##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 001-33808
 SYMETRA FINANCIAL CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-0978027(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 777 108th Avenue NE, Suite 1200
Bellevue, Washington 98004  (Address of principal executive offices, including zip code)
 (425) 256-8000  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1: Financial Statements:Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Stockholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Condensed Notes to Consolidated Financial Statements
    
    
    7Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3: Quantitative and Qualitative Disclosures about Market Risk
    
    
    60Item 4: Controls and Procedures
    
    
    61PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    62Item 1A: Risk Factors
    
    
    62Item 6: Exhibits
    
    
    62Signatures
    
    
    63EX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-32.1EX-32.2
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Forward-Looking Statements
  
    
    estimates or projections of revenues, net income, net income per share, adjusted
operating income, adjusted operating income per share, market share or other financial
forecasts;
    
    trends in operations, financial performance and financial condition;
    
    financial and operating targets or plans; and
    
    business and growth strategy.
  
    
    general economic, market or business conditions, including further economic downturns
or other adverse conditions in the global and domestic capital and credit markets;
    
    the availability of capital and financing;
    
    potential investment losses;
    
    the effects of fluctuations in interest rates and a prolonged low interest rate environment;
    
    recorded reserves for future policy benefits and claims subsequently proving to be inadequate or inaccurate;
    
    deviations from assumptions used in setting prices for insurance and annuity products;
    
    market pricing and competitive trends related to insurance products and services;
    
    changes in amortization of deferred policy acquisition costs;
    
    financial strength or credit ratings downgrades;
    
    the continued availability and cost of reinsurance coverage;
    
    changes in laws or regulations, or their interpretation, including those that could
increase Symetras business costs and required capital levels;
    
    the ability of subsidiaries to pay dividends to Symetra;
    
    the effects of implementation of the Patient Protection and Affordable Care Act;
    
    the effects of implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
    
    the risks that are described in Part II, Item 1A  Risk Factors in this report; in
Part I, Item 1A  Risk Factors in our Annual Report on Form 10-K for the year ended
December 31, 2009; and Item 1A  Risk Factors in Part II of our Form 10-Q for the
quarters ended March 31, and June 30, 2010.
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PART I  Financial Information
 
 Item 1. Financial Statements
 
 CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
 As of
    
    
    As ofSeptember 30, 2010
    
    
    December 31, 2009(Unaudited)ASSETSInvestments:Available-for-sale securities:Fixed maturities, at fair value (cost: $19,896.4and $18,553.7, respectively)
    
    $
    21,450.1
    
    
    $
    18,594.3Marketable equity securities, at fair value (cost: $52.5and $52.6, respectively)
    
    
    45.4
    
    
    
    36.7Trading securities:Marketable equity securities, at fair value (cost: $159.0and $165.9, respectively)
    
    
    158.8
    
    
    
    154.1Mortgage loans, net
    
    
    1,493.4
    
    
    
    1,199.6Policy loans
    
    
    71.7
    
    
    
    73.9Investments in limited partnerships (includes $38.5and $24.7 measured at fair value,
respectively)
    
    
    169.1
    
    
    
    110.2Other invested assets
    
    
    12.0
    
    
    
    12.2Total investments
    
    
    23,400.5
    
    
    
    20,181.0Cash and cash equivalents
    
    
    197.2
    
    
    
    257.8Accrued investment income
    
    
    257.5
    
    
    
    237.2Accounts receivable and other receivables
    
    
    89.0
    
    
    
    70.1Reinsurance recoverables
    
    
    284.8
    
    
    
    276.6Deferred policy acquisition costs
    
    
    160.9
    
    
    
    250.4Goodwill
    
    
    27.8
    
    
    
    26.3Current income taxes recoverable
    
    
    
    
    
    
    20.2Deferred income tax assets, net
    
    
    
    
    
    
    191.2Other assets
    
    
    58.4
    
    
    
    84.5Separate account assets
    
    
    826.2
    
    
    
    840.1Total assets
    
    $
    25,302.3
    
    
    $
    22,435.4LIABILITIES AND STOCKHOLDERS EQUITYFunds held under deposit contracts
    
    $
    20,107.9
    
    
    $
    18,816.7Future policy benefits
    
    
    397.6
    
    
    
    394.9Policy and contract claims
    
    
    126.1
    
    
    
    125.6Unearned premiums
    
    
    12.8
    
    
    
    12.1Other policyholders funds
    
    
    109.1
    
    
    
    113.8Notes payable
    
    
    449.0
    
    
    
    448.9Deferred income tax liabilities, net
    
    
    291.1
    
    
    
    Other liabilities
    
    
    271.2
    
    
    
    250.0Separate account liabilities
    
    
    826.2
    
    
    
    840.1Total liabilities
    
    
    22,591.0
    
    
    
    21,002.1Commitments and contingencies (Note 10)Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.01 par value; 750,000,000 shares authorized; 118,171,213issued and
outstanding as of September 30, 2010; 92,729,455 issued and outstanding as of December
31, 2009
    
    
    1.2
    
    
    
    0.9Additional paid-in capital
    
    
    1,449.3
    
    
    
    1,165.7Retained earnings
    
    
    441.4
    
    
    
    316.4Accumulated other comprehensive income (loss), net of taxes
    
    
    819.4
    
    
    
    (49.7
    )Total stockholders equity
    
    
    2,711.3
    
    
    
    1,433.3Total liabilities and stockholders equity
    
    $
    25,302.3
    
    
    $
    22,435.4
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CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Premiums
    
    $
    120.2
    
    
    $
    116.6
    
    
    $
    354.7
    
    
    $
    352.9Net investment income
    
    
    304.4
    
    
    
    283.6
    
    
    
    888.4
    
    
    
    829.4Policy fees, contract charges, and other
    
    
    40.9
    
    
    
    40.2
    
    
    
    123.2
    
    
    
