00 | | | 23,263.80 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Mortgage-backed securities | 9,847.20 | | | 10,848.80 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Other asset-backed securities | 1,789.40 | | | 1,839.40 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Fixed maturities, including securities pledged | $ | 69,920.30 | | | $ | 74,803.10 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer. |
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As of March 31, 2014 and December 31, 2013, the Company did not have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company’s condensed consolidated Shareholders' equity. |
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The following tables set forth the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated: |
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| Amortized | | Gross | | Gross | | Fair | | | | | | | | | | | | | | | | |
Cost | Unrealized | Unrealized | Value | | | | | | | | | | | | | | | | |
| Capital | Capital | | | | | | | | | | | | | | | | | |
| Gains | Losses | | | | | | | | | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | |
Communications | $ | 3,966.90 | | | $ | 403.4 | | | $ | 29.2 | | | $ | 4,341.10 | | | | | | | | | | | | | | | | | |
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Financial | 6,990.90 | | | 675.5 | | | 42.7 | | | 7,623.70 | | | | | | | | | | | | | | | | | |
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Industrial and other companies | 29,959.30 | | | 1,964.80 | | | 293.2 | | | 31,630.90 | | | | | | | | | | | | | | | | | |
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Utilities | 9,165.50 | | | 778.4 | | | 70.8 | | | 9,873.10 | | | | | | | | | | | | | | | | | |
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Transportation | 1,436.10 | | | 116.4 | | | 14.4 | | | 1,538.10 | | | | | | | | | | | | | | | | | |
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Total | $ | 51,518.70 | | | $ | 3,938.50 | | | $ | 450.3 | | | $ | 55,006.90 | | | | | | | | | | | | | | | | | |
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December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | |
Communications | $ | 4,016.20 | | | $ | 293 | | | $ | 73.4 | | | $ | 4,235.80 | | | | | | | | | | | | | | | | | |
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Financial | 6,640.70 | | | 566.6 | | | 72.6 | | | 7,134.70 | | | | | | | | | | | | | | | | | |
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Industrial and other companies | 29,303.10 | | | 1,524.50 | | | 564.5 | | | 30,263.10 | | | | | | | | | | | | | | | | | |
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Utilities | 9,200.60 | | | 570 | | | 142.2 | | | 9,628.40 | | | | | | | | | | | | | | | | | |
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Transportation | 1,467.10 | | | 84.6 | | | 30 | | | 1,521.70 | | | | | | | | | | | | | | | | | |
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Total | $ | 50,627.70 | | | $ | 3,038.70 | | | $ | 882.7 | | | $ | 52,783.70 | | | | | | | | | | | | | | | | | |
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Fixed Maturities and Equity Securities |
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The Company's fixed maturities and equity securities are currently designated as available-for-sale, except those accounted for using the FVO. Available-for-sale securities are reported at fair value and unrealized capital gains (losses) on these securities are recorded directly in Accumulated other comprehensive income (loss) ("AOCI"), and presented net of related changes in DAC, VOBA and deferred income taxes. In addition, certain fixed maturities have embedded derivatives, which are reported with the host contract on the Condensed Consolidated Balance Sheets. |
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The Company has elected the FVO for certain of its fixed maturities to better match the measurement of assets and liabilities in the Condensed Consolidated Statements of Operations. Certain collateralized mortgage obligations ("CMOs"), primarily interest-only and principal-only strips, are accounted for as hybrid instruments and valued at fair value with changes in the fair value recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations. |
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The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of March 31, 2014 and December 31, 2013, approximately 41.5% and 38.3%, respectively, of the Company’s CMO holdings, such as interest-only or principal-only strips, were invested in those types of CMOs that are subject to more prepayment and extension risk than traditional CMOs. |
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Repurchase Agreements |
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The Company engages in dollar repurchase agreements with mortgage-backed securities ("dollar rolls") and repurchase agreements with other collateral types to increase its return on investments and improve liquidity. Such arrangements meet the requirements to be accounted for as financing arrangements. The Company also enters into reverse repurchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. As of March 31, 2014 and December 31, 2013, the Company did not have any securities pledged in dollar rolls, repurchase agreement transactions or reverse repurchase agreements. |
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Securities Lending |