    120.5Net realized investment gains (losses):Total other-than-temporary impairment losses on securities
    
    
    (9.6
    )
    
    
    (44.1
    )
    
    
    (30.2
    )
    
    
    (167.9
    )Less: portion of losses recognized in other comprehensive
income
    
    
    6.1
    
    
    
    26.7
    
    
    
    15.5
    
    
    
    94.2Net impairment losses recognized in earnings
    
    
    (3.5
    )
    
    
    (17.4
    )
    
    
    (14.7
    )
    
    
    (73.7
    )Other net realized investment gains
    
    
    23.5
    
    
    
    28.7
    
    
    
    31.5
    
    
    
    44.7Total net realized investment gains (losses)
    
    
    20.0
    
    
    
    11.3
    
    
    
    16.8
    
    
    
    (29.0
    )Total revenues
    
    
    485.5
    
    
    
    451.7
    
    
    
    1,383.1
    
    
    
    1,273.8Benefits and expenses:Policyholder benefits and claims
    
    
    85.4
    
    
    
    85.6
    
    
    
    254.9
    
    
    
    262.1Interest credited
    
    
    227.8
    
    
    
    220.5
    
    
    
    667.8
    
    
    
    629.2Other underwriting and operating expenses
    
    
    63.1
    
    
    
    61.7
    
    
    
    186.9
    
    
    
    186.7Interest expense
    
    
    8.0
    
    
    
    7.9
    
    
    
    23.9
    
    
    
    23.8Amortization of deferred policy acquisition costs
    
    
    18.0
    
    
    
    13.8
    
    
    
    50.4
    
    
    
    36.4Total benefits and expenses
    
    
    402.3
    
    
    
    389.5
    
    
    
    1,183.9
    
    
    
    1,138.2Income from operations before income taxes
    
    
    83.2
    
    
    
    62.2
    
    
    
    199.2
    
    
    
    135.6Provision (benefit) for income taxes:Current
    
    
    18.8
    
    
    
    (15.7
    )
    
    
    46.1
    
    
    
    (4.2
    )Deferred
    
    
    7.8
    
    
    
    33.8
    
    
    
    14.4
    
    
    
    43.6Total provision for income taxes
    
    
    26.6
    
    
    
    18.1
    
    
    
    60.5
    
    
    
    39.4Net income
    
    $
    56.6
    
    
    $
    44.1
    
    
    $
    138.7
    
    
    $
    96.2Net income per common share:Basic
    
    $
    0.41
    
    
    $
    0.40
    
    
    $
    1.03
    
    
    $
    0.86Diluted
    
    $
    0.41
    
    
    $
    0.40
    
    
    $
    1.03
    
    
    $
    0.86Weighted-average number of common shares outstanding:Basic
    
    
    137.140
    
    
    
    111.622
    
    
    
    135.082
    
    
    
    111.622Diluted
    
    
    137.145
    
    
    
    111.624
    
    
    
    135.096
    
    
    
    111.623Cash dividends declared per common share
    
    $
    0.05
    
    
    
    
    
    
    $
    0.10
    
    
    
    
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(In millions)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    Treasury
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    Stock,
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    at Cost
    
    
    Income (Loss)
    
    
    EquityBalances as of January 1, 2009
    
    $
    0.9
    
    
    $
    1,165.5
    
    
    $
    172.4
    
    
    $
    
    
    
    $
    (1,052.6
    )
    
    $
    286.2Cumulative effect adjustment  new accounting
guidance (net of taxes: $(8.4))
    
    
    
    
    
    
    
    
    
    
    15.7
    
    
    
    
    
    
    
    (15.7
    )
    
    
    Comprehensive income, net of taxes:Net income
    
    
    
    
    
    
    
    
    
    
    96.2
    
    
    
    
    
    
    
    
    
    
    
    96.2Other comprehensive income (net of taxes: $591.3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,098.1
    
    
    
    1,098.1Total comprehensive income, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,194.3Balances as of September 30, 2009
    
    $
    0.9
    
    
    $
    1,165.5
    
    
    $
    284.3
    
    
    $
    
    
    
    $
    29.8
    
    
    $
    1,480.5Balances as of January 1, 2010
    
    $
    0.9
    
    
    $
    1,165.7
    
    
    $
    316.4
    
    
    $
    
    
    
    $
    (49.7
    )
    
    $
    1,433.3Common stock issued (net of issuance costs: $20.6)
    
    
    0.3
    
    
    
    282.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282.5Comprehensive income, net of taxes:Net income
    
    
    
    
    
    
    
    
    
    
    138.7
    
    
    
    
    
    
    
    
    
    
    
    138.7Other comprehensive income (net of taxes: $467.8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    869.1
    
    
    
    869.1Total comprehensive income, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,007.8Stock-based compensation
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    1.4Retirement of treasury stock
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    (13.7
    )
    
    
    
    
    
    
    
    
    
    
    (13.7
    )Balances as of September 30, 2010
    
    $
    1.2
    
    
    $
    1,449.3
    
    
    $
    441.4
    
    
    $
    
    
    
    $
    819.4
    
    
    $
    2,711.3
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 For the Nine Months EndedSeptember 30,2010
    
    
    2009Cash flows from operating activitiesNet income
    
    $
    138.7
    
    
    $
    96.2Adjustments to reconcile net income to net cash provided by operating activities:Net realized investment (gains) losses
    
    
    (16.8
    )
    
    
    29.0Accretion and amortization of invested assets, net
    
    
    30.0
    
    
    
    15.0Accrued interest on bonds
    
    
    (31.1
    )
    
    
    (25.8
    )Amortization and depreciation
    
    
    16.9
    
    
    
    10.9Deferred income tax provision
    
    
    14.4
    
    
    
    43.6Interest credited on deposit contracts
    
    
    667.8
    
    
    
    629.2Mortality and expense charges and administrative fees
    
    
    (77.0
    )
    
    
    (75.1
    )Changes in:Accrued investment income
    
    
    (20.3
    )
    
    
    (36.7
    )Deferred policy acquisition costs, net
    
    
    (44.0
    )
    
    
    (95.9
    )Other receivables
    
    
    (10.1
    )
    
    
    (5.4
    )Future policy benefits
    
    
    2.7
    
    
    
    2.6Policy and contract claims
    
    
    0.5
    
    
    
    1.5Current income taxes
    
    
    23.1
    
    
    
    (4.0
    )Other assets and liabilities
    
    
    (30.0
    )
    
    
    (9.5
    )Other, net
    
    
    0.4
    
    
    
    (0.2
    )Total adjustments
    
    
    526.5
    
    
    
    479.2Net cash provided by operating activities
    
    
    665.2
    
    
    
    575.4Cash flows from investing activitiesPurchases of:Fixed maturities and marketable equity securities
    
    
    (3,219.8
    )
    
    
    (3,332.4
    )Other invested assets and investments in limited partnerships
    
    
    (34.1
    )
    
    
    (9.1
    )Issuances of mortgage loans
    
    
    (354.5
    )
    
    
    (162.3
    )Issuances of policy loans
    
    
    (12.3
    )
    
    
    (13.6
    )Maturities, calls, paydowns, and other
    
    
    1,345.3
    
    
    
    1,001.5Securities lending collateral returned, net
    
    
    
    
    
    
    72.3Sales of:Fixed maturities and marketable equity securities
    
    
    548.3
    
    
    
    454.1Other invested assets and investments in limited partnerships
    
    
    13.8
    
    
    
    23.0Repayments of mortgage loans
    
    
    56.5
    
    
    
    53.9Repayments of policy loans
    
    
    13.6
    
    
    
    14.1Other, net
    
    
    (1.8
    )
    
    
    3.0Net cash used in investing activities
    
    
    (1,645.0
    )
    
    
    (1,895.5
    )Cash flows from financing activitiesPolicyholder account balances:Deposits
    
    
    1,674.0
    
    
    
    2,187.7Withdrawals
    
    
    (1,005.7
    )
    
    
    (1,010.1
    )Securities lending collateral paid, net
    
    
    
    
    
    
    (72.3
    )Proceeds from issuance of common stock
    
    
    282.5
    
    
    
    Cash dividends paid on common stock
    
    
    (13.7
    )
    
    
    Other, net
    
    
    (17.9
    )
    
    
    (11.5
    )Net cash provided by financing activities
    
    
    919.2
    
    
    
    1,093.8Net decrease in cash and cash equivalents
    
    
    (60.6
    )
    
    
    (226.3
    )Cash and cash equivalents at beginning of period
    
    
    257.8
    
    
    
    468.0Cash and cash equivalents at end of period
    
    $
    197.2
    
    
    $
    241.7Supplemental disclosures of cash flow informationNon-cash transactions during the period:Investments in limited partnerships and capital obligations incurred
    
    $
    38.7
    
    
    $
    10.0Bond exchanges
    
    
    76.5
    
    
    
    147.7
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 1. Description of Business
   2. Summary of Significant Accounting Policies
 Basis of Presentation and Use of Estimates
     Adoption of New Accounting Pronouncements
 ASC 810-10 (formerly SFAS No. 167), Amendments to FASB Interpretation No. 46(R)
 Amendments to FASB Interpretation No.
46(R)
 7




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
   ASU 2010-6, Improving Disclosures about Fair Value Measurement
 Fair Value Measurements and Disclosures (Topic
820)  Improving Disclosures about Fair Value Measurement
 Accounting Pronouncements Not Yet Adopted
 ASU 2010-15, How Investments Held through Separate Accounts Affect an Insurers Consolidation Analysis of Those Investments
 Financial Services  Insurance (Topic 944)  How
Investments Held through Separate Accounts Affect an Insurers Consolidation Analysis of Those
Investments
 ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
 Receivables (Topic 310)  Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses
 ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
 Financial Services  Insurance (Topic 944) 
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
 3. Earnings Per Share
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
     For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income, as reported
    
    $
    56.6
    
    
    $
    44.1
    
    
    $
    138.7
    
    
    $
    96.2Denominator:Weighted-average common shares outstanding  basic
    
    
    137.140
    
    
    
    111.622
    
    
    
    135.082
    
    
    
    111.622Add: Dilutive effect of restricted stock
    
    
    0.005
    
    
    
    0.002
    
    
    
    0.014
    
    
    
    0.001Weighted-average common shares outstanding  diluted
    
    
    137.145
    
    
    
    111.624
    
    
    
    135.096
    
    
    
    111.623Net income per common share:Basic
    
    $
    0.41
    
    
    $
    0.40
    
    
    $
    1.03
    
    
    $
    0.86Diluted
    
    $
    0.41
    
    
    $
    0.40
    
    
    $
    1.03
    
    
    $
    0.86
 4. Investments
  Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI inCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    AOCIAs of September 30, 2010Fixed maturities:U.S. government and agencies
    
    $
    87.6
    
    
    $
    8.4
    
    
    $
    
    
    
    $
    96.0
    
    
    $
    (0.1
    )State and political subdivisions
    
    
    468.8
    
    
    
    12.1
    
    
    
    (7.6
    )
    
    
    473.3
    
    
    
    (0.2
    )Corporate securities
    
    
    13,576.7
    
    
    
    1,331.0
    
    
    
    (128.4
    )
    
    
    14,779.3
    
    
    
    (25.2
    )Residential mortgage-backed securities
    
    
    3,667.7
    
    
    
    214.9
    
    
    
    (42.6
    )
    
    
    3,840.0
    
    
    
    (39.1
    )Commercial mortgage-backed securities
    
    
    1,766.9
    
    
    
    152.3
    
    
    
    (8.2
    )
    
    
    1,911.0
    
    
    
    (3.6
    )Other debt obligations
    
    
    328.7
    
    
    