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The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned securities. For certain transactions, a lending agent may be used and the agent may retain some or all of the collateral deposited by the borrower and transfer the remaining collateral to the Company. Collateral retained by the agent is invested in liquid assets on behalf of the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. As of March 31, 2014 and December 31, 2013, the fair value of loaned securities was $449.4 and $435.4, respectively, and is included in Securities pledged on the Condensed Consolidated Balance Sheets. As of March 31, 2014 and December 31, 2013, collateral retained by the lending agent and invested in liquid assets on the Company's behalf was $466.3 and $451.0, respectively, and recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Consolidated Balance Sheets. As of March 31, 2014 and December 31, 2013, liabilities to return collateral of $466.3 and $451.0, respectively, were included in Payables under securities loan agreements, including collateral held on the Condensed Consolidated Balance Sheets. |
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Unrealized Capital Losses |
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Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of March 31, 2014: |
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| Six Months or Less | | More Than Six | | More Than Twelve | | Total |
Below Amortized Cost | Months and Twelve Months or Less | Months Below |
| Below Amortized Cost | Amortized Cost |
| Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses |
U.S. Treasuries | $ | 1,315.70 | | | $ | 7.9 | | | $ | 927.9 | | | $ | 29.4 | | | $ | 45.1 | | | $ | 6.8 | | | $ | 2,288.70 | | | $ | 44.1 | |
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U.S. Government agencies and authorities | 6.8 | | | — | | * | 57.5 | | | 0.2 | | | — | | | — | | | 64.3 | | | 0.2 | |
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U.S. corporate, state and municipalities | 1,316.40 | | | 14.2 | | | 5,743.40 | | | 247.1 | | | 1,112.80 | | | 100.7 | | | 8,172.60 | | | 362 | |
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Foreign | 345.1 | | | 2.4 | | | 1,842.90 | | | 84.5 | | | 295.9 | | | 25.9 | | | 2,483.90 | | | 112.8 | |
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Residential mortgage-backed | 427.1 | | | 2.7 | | | 950.4 | | | 27.1 | | | 392.2 | | | 23 | | | 1,769.70 | | | 52.8 | |
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Commercial mortgage-backed | 28.6 | | | 0.6 | | | — | | | — | | | — | | | — | | | 28.6 | | | 0.6 | |
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Other asset-backed | 146.7 | | | 0.7 | | | 45.9 | | | 0.4 | | | 288.1 | | | 30.3 | | | 480.7 | | | 31.4 | |
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Total | $ | 3,586.40 | | | $ | 28.5 | | | $ | 9,568.00 | | | $ | 388.7 | | | $ | 2,134.10 | | | $ | 186.7 | | | $ | 15,288.50 | | | $ | 603.9 | |
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* Less than $0.1 |
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Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2013: |
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| Six Months or Less | | More Than Six | | More Than Twelve | | Total |
Below Amortized Cost | Months and Twelve Months or Less | Months Below |
| Below Amortized Cost | Amortized Cost |
| Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses | | Fair Value | | Unrealized Capital Losses |
U.S. Treasuries | $ | 1,559.50 | | | $ | 24.3 | | | $ | 1,087.60 | | | $ | 52.6 | | | $ | 41.9 | | | $ | 9.9 | | | $ | 2,689.00 | | | $ | 86.8 | |
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U.S. Government agencies and authorities | 9.5 | | | — | | * | 55.9 | | | 1.4 | | | — | | | — | | | 65.4 | | | 1.4 | |
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U.S. corporate, state and municipalities | 3,524.90 | | | 78.5 | | | 6,893.90 | | | 519.6 | | | 821.9 | | | 109.6 | | | 11,240.70 | | | 707.7 | |
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Foreign | 1,133.60 | | | 16 | | | 2,447.80 | | | 184.3 | | | 179.1 | | | 18.4 | | | 3,760.50 | | | 218.7 | |
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Residential mortgage-backed | 919.1 | | | 8.3 | | | 1,019.60 | | | 40.6 | | | 377.9 | | | 31.5 | | | 2,316.60 | | | 80.4 | |
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Commercial mortgage-backed | 235.8 | | | 3.3 | | | — | | | — | | | 6.2 | | | 0.2 | | | 242 | | | 3.5 | |
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Other asset-backed | 150.6 | | | 0.9 | | | 105.5 | | | 1.5 | | | 299.3 | | | 35.6 | | | 555.4 | | | 38 | |
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Total | $ | 7,533.00 | | | $ | 131.3 | | | $ | 11,610.30 | | | $ | 800 | | | $ | 1,726.30 | | | $ | 205.2 | | | $ | 20,869.60 | | | $ | 1,136.50 | |
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* Less than $0.1 |
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Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 92.0% and 89.4% of the average book value as of March 31, 2014 and December 31, 2013, respectively. |
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Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive months as indicated in the tables below, were as follows as of the dates indicated: |
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| Amortized Cost | | Unrealized Capital Losses | | Number of Securities | | | | | | | | | | |