    29.7
    
    
    
    (7.9
    )
    
    
    350.5
    
    
    
    (8.5
    )Total fixed maturities
    
    
    19,896.4
    
    
    
    1,748.4
    
    
    
    (194.7
    )
    
    
    21,450.1
    
    
    
    (76.7
    )Marketable equity securities, available-for-sale
    
    
    52.5
    
    
    
    1.1
    
    
    
    (8.2
    )
    
    
    45.4
    
    
    
    Total
    
    $
    19,948.9
    
    
    $
    1,749.5
    
    
    $
    (202.9
    )
    
    $
    21,495.5
    
    
    $
    (76.7
    )
 9




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI inCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    AOCIAs of December 31, 2009Fixed maturities:U.S. government and agencies
    
    $
    41.6
    
    
    $
    2.4
    
    
    $
    (0.1
    )
    
    $
    43.9
    
    
    $
    (0.1
    )State and political subdivisions
    
    
    518.4
    
    
    
    1.9
    
    
    
    (37.3
    )
    
    
    483.0
    
    
    
    (1.3
    )Corporate securities
    
    
    12,300.2
    
    
    
    483.8
    
    
    
    (384.0
    )
    
    
    12,400.0
    
    
    
    (32.3
    )Residential mortgage-backed securities
    
    
    3,532.1
    
    
    
    105.3
    
    
    
    (101.0
    )
    
    
    3,536.4
    
    
    
    (39.9
    )Commercial mortgage-backed securities
    
    
    1,805.6
    
    
    
    44.5
    
    
    
    (60.7
    )
    
    
    1,789.4
    
    
    
    (4.0
    )Other debt obligations
    
    
    355.8
    
    
    
    13.1
    
    
    
    (27.3
    )
    
    
    341.6
    
    
    
    (4.3
    )Total fixed maturities
    
    
    18,553.7
    
    
    
    651.0
    
    
    
    (610.4
    )
    
    
    18,594.3
    
    
    
    (81.9
    )Marketable equity securities, available-for-sale
    
    
    52.6
    
    
    
    0.1
    
    
    
    (16.0
    )
    
    
    36.7
    
    
    
    Total
    
    $
    18,606.3
    
    
    $
    651.1
    
    
    $
    (626.4
    )
    
    $
    18,631.0
    
    
    $
    (81.9
    )
  Less Than 12 Months
    
    
    12 Months or MoreGross
    
    
    
    
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    # of
    
    
    Fair
    
    
    Unrealized
    
    
    # ofValue
    
    
    Losses
    
    
    Securities
    
    
    Value
    
    
    Losses
    
    
    SecuritiesAs of September 30, 2010Fixed maturities:State and political subdivisions
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    180.5
    
    
    $
    (7.6
    )
    
    
    26Corporate securities
    
    
    343.0
    
    
    
    (26.1
    )
    
    
    63
    
    
    
    1,083.2
    
    
    
    (102.3
    )
    
    
    123Residential mortgage-backed securities
    
    
    27.1
    
    
    
    (0.2
    )
    
    
    8
    
    
    
    319.5
    
    
    
    (42.4
    )
    
    
    47Commercial mortgage-backed securities
    
    
    21.8
    
    
    
    (0.4
    )
    
    
    7
    
    
    
    70.9
    
    
    
    (7.8
    )
    
    
    19Other debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50.8
    
    
    
    (7.9
    )
    
    
    9Total fixed maturities
    
    $
    391.9
    
    
    $
    (26.7
    )
    
    
    78
    
    
    $
    1,704.9
    
    
    $
    (168.0
    )
    
    
    224Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.6
    
    
    
    (8.2
    )
    
    
    3Total
    
    $
    391.9
    
    
    $
    (26.7
    )
    
    
    78
    
    
    $
    1,728.5
    
    
    $
    (176.2
    )
    
    
    227
 Less Than 12 Months
    
    
    12 Months or MoreGross
    
    
    
    
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    # of
    
    
    Fair
    
    
    Unrealized
    
    
    # ofValue
    
    
    Losses
    
    
    Securities
    
    
    Value
    
    
    Losses
    
    
    SecuritiesAs of December 31, 2009Fixed maturities:U.S. government and agencies
    
    $
    2.2
    
    
    $
    (0.1
    )
    
    
    1
    
    
    $
    
    
    
    $
    
    
    
    
    State and political subdivisions
    
    
    67.7
    
    
    
    (1.9
    )
    
    
    18
    
    
    
    299.7
    
    
    
    (35.4
    )
    
    
    49Corporate securities
    
    
    1,377.6
    
    
    
    (33.3
    )
    
    
    148
    
    
    
    2,442.6
    
    
    
    (350.8
    )
    
    
    284Residential mortgage-backed securities
    
    
    579.9
    
    
    
    (9.4
    )
    
    
    30
    
    
    
    404.6
    
    
    
    (91.6
    )
    
    
    65Commercial mortgage-backed securities
    
    
    94.9
    
    
    
    (1.4
    )
    
    
    11
    
    
    
    622.8
    
    
    
    (59.3
    )
    
    
    44Other debt obligations
    
    
    37.8
    
    
    
    (0.3
    )
    
    
    6
    
    
    
    89.6
    
    
    
    (26.9
    )
    
    
    15Total fixed maturities
    
    $
    2,160.1
    
    
    $
    (46.4
    )
    
    
    214
    
    
    $
    3,859.3
    
    
    $
    (564.0
    )
    
    
    457Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.3
    
    
    
    (16.0
    )
    
    
    5Total
    
    $
    2,160.1
    
    
    $
    (46.4
    )
    
    
    214
    
    
    $
    3,895.6
    
    
    $
    (580.0
    )
    
    
    462
  10




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  Amortized
    
    
    FairCost
    
    
    ValueOne year or less
    
    $
    718.7
    
    
    $
    730.1Over one year through five years
    
    
    3,189.3
    
    
    
    3,441.5Over five years through ten years
    
    
    5,163.1
    
    
    
    5,755.8Over ten years
    
    
    5,121.0
    
    
    
    5,484.8Residential mortgage-backed securities
    
    
    3,667.7
    
    
    
    3,840.0Commercial mortgage-backed securities
    
    
    1,766.9
    
    
    
    1,911.0Other asset-backed securities
    
    
    269.7
    
    
    
    286.9Total fixed maturities
    
    $
    19,896.4
    
    
    $
    21,450.1
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturities
    
    $
    282.0
    
    
    $
    267.0
    
    
    $
    833.4
    
    
    $
    781.4Marketable equity securities, available-for-sale
    
    
    0.6
    
    
    
    0.6
    
    
    
    2.3
    
    
    
    2.3Marketable equity securities, trading
    
    
    0.7
    
    
    
    0.7
    
    
    
    2.2
    
    
    
    1.9Mortgage loans
    
    
    23.2
    
    
    
    17.2
    
    
    
    62.9
    
    
    
    49.3Policy loans
    
    
    1.1
    
    
    
    1.1
    
    
    
    3.3
    
    
    
    3.3Investments in limited partnerships
    
    
    (0.3
    )
    
    
    (0.9
    )
    
    
    (4.1
    )
    
    
    1.7Other
    
    
    1.8
    
    
    
    2.8
    
    
    
    3.6
    
    
    
    4.0Total investment income
    
    
    309.1
    
    
    
    288.5
    
    
    
    903.6
    
    
    
    843.9Investment expenses
    
    
    (4.7
    )
    
    
    (4.9
    )
    
    
    (15.2
    )
    
    
    (14.5
    )Net investment income
    
    $
    304.4
    
    
    $
    283.6
    
    
    $
    888.4
    
    
    $
    829.4
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturities:Gross gains on sales
    
    $
    6.6
    
    
    $
    10.7
    
    
    $
    24.0
    
    
    $
    17.0Gross losses on sales
    
    
    (2.1
    )
    
    
    (12.7
    )
    
    
    (3.4
    )
    
    
    (14.9
    )Other-than-temporary impairments
    
    
    (3.5
    )
    
    
    (17.4
    )
    
    
    (14.7
    )
    
    
    (73.7
    )Other(1)
    
    
    5.1
    
    
    
    7.6
    
    
    
    7.3
    
    
    
    6.9Total fixed maturities
    
    
    6.1
    
    
    
    (11.8
    )
    
    
    13.2
    
    
    
    (64.7
    )Marketable equity securities, trading(2)
    
    
    15.2
    
    
    
    21.6
    
    
    
    14.0
    
    
    
    25.9Other invested assets
    
    
    (0.4
    )
    
    
    0.4
    
    
    
    (6.6
    )
    
    
    (1.1
    )Deferred policy acquisition costs adjustment
    
    
    (0.9
    )
    
    
    1.1
    
    
    
    (3.8
    )
    
    
    10.9Net realized investment gains (losses)
    
    $
    20.0
    
    
    $
    11.3
    
    
    $
    16.8
    
    
    $
    (29.0
    )
 
 (1)
    
    This includes gains (losses) on calls and redemptions. Also
included are changes in the fair value of the Companys
convertible securities held as of period end totaling $4.0, $6.3,
$(0.4) and $7.7 for the three and nine months ended September 30,
2010 and 2009, respectively.(2)
    
    This includes $15.8, $21.5, $13.5 and $23.5 of net gains for the
three and nine months ended September 30, 2010 and 2009,
respectively, related to changes in fair value of trading
securities held as of period end. Other-Than-Temporary Impairments
  11






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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  
    
    Extent and duration of the decline in fair value below cost or amortized cost;
    
    The financial condition and near-term prospects of the issuer of the security,
including any specific events that may affect its operations, earnings potential or
compliance with terms and covenants of the security;
    
    Changes in the financial condition of the securitys underlying collateral;
    
    Any downgrades of the security by a rating agency;
    
    Any reduction or elimination of dividends or nonpayment of scheduled interest payments;
    
    Other indications that a credit loss has occurred; and
    
    The Companys intent to sell a fixed maturity or whether it is more likely than not the
Company will be required to sell the fixed maturity prior to recovery of its amortized
cost, considering any regulatory developments and the Companys liquidity needs.
  Determination of Credit Losses on Corporate Securities
  
    
    Fundamentals of the issuer to determine what the Company would recover if the issuer
were to file for bankruptcy, compared to the price at which the market is trading;
    
    Fundamentals of the industry in which the issuer operates;
    
    Earnings multiples for the given industry or sector of the industry that the issuer
operates within, divided by the outstanding debt to determine an expected recovery value of
the security in the case of a liquidation;
    
    Expected cash flows of the issuer;
    
    Expectations regarding defaults and recovery rates;
    
    Changes to the rating of the security by a rating agency; and
    
    Additional market information.
 Determination of Credit Losses on Structured Securities
  
    
    Discounted cash flow analysis based on the current and future cash flows the Company
expects to recover;
 12




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 
    
    Level of creditworthiness;
    
    Delinquency ratios and loan-to-value ratios;
    
    Average cumulative collateral loss, vintage year and level of subordination;
    
    Susceptibility to fair value fluctuations due to changes in the interest rate
environment;
    
    Susceptibility to reinvestment risk in cases where market yields are lower than the
book yield earned;
    
    Susceptibility to reinvestment risk in cases where market yields are higher than the
book yields earned and the Companys expectation of the sale of such security; and
    
    Susceptibility to variability of prepayments.
  As of September 30, 2010
    
    
    As of December 31, 2009Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    LossesFixed maturitiesUnderwater by 20% or more:Less than 6 consecutive months
    
    $
    97.3
    
    
    $
    (29.7
    )
    