| < 20% | | > 20% | | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | |
Six months or less below amortized cost | $ | 3,892.30 | | | $ | 35.4 | | | $ | 69.1 | | | $ | 8.5 | | | 322 | | | 9 | | | | | | | | | | | |
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More than six months and twelve months or less below amortized cost | 9,935.50 | | | 12.9 | | | 381.6 | | | 4.1 | | | 622 | | | 5 | | | | | | | | | | | |
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More than twelve months below amortized cost | 2,004.70 | | | 11.6 | | | 136.9 | | | 3.7 | | | 338 | | | 15 | | | | | | | | | | | |
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Total | $ | 15,832.50 | | | $ | 59.9 | | | $ | 587.6 | | | $ | 16.3 | | | 1,282 | | | 29 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | |
Six months or less below amortized cost | $ | 7,883.30 | | | $ | 80.5 | | | $ | 166 | | | $ | 18.6 | | | 570 | | | 20 | | | | | | | | | | | |
| | | | | | | | | |
More than six months and twelve months or less below amortized cost | 12,339.70 | | | 67.6 | | | 776.8 | | | 16.7 | | | 798 | | | 8 | | | | | | | | | | | |
| | | | | | | | | |
More than twelve months below amortized cost | 1,579.20 | | | 55.8 | | | 144.5 | | | 13.9 | | | 302 | | | 22 | | | | | | | | | | | |
| | | | | | | | | |
Total | $ | 21,802.20 | | | $ | 203.9 | | | $ | 1,087.30 | | | $ | 49.2 | | | 1,670 | | | 50 | | | | | | | | | | | |
| | | | | | | | | |
Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, by market sector for instances in which fair value declined below amortized cost by greater than or less than 20% were as follows as of the dates indicated: |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | Number of Securities | | | | | | | | | | |
| < 20% | | > 20% | | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | |
March 31, 2014 | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasuries | $ | 2,332.80 | | | $ | — | | | $ | 44.1 | | | $ | — | | | 28 | | | — | | | | | | | | | | | |
| | | | | | | | | |
U.S. Government agencies and authorities | 64.5 | | | — | | | 0.2 | | | — | | | 3 | | | — | | | | | | | | | | | |
| | | | | | | | | |
U.S. corporate, state and municipalities | 8,506.00 | | | 28.6 | | | 355.1 | | | 6.9 | | | 520 | | | 3 | | | | | | | | | | | |
| | | | | | | | | |
Foreign | 2,593.30 | | | 3.4 | | | 112 | | | 0.8 | | | 210 | | | 1 | | | | | | | | | | | |
| | | | | | | | | |
Residential mortgage-backed | 1,814.60 | | | 7.9 | | | 49 | | | 3.8 | | | 416 | | | 15 | | | | | | | | | | | |
| | | | | | | | | |
Commercial mortgage-backed | 29.2 | | | — | | * | 0.6 | | | — | | * | 8 | | | 1 | | | | | | | | | | | |
| | | | | | | | | |
Other asset-backed | 492.1 | | | 20 | | | 26.6 | | | 4.8 | | | 97 | | | 9 | | | | | | | | | | | |
| | | | | | | | | |
Total | $ | 15,832.50 | | | $ | 59.9 | | | $ | 587.6 | | | $ | 16.3 | | | 1,282 | | | 29 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasuries | $ | 2,750.50 | | | $ | 25.3 | | | $ | 81.4 | | | $ | 5.4 | | | 32 | | | 1 | | | | | | | | | | | |
| | | | | | | | | |
U.S. Government agencies and authorities | 66.8 | | | — | | | 1.4 | | | — | | | 3 | | | — | | | | | | | | | | | |
| | | | | | | | | |
U.S. corporate, state and municipalities | 11,892.60 | | | 55.8 | | | 694.2 | | | 13.5 | | | 744 | | | 5 | | | | | | | | | | | |
| | | | | | | | | |
Foreign | 3,944.20 | | | 35 | | | 211 | | | 7.7 | | | 300 | | | 6 | | | | | | | | | | | |
| | | | | | | | | |
Residential mortgage-backed | 2,361.40 | | | 35.6 | | | 70.2 | | | 10.2 | | | 471 | | | 25 | | | | | | | | | | | |
| | | | | | | | | |
Commercial mortgage-backed | 245.5 | | | — | | | 3.5 | | | — | | | 16 | | | — | | | | | | | | | | | |
| | | | | | | | | |
Other asset-backed | 541.2 | | | 52.2 | | | 25.6 | | | 12.4 | | | 104 | | | 13 | | | | | | | | | | | |
| | | | | | | | | |
Total | $ | 21,802.20 | | | $ | 203.9 | | | $ | 1,087.30 | | | $ | 49.2 | | | 1,670 | | | 50 | | | | | | | | | | | |
| | | | | | | | | |
* Less than $0.1. |
|
|
The following tables summarize loan-to-value, credit enhancement and fixed floating rate details for residential mortgage-backed securities ("RMBS") and Other ABS in a gross unrealized loss position as of the dates indicated: |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan-to-Value Ratio | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
March 31, 2014 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
RMBS and Other ABS(1) | | | | | | | | | | | | | | | | | | | | | | | |
Non-agency RMBS > 100% | $ | 38.9 | | | $ | 2.6 | | | $ | 4.2 | | | $ | 0.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 90% - 100% | 80.5 | | | 7.1 | | | 5.1 | | | 1.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 80% - 90% | 99.9 | | | 4.8 | | | 9.1 | | | 1.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS < 80% | 281 | | | 6.8 | | | 15.7 | | | 2.1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Agency RMBS | 1,605.80 | | | 4.5 | | | 39.3 | | | 2.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other ABS (Non-RMBS) | 200.6 | | | 2.1 | | | 2.2 | | | 0.5 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total RMBS and Other ABS | $ | 2,306.70 | | | $ | 27.9 | | | $ | 75.6 | | | $ | 8.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Credit Enhancement Percentage | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
March 31, 2014 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