    $
    103.4
    
    
    $
    (28.4
    )6 consecutive months or more
    
    
    157.3
    
    
    
    (54.4
    )
    
    
    517.9
    
    
    
    (229.5
    )Total underwater by 20% or more
    
    
    254.6
    
    
    
    (84.1
    )
    
    
    621.3
    
    
    
    (257.9
    )All other underwater fixed maturities
    
    
    1,842.2
    
    
    
    (110.6
    )
    
    
    5,398.1
    
    
    
    (352.5
    )Total underwater fixed maturities
    
    $
    2,096.8
    
    
    $
    (194.7
    )
    
    $
    6,019.4
    
    
    $
    (610.4
    )Marketable equity securities, available-for-saleUnderwater by 20% or more:6 consecutive months or more
    
    $
    1.7
    
    
    $
    (4.4
    )
    
    $
    35.6
    
    
    $
    (15.9
    )All other underwater marketable equity securities, available-for-sale
    
    
    21.9
    
    
    
    (3.8
    )
    
    
    0.7
    
    
    
    (0.1
    )Total underwater marketable equity securities, available-for-sale
    
    $
    23.6
    
    
    $
    (8.2
    )
    
    $
    36.3
    
    
    $
    (16.0
    )
   13




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Balance, beginning of period
    
    $
    68.5
    
    
    $
    74.4
    
    
    $
    69.6
    
    
    $
    73.0Increases recognized in the current period:For which an OTTI was not previously recognized
    
    
    2.1
    
    
    
    14.1
    
    
    
    8.6
    
    
    
    35.4For which an OTTI was previously recognized
    
    
    0.5
    
    
    
    1.5
    
    
    
    2.9
    
    
    
    12.1Decreases attributable to:Securities sold or paid down during the period
    
    
    (3.5
    )
    
    
    (18.7
    )
    
    
    (13.5
    )
    
    
    (26.4
    )Previously recognized credit losses on
securities impaired during the period due to a
change in intent to sell(1)
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (23.1
    )Balance, end of period
    
    $
    67.6
    
    
    $
    71.0
    
    
    $
    67.6
    
    
    $
    71.0
 
 (1)
    
    Represents circumstances where the Company determined in the
current period that it intends to sell the security or it is more
likely than not that it will be required to sell the security
prior to recovery of its amortized cost. 5. Fair Value of Financial Instruments
   
    
    Level 1 Unadjusted quoted prices in active markets for identical instruments. This
level primarily consists of exchange-traded marketable equity securities and actively
traded mutual fund investments.
    
    Level 2 Quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active and model-derived
valuations whose inputs are observable or whose significant value drivers are observable.
This level includes those financial instruments that are valued using industry-standard
pricing methodologies, models or other valuation methodologies. All significant inputs are
observable, derived from observable information in the marketplace or are supported by
observable levels at which transactions are executed in the market place. Financial
instruments in this category primarily include certain public and private corporate fixed
maturities, government or agency securities and certain mortgage-backed securities.
    
    Level 3 Instruments whose significant value drivers are unobservable. This comprises
financial instruments for which fair value is estimated based on industry-standard pricing
methodologies and internally developed models utilizing significant inputs not based on or
corroborated by readily available market information. In limited circumstances, this
category may also utilize non-binding broker quotes. This category primarily consists of
certain less liquid fixed maturities, including corporate private placement securities,
investments in private equity and hedge funds and trading securities where the Company
cannot corroborate the significant valuation inputs with market observable data.
 14




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  As of September 30, 2010Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 3 PercentTypes of InvestmentsFixed maturities, available-for-sale:U.S. government and agencies
    
    $
    96.0
    
    
    $
    
    
    
    $
    96.0
    
    
    $
    
    
    
    
    State and political subdivisions
    
    
    473.3
    
    
    
    
    
    
    
    473.3
    
    
    
    
    
    
    
    Corporate securities
    
    
    14,779.3
    
    
    
    
    
    
    
    13,916.4
    
    
    
    862.9
    
    
    
    3.8
    %Residential mortgage-backed securities
    
    
    3,840.0
    
    
    
    
    
    
    
    3,779.1
    
    
    
    60.9
    
    
    
    0.3Commercial mortgage-backed securities
    
    
    1,911.0
    
    
    
    
    
    
    
    1,891.9
    
    
    
    19.1
    
    
    
    0.1Other debt obligations
    
    
    350.5
    
    
    
    
    
    
    
    292.7
    
    
    
    57.8
    
    
    
    0.2Total fixed maturities, available-for-sale
    
    
    21,450.1
    
    
    
    
    
    
    
    20,449.4
    
    
    
    1,000.7
    
    
    
    4.4Marketable equity securities, available-for-sale
    
    
    45.4
    
    
    
    43.6
    
    
    
    
    
    
    
    1.8
    
    
    
    0.0Marketable equity securities, trading
    
    
    158.8
    
    
    
    158.2
    
    
    
    
    
    
    
    0.6
    
    
    
    0.0Investments in limited partnerships(1)
    
    
    38.5
    
    
    
    
    
    
    
    
    
    
    
    38.5
    
    
    
    0.2Other invested assets
    
    
    5.5
    
    
    
    2.7
    
    
    
    
    
    
    
    2.8
    
    
    
    0.0Total investments carried at fair value
    
    
    21,698.3
    
    
    
    204.5
    
    
    
    20,449.4
    
    
    
    1,044.4
    
    
    
    4.6Separate account assets
    
    
    826.2
    
    
    
    826.2
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    22,524.5
    
    
    $
    1,030.7
    
    
    $
    20,449.4
    
    
    $
    1,044.4
    
    
    
    4.6
    %
 As of December 31, 2009Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 3 PercentTypes of InvestmentsFixed maturities, available-for-sale:U.S. government and agencies
    
    $
    43.9
    
    
    $
    
    
    
    $
    43.9
    
    
    $
    
    
    