RMBS and Other ABS(1) | | | | | | | | | | | | | | | | | | | | | | | |
Non-agency RMBS 10% + | $ | 387.3 | | | $ | 17.9 | | | $ | 27.8 | | | $ | 4.4 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 5% - 10% | 20.6 | | | — | | | 0.7 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 0% - 5% | 34.1 | | | — | | | 1 | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 0% | 58.3 | | | 3.4 | | | 4.6 | | | 1.1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Agency RMBS | 1,605.80 | | | 4.5 | | | 39.3 | | | 2.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other ABS (Non-RMBS) | 200.6 | | | 2.1 | | | 2.2 | | | 0.5 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total RMBS and Other ABS | $ | 2,306.70 | | | $ | 27.9 | | | $ | 75.6 | | | $ | 8.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fixed Rate/Floating Rate | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
March 31, 2014 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
Fixed Rate | $ | 1,317.30 | | | $ | 4.2 | | | $ | 36.3 | | | $ | 1.4 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Floating Rate | 989.4 | | | 23.7 | | | 39.3 | | | 7.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | $ | 2,306.70 | | | $ | 27.9 | | | $ | 75.6 | | | $ | 8.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) For purposes of this table, subprime mortgages are included in Non-agency RMBS categories. |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan-to-Value Ratio | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
December 31, 2013 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
RMBS and Other ABS(1) | | | | | | | | | | | | | | | | | | | | | | | |
Non-agency RMBS > 100% | $ | 75.7 | | | $ | 36.4 | | | $ | 2.9 | | | $ | 8.3 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 90% - 100% | 156.8 | | | 24.1 | | | 8.6 | | | 5.7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 80% - 90% | 151.3 | | | 5.9 | | | 8.4 | | | 1.7 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS < 80% | 284.7 | | | 8 | | | 15.5 | | | 2.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Agency RMBS | 2,008.90 | | | 11.3 | | | 57.9 | | | 4.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other ABS (Non-RMBS) | 225.2 | | | 2.1 | | | 2.5 | | | 0.5 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total RMBS and Other ABS | $ | 2,902.60 | | | $ | 87.8 | | | $ | 95.8 | | | $ | 22.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Credit Enhancement Percentage | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
December 31, 2013 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
RMBS and Other ABS(1) | | | | | | | | | | | | | | | | | | | |
Non-agency RMBS 10% + | $ | 407.1 | | | $ | 47.7 | | | $ | 27.6 | | | $ | 11.1 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 5% - 10% | 43.9 | | | 0.8 | | | 1.2 | | | 0.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 0% - 5% | 90.4 | | | 3.9 | | | 1.9 | | | 0.8 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-agency RMBS 0% | 127.1 | | | 22 | | | 4.7 | | | 5.8 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Agency RMBS | 2,008.90 | | | 11.3 | | | 57.9 | | | 4.2 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other ABS (Non-RMBS) | 225.2 | | | 2.1 | | | 2.5 | | | 0.5 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total RMBS and Other ABS | $ | 2,902.60 | | | $ | 87.8 | | | $ | 95.8 | | | $ | 22.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fixed Rate/Floating Rate | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Capital Losses | | | | | | | | | | | | | | | | |
December 31, 2013 | < 20% | | > 20% | | < 20% | | > 20% | | | | | | | | | | | | | | | | |
Fixed Rate | $ | 1,723.70 | | | $ | 4.4 | | | $ | 50.5 | | | $ | 1.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Floating Rate | 1,178.90 | | | 83.4 | | | 45.3 | | | 21 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total | $ | 2,902.60 | | | $ | 87.8 | | | $ | 95.8 | | | $ | 22.6 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) For purposes of this table, subprime mortgages are included in Non-agency RMBS categories. |
|
All investments with fair values less than amortized cost are included in the Company's other-than-temporary impairments analysis, and impairments were recognized as disclosed in the "Evaluating Securities for Other-Than-Temporary Impairments" section below. The Company evaluates non-agency RMBS and ABS for "other-than-temporary impairments" each quarter based on actual and projected cash flows after considering the quality and updated loan-to-value ratios reflecting current home prices of underlying collateral, forecasted loss severity, the payment priority within the tranche structure of the security and amount of any credit enhancements. The Company's assessment of current levels of cash flows compared to estimated cash flows at the time the securities were acquired indicates the amount and the pace of projected cash flows from the underlying collateral has generally been lower and slower, respectively. However, since cash flows are typically projected at a trust level, the impairment review incorporates the security's position within the trust structure as well as credit enhancement remaining in the trust to determine whether an impairment is warranted. Therefore, while lower and slower cash flows will impact the trust, the effect on a particular security within the trust will be dependent upon the trust structure. Where the assessment continues to project full recovery of principal and interest on schedule, the Company has not recorded an impairment. Unrealized losses on below investment grade securities are principally related to RMBS (primarily Alt-A RMBS), and ABS (primarily subprime RMBS) largely due to economic and market uncertainties including concerns over unemployment levels, lower interest rate environment on floating rate securities requiring higher risk premiums since purchase and valuations on residential real estate supporting non-agency RMBS. Based on this analysis, the Company determined that the remaining investments in an unrealized loss position were not other-than-temporarily impaired and therefore no further other-than-temporary impairment was necessary. |
|
Troubled Debt Restructuring |
|
The Company invests in high quality, well performing portfolios of commercial mortgage loans and private placements. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. A valuation allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. As of March 31, 2014, the Company had no new troubled debt restructurings for private placement or commercial mortgage loans. As of December 31, 2013, the Company had no new private placement troubled debt restructurings and had 21 new commercial mortgage loan troubled debt restructurings with a pre-modification and post modification carrying value of $91.0. Of these 21 commercial mortgage loans, 20 comprise a portfolio of cross-defaulted, cross-collateralized individual loans, which are owned by the same sponsor. Between the date of the troubled debt restructurings and March 31, 2014, these loans have repaid $4.2 in principal. |
|
As of March 31, 2014 and December 31, 2013, the Company did not have any commercial mortgage loans or private placements modified in a troubled debt restructuring with a subsequent payment default. |
|
Mortgage Loans on Real Estate |
|
The Company's mortgage loans on real estate are all commercial mortgage loans held for investment, which are reported at amortized cost, less impairment write-downs and allowance for losses. The Company diversifies its commercial mortgage loan portfolio by geographic region and property type to reduce concentration risk. The Company manages risk when originating commercial mortgage loans by generally lending only up to 75% of the estimated fair value of the underlying real estate. Subsequently, the Company continuously evaluates all mortgage loans based on relevant current information including a review of loan-specific credit quality, property characteristics and market trends. Loan performance is monitored on a loan specific basis through the review of submitted appraisals, operating statements, rent revenues and annual inspection reports, among other items. This review ensures properties are performing at a consistent and acceptable level to secure the debt. The components to evaluate debt service coverage are received and reviewed at least annually to determine the level of risk. |
|
The following table summarizes the Company's investment in mortgage loans as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial mortgage loans | $ | 9,261.50 | | | $ | 9,316.00 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Collective valuation allowance | (3.4 | ) | | (3.8 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Total net commercial mortgage loans | $ | 9,258.10 | | | $ | 9,312.20 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
There were no impairments taken on the mortgage loan portfolio for the three months ended March 31, 2014 and 2013. |
|
The following table summarizes the activity in the allowance for losses for all commercial mortgage loans for the periods indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Collective valuation allowance for losses, balance at January 1 | $ | 3.8 | | | $ | 3.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Addition to (reduction of) allowance for losses | (0.4 | ) | | (0.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Collective valuation allowance for losses, end of period | $ | 3.4 | | | $ | 3.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
The carrying values and unpaid principal balances of impaired mortgage loans were as follows as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans with allowances for losses | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans without allowances for losses | 94.2 | | | 94.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Subtotal | 94.2 | | | 94.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Less: Allowances for losses on impaired loans | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans, net | $ | 94.2 | | | $ | 94.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Unpaid principal balance of impaired loans | $ | 96.6 | | | $ | 96.7 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
The following table presents information on impaired loans, restructured loans, loans 90 days or more past due and loans in foreclosure as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Troubled debt restructured loans | $ | 86.6 | | | $ | 86.6 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Loans 90 days or more past due, interest no longer accruing, at amortized cost | — | | | 5.1 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Loans in foreclosure, at amortized cost | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Unpaid principal balance of loans 90 days or more past due, interest no longer accruing | — | | | 5.1 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