    
    State and political subdivisions
    
    
    483.0
    
    
    
    
    
    
    
    475.8
    
    
    
    7.2
    
    
    
    0.0
    %Corporate securities
    
    
    12,400.0
    
    
    
    
    
    
    
    11,552.9
    
    
    
    847.1
    
    
    
    4.3Residential mortgage-backed securities
    
    
    3,536.4
    
    
    
    
    
    
    
    3,285.9
    
    
    
    250.5
    
    
    
    1.3Commercial mortgage-backed securities
    
    
    1,789.4
    
    
    
    
    
    
    
    1,765.4
    
    
    
    24.0
    
    
    
    0.1Other debt obligations
    
    
    341.6
    
    
    
    
    
    
    
    286.9
    
    
    
    54.7
    
    
    
    0.3Total fixed maturities, available-for-sale
    
    
    18,594.3
    
    
    
    
    
    
    
    17,410.8
    
    
    
    1,183.5
    
    
    
    6.0Marketable equity securities, available-for-sale
    
    
    36.7
    
    
    
    34.9
    
    
    
    
    
    
    
    1.8
    
    
    
    0.0Marketable equity securities, trading
    
    
    154.1
    
    
    
    153.8
    
    
    
    
    
    
    
    0.3
    
    
    
    0.0Investments in limited partnerships(1)
    
    
    24.7
    
    
    
    
    
    
    
    
    
    
    
    24.7
    
    
    
    0.2Other invested assets
    
    
    6.7
    
    
    
    2.1
    
    
    
    
    
    
    
    4.6
    
    
    
    0.0Total investments carried at fair value
    
    
    18,816.5
    
    
    
    190.8
    
    
    
    17,410.8
    
    
    
    1,214.9
    
    
    
    6.2Separate account assets
    
    
    840.1
    
    
    
    840.1
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    19,656.6
    
    
    $
    1,030.9
    
    
    $
    17,410.8
    
    
    $
    1,214.9
    
    
    
    6.2
    %
 
 (1)
    
    As of September 30, 2010 and December 31, 2009, this amount consisted of investments in private equity
and hedge funds. Fixed Maturities
   15




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
   Corporate Securities
  As of September 30, 2010
    
    
    As of December 31, 2009%
    
    
    # of
    
    
    
    
    
    
    %
    
    
    # ofAmount
    
    
    of Total
    
    
    Securities
    
    
    Amount
    
    
    of Total
    
    
    SecuritiesSignificant Security Sectors:Industrials
    
    $
    2,396.5
    
    
    
    17.2
    %
    
    
    203
    
    
    $
    1,923.4
    
    
    
    16.6
    %
    
    
    215Consumer staples
    
    
    2,100.4
    
    
    
    15.1
    
    
    
    145
    
    
    
    1,695.9
    
    
    
    14.7
    
    
    
    147Utilities
    
    
    1,909.8
    
    
    
    13.7
    
    
    
    253
    
    
    
    1,771.6
    
    
    
    15.3
    
    
    
    216Financials
    
    
    1,896.0
    
    
    
    13.6
    
    
    
    199
    
    
    
    1,750.5
    
    
    
    15.2
    
    
    
    285Weighted-average coupon rate
    
    
    6.41
    %
    
    
    
    
    
    
    
    
    
    
    6.55
    %Weighted-average remaining years to contractual maturity
    
    
    12.3
    
    
    
    
    
    
    
    
    
    
    
    13.3
     As of September 30, 2010
    
    
    As of December 31, 2009Fair
    
    
    % of Total
    
    
    Fair
    
    
    % of TotalNAIC Rating
    
    Comparable Standard & Poors rating
    
    Value
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value1
    
    AAA, AA, A
    
    $
    140.7
    
    
    
    17.8
    %
    
    $
    153.5
    
    
    
    19.2
    %2
    
    BBB
    
    
    573.5
    
    
    
    72.4
    
    
    
    557.4
    
    
    
    69.83  6
    
    BB & below
    
    
    78.1
    
    
    
    9.8
    
    
    
    87.3
    
    
    
    11.0Total
    
    
    
    $
    792.3
    
    
    
    100.0
    %
    
    $
    798.2
    
    
    
    100.0
    %
  16




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  Residential Mortgage-backed Securities
   As of
    
    
    As ofSeptember 30, 2010
    
    
    December 31, 2009Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalStandard & Poors equivalent rating:AAA
    
    $
    176.8
    
    
    
    38.0
    %
    
    $
    200.8
    
    
    
    39.9
    %AA through BBB
    
    
    94.7
    
    
    
    20.3
    
    
    
    140.2
    
    
    
    27.8BB & below
    
    
    193.9
    
    
    
    41.7
    
    
    
    162.7
    
    
    
    32.3Total Non-agency RMBS
    
    $
    465.4
    
    
    
    100.0
    %
    
    $
    503.7
    
    
    
    100.0
    %Non-agency RMBS with super senior subordination
    
    $
    276.1
    
    
    
    59.3
    %
    
    $
    300.3
    
    
    
    59.6
    %
   Commercial Mortgage-backed Securities
    17




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Marketable Equity Securities
   Investments in Limited Partnerships
   Other Invested Assets
  Separate Accounts
  Rollforward of Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant
Unobservable Inputs (Level 3)
  Unrealized Gain (Loss)Transfers In
    
    
    
    
    
    
    Included in:Balance as
    
    
    
    
    
    
    
    
    
    
    and/or
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Realized
    
    
    Balance as ofof July 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    September 30,2010
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(2)
    
    
    Income(3)
    
    
    Income
    
    
    (Losses)(3)
    
    
    2010Types of Investments:State and political subdivisions
    
    $
    7.6
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (7.6
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
     Corporate securities
    
    
    862.2
    
    
    
    
    
    
    
    (9.9
    )
    
    
    (5.8
    )
    
    
    (1.1
    )
    
    
    
    
    
    
    17.6
    
    
    