The Company defines delinquent mortgage loans consistent with industry practice as 60 days past due. The Company's policy is to recognize interest income until a loan becomes 90 days delinquent or foreclosure proceedings are commenced, at which point interest accrual is discontinued. Interest accrual is not resumed until the loan is brought current. |
|
The following table presents the aging of past due mortgage loans at carrying value as of the dates indicated: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions) | 30 days or less past due | | 31 to 90 days past due | | 91 to 180 days past due | | 181 days or more past due | | Total | | | | | | | | | | | | |
As of March 31, 2014 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | |
As of December 31, 2013 | — | | | 5.1 | | | — | | | — | | | 5.1 | | | | | | | | | | | | | |
| | | | | | | | | | | |
|
There were no mortgage loans in the Company's portfolio in process of foreclosure as of March 31, 2014 or December 31, 2013. |
|
There were no loans in arrears with respect to principal and interest as of March 31, 2014. There was one loan in arrears with respect to principal and interest as of December 31, 2013 with a total amortized cost of $5.1. |
|
The following table presents information on the average investment during the period in impaired loans and interest income recognized on impaired and troubled debt restructured loans for the periods indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired loans, average investment during the period (amortized cost) (1) | $ | 94.2 | | | $ | 16.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Interest income recognized on impaired loans, on an accrual basis (1) | 1.3 | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Interest income recognized on impaired loans, on a cash basis (1) | 1 | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Interest income recognized on troubled debt restructured loans, on an accrual basis | 1.2 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Includes amounts for Troubled debt restructured loans. |
|
Loan-to-value ("LTV") and debt service coverage ("DSC") ratios are measures commonly used to assess the risk and quality of mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a percentage of the amount of the loan relative to the value of the underlying property. A LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the underlying collateral. The DSC ratio, based upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s net income to its debt service payments. A DSC ratio of less than 1.0 indicates that a property’s operations do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process described above. |
|
The following table presents the LTV ratios as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 (1) | | December 31, 2013(1) | | | | | | | | | | | | | | | | | | | | | | | | |
Loan-to-Value Ratio: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
0% - 50% | $ | 1,604.30 | | | $ | 1,782.60 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
50% - 60% | 2,484.60 | | | 2,390.00 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
60% - 70% | 4,708.80 | | | 4,668.30 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
70% - 80% | 445.1 | | | 455.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
80% and above | 18.7 | | | 19.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial mortgage loans | $ | 9,261.50 | | | $ | 9,316.00 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Balances do not include allowance for mortgage loan credit losses. |
|
The following table presents the DSC ratios as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 (1) | | December 31, 2013(1) | | | | | | | | | | | | | | | | | | | | | | | | |
Debt Service Coverage Ratio: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Greater than 1.5x | $ | 6,333.10 | | | $ | 6,346.50 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
1.25x - 1.5x | 1,515.30 | | | 1,520.90 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
1.0x - 1.25x | 973.2 | | | 980.6 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Less than 1.0x | 439.7 | | | 467.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Commercial mortgage loans secured by land or construction loans | 0.2 | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial mortgage loans | $ | 9,261.50 | | | $ | 9,316.00 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Balances do not include allowance for mortgage loan credit losses. |
|
Properties collateralizing mortgage loans are geographically dispersed throughout the United States, as well as diversified by property type, as reflected in the following tables as of the dates indicated: |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 (1) | | December 31, 2013(1) | | | | | | | | | | | | | | | | | | |
| Gross Carrying Value | | % of | | Gross Carrying Value | | % of | | | | | | | | | | | | | | | | | | |
Total | Total | | | | | | | | | | | | | | | | | | |
Commercial Mortgage Loans by U.S. Region: | | | | | | | | | | | | | | | | | | | | | | | | | |
Pacific | $ | 2,369.20 | | | 25.6 | % | | $ | 2,281.80 | | | 24.5 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
South Atlantic | 1,964.60 | | | 21.2 | % | | 1,936.00 | | | 20.8 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Middle Atlantic | 1,113.20 | | | 12 | % | | 1,112.00 | | | 11.9 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
West South Central | 1,112.70 | | | 12 | % | | 1,122.30 | | | 12 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
East North Central | 1,055.60 | | | 11.4 | % | | 1,037.50 | | | 11.1 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Mountain | 771.7 | | | 8.3 | % | | 790.4 | | | 8.5 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
West North Central | 525.6 | | | 5.7 | % | | 517.2 | | | 5.6 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
East South Central | 198.7 | | | 2.2 | % | | 200.7 | | | 2.2 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
New England | 150.2 | | | 1.6 | % | | 318.1 | | | 3.4 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial mortgage loans | $ | 9,261.50 | | | 100 | % | | $ | 9,316.00 | | | 100 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(1) Balances do not include allowance for mortgage loan credit losses. |
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 (1) | | December 31, 2013(1) | | | | | | | | | | | | | | | | | | |
| Gross Carrying Value | | % of | | Gross Carrying Value | | % of | | | | | | | | | | | | | | | | | | |
Total | Total | | | | | | | | | | | | | | | | | | |
Commercial Mortgage Loans by Property Type: | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | $ | 2,951.00 | | | 31.9 | % | | $ | 2,936.90 | | | 31.5 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Industrial | 2,818.60 | | | 30.4 | % | | 2,848.00 | | | 30.6 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Apartments | 1,348.70 | | | 14.6 | % | | 1,296.10 | | | 13.9 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Office | 1,089.00 | | | 11.7 | % | | 1,242.20 | | | 13.3 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Hotel/Motel | 382.1 | | | 4.1 | % | | 430.6 | | | 4.6 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Mixed Use | 305.8 | | | 3.3 | % | | 184.1 | | | 2 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other | 366.3 | | | 4 | % | | 378.1 | | | 4.1 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total Commercial mortgage loans | $ | 9,261.50 | | | 100 | % | | $ | 9,316.00 | | | 100 | % | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
(1) Balances do not include allowance for mortgage loan credit losses. |
|
The following table sets forth the breakdown of mortgages by year of origination as of the dates indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2014 (1) | | December 31, 2013(1) | | | | | | | | | | | | | | | | | | | | | | | | |
Year of Origination: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | $ | 252.9 | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2013 | 2,187.00 | | | 2,199.80 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2012 | 1,731.50 | | | 1,743.30 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2011 | 1,804.90 | | | 1,835.90 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2010 | 394.4 | | | 409.8 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2009 | 148.9 | | | 149.5 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2008 and prior | 2,741.90 | | | 2,977.70 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Total Commercial mortgage loans | $ | 9,261.50 | | | $ | 9,316.00 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) Balances do not include allowance for mortgage loan credit losses. |
|
Evaluating Securities for Other-Than-Temporary Impairments |
|
The Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities and equity securities in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired. |
|
The following table identifies the Company's credit-related and intent-related impairments included in the Condensed Consolidated Statements of Operations, excluding impairments included in Other comprehensive income (loss) by type for the periods indicated: |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | |
| Impairment | | No. of | | Impairment | | No. of | | | | | | | | | | | | | | | | | | |
Securities | Securities | | | | | | | | | | | | | | | | | | |
U.S. corporate | $ | 0.4 | | | 1 | | | $ | — | | | — | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Residential mortgage-backed | 1.6 | | | 37 | | | 3.6 | | | 74 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Commercial mortgage-backed | 0.2 | | | 2 | | | 0.1 | | | 2 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other asset-backed | 0.1 | | | 2 | | | 7.3 | | | 2 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Equity | 1 | | | 2 | | | — | | | — | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 3.3 | | | 44 | | | $ | 11 | | | 78 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
The above table includes $3.1 and $3.6 of write-downs related to credit impairments for the three months ended March 31, 2014 and 2013, respectively, in Other-than-temporary impairments, which are recognized in the Condensed Consolidated Statements of Operations. The remaining $0.2 and $7.4 in write-downs for the three months ended March 31, 2014 and 2013, respectively, are related to intent impairments. |
|
The following tables summarize these intent impairments, which are also recognized in earnings, by type for the periods indicated: |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | |
| Impairment | | No. of | | Impairment | | No. of | | | | | | | | | | | | | | | | | | |
Securities | Securities | | | | | | | | | | | | | | | | | | |
Commercial mortgage-backed | $ | 0.2 | | | 2 | | | $ | 0.1 | | | 2 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other asset-backed | — | | | — | | | 7.3 | | | 2 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 0.2 | | | 2 | | | $ | 7.4 | | | 4 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
The Company may sell securities during the period in which fair value has declined below amortized cost for fixed maturities or cost for equity securities. In certain situations, new factors, including changes in the business environment, can change the Company’s previous intent to continue holding a security. Accordingly, these factors may lead the Company to record additional intent related capital losses. |
|
The following table identifies the amount of credit impairments on fixed maturities for which a portion of the OTTI loss was recognized in Other comprehensive income (loss) and the corresponding changes in such amounts for the periods indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at January 1 | $ | 102.8 | | | $ | 114.7 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Additional credit impairments: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
On securities not previously impaired | 1.1 | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
On securities previously impaired | 1 | | | 3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Reductions: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities intent impaired | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Securities sold, matured, prepaid or paid down | (3.8 | ) | | (5.5 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at March 31 | $ | 101.1 | | | $ | 112.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net Investment Income |
|
The following table summarizes Net investment income for the periods indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturities | $ | 984.8 | | | $ | 1,012.60 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Equity securities, available-for-sale | 3.8 | | | 2.6 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate | 115.3 | | | 118.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Policy loans | 28 | | | 29.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Short-term investments and cash equivalents | 0.8 | | | 0.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Other | 14.1 | | | 35.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Gross investment income | 1,146.80 | | | 1,200.10 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Less: investment expenses | 1.2 | | | 1.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | $ | 1,145.60 | | | $ | 1,198.70 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Interest income on fixed maturities is recorded when earned using an effective yield method, giving effect to amortization of premiums and accretion of discounts. Such interest income is recorded in Net investment income in the Condensed Consolidated Statements of Operations. |
|
Net Realized Capital Gains (Losses) |
|
Net realized capital gains (losses) are comprised of the difference between the amortized cost of investments and proceeds from sale and redemption, as well as losses incurred due to the credit-related and intent-related other-than-temporary impairment of investments. Realized investment gains and losses are also primarily generated from changes in fair value of embedded derivatives within product guarantees and fixed maturities, changes in fair value of fixed maturities recorded at FVO and changes in fair value including accruals on derivative instruments, except for effective cash flow hedges. The cost of the investments on disposal is generally determined based on first-in-first-out ("FIFO") methodology. |
|
Net realized capital gains (losses) were as follows for the periods indicated: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturities, available-for-sale, including securities pledged | $ | 13.7 | | | $ | 9.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturities, at fair value option | (18.9 | ) | | (107.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Equity securities, available-for-sale | 17.1 | | | 0.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Derivatives | 53.8 | | | (1,099.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivative - fixed maturities | (3.3 | ) | | (23.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
Embedded derivative - product guarantees | (255.1 | ) | | 346.3 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Other investments | 2.1 | | | (0.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net realized capital gains (losses) | $ | (190.6 | ) | | $ | (874.8 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
After-tax net realized capital gains (losses) | $ | (118.3 | ) | | $ | (568.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
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Proceeds from the sale of fixed maturities and equity securities, available-for-sale and the related gross realized gains and losses, before tax, were as follows for the periods indicated: |
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| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Proceeds on sales | $ | 1,494.90 | | | $ | 3,212.70 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Gross gains | 39.7 | | | 42 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Gross losses | 19.8 | | | 14.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
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