    (0.1
    )
    
    
    862.9Residential mortgage-backed securities
    
    
    77.1
    
    
    
    
    
    
    
    
    
    
    
    (17.5
    )
    
    
    0.3
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    60.9Commercial mortgage-backed securities
    
    
    31.6
    
    
    
    
    
    
    
    
    
    
    
    (10.5
    )
    
    
    (1.9
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    19.1Other debt obligations
    
    
    56.5
    
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    (3.2
    )
    
    
    
    
    
    
    10.1
    
    
    
    (2.1
    )
    
    
    57.8Total fixed maturities, available-for-sale
    
    
    1,035.0
    
    
    
    
    
    
    
    (9.9
    )
    
    
    (37.3
    )
    
    
    (13.5
    )
    
    
    
    
    
    
    28.6
    
    
    
    (2.2
    )
    
    
    1,000.7Marketable equity securities, available-for-sale
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8Marketable equity securities, trading
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Investments in limited partnerships
    
    
    32.1
    
    
    
    11.9
    
    
    
    
    
    
    
    
    
    
    
    (7.5
    )
    
    
    2.0
    
    
    
    
    
    
    
    
    
    
    
    38.5Other invested assets
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    2.8Total Level 3
    
    $
    1,072.1
    
    
    $
    11.9
    
    
    $
    (9.9
    )
    
    $
    (37.4
    )
    
    $
    (21.0
    )
    
    $
    2.3
    
    
    $
    28.6
    
    
    $
    (2.2
    )
    
    $
    1,044.4
 18




---



##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Unrealized Gain (Loss)Transfers In
    
    
    
    
    
    
    Included in:Balance as
    
    
    
    
    
    
    
    
    
    
    and/or
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Realized
    
    
    Balance as ofof January 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    September 30,2010
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(2)
    
    
    Income(3)
    
    
    Income
    
    
    (Losses)(3)
    
    
    2010Types of Investments:State and political subdivisions
    
    $
    7.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (7.2
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
     Corporate securities
    
    
    847.1
    
    
    
    26.8
    
    
    
    (27.2
    )
    
    
    12.8
    
    
    
    (40.1
    )
    
    
    
    
    
    
    43.0
    
    
    
    0.5
    
    
    
    862.9Residential mortgage-backed securities
    
    
    250.5
    
    
    
    
    
    
    
    
    
    
    
    (194.6
    )
    
    
    1.8
    
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    60.9Commercial mortgage-backed securities
    
    
    24.0
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (4.7
    )
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    19.1Other debt obligations
    
    
    54.7
    
    
    
    
    
    
    
    
    
    
    
    (3.4
    )
    
    
    (4.2
    )
    
    
    
    
    
    
    12.9
    
    
    
    (2.2
    )
    
    
    57.8Total fixed maturities, available-for-sale
    
    
    1,183.5
    
    
    
    26.8
    
    
    
    (27.2
    )
    
    
    (186.5
    )
    
    
    (54.4
    )
    
    
    
    
    
    
    60.2
    
    
    
    (1.7
    )
    
    
    1,000.7Marketable equity securities, available-for-sale
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8Marketable equity securities, trading
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.6Investments in limited partnerships
    
    
    24.7
    
    
    
    21.1
    
    
    
    
    
    
    
    
    
    
    
    (9.9
    )
    
    
    2.7
    
    
    
    
    
    
    
    (0.1
    )
    
    
    38.5Other invested assets
    
    
    4.6
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.7
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    0.1
    
    
    
    2.8Total Level 3
    
    $
    1,214.9
    
    
    $
    47.9
    
    
    $
    (27.5
    )
    
    $
    (186.5
    )
    
    $
    (64.8
    )
    
    $
    1.9
    
    
    $
    60.2
    
    
    $
    (1.7
    )
    
    $
    1,044.4
 
 (1)
    
    Transfers into and/or out of Level 3 are reported at the value as of the beginning of the
period in which the transfer occurs. Gross transfers into Level 3 were $0.0 and $14.9 for
the three and nine months ended September 30, 2010, respectively. Gross transfers out of
Level 3 were $(37.4) and $(201.4) for the three and nine months ended September 30, 2010,
respectively, as public market information on many of our RMBS securities became
available and third party independent pricing services began to provide prices. Such
securities are now classified as Level 2.(2)
    
    Other is comprised of transactions such as pay downs, calls, amortization and redemptions.(3)
    
    Realized and unrealized gains and losses for investments in limited partnerships are
included in net investment income. All other realized and unrealized gains and losses are
included in net realized investment gains (losses).  Unrealized Gain (Loss)Transfers In
    
    
    
    
    
    
    Included in:Balance as
    
    
    
    
    
    
    
    
    
    
    and/or
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Realized
    
    
    Balance as ofof July 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    September 30,2009
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(2)
    
    
    Income(3)
    
    
    Loss
    
    
    (Losses)(3)
    
    
    2009Types of Investments:State and political subdivisions
    
    $
    7.1
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.6
    )
    
    $
    
    
    
    $
    
    
    
    $
    0.7
    
    
    $
    
    
    
    $
    7.2Corporate securities
    
    
    704.2
    
    
    
    34.4
    
    
    
    (4.0
    )
    
    
    7.8
    
    
    
    38.5
    
    
    
    
    
    
    
    79.2
    
    
    
    
    
    
    
    860.1Residential mortgage-backed securities
    
    
    61.1
    
    
    
    206.6
    
    
    
    
    
    
    
    (4.3
    )
    
    
    0.2
    
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    266.1Commercial mortgage-backed securities
    
    
    23.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    23.3Other debt obligations
    
    
    55.6
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    (1.4
    )
    
    
    
    
    
    
    3.4
    
    
    
    
    
    
    
    58.2Total fixed maturities, available-for-sale
    
    
    851.1
    
    
    
    241.0
    
    
    
    (4.0
    )
    
    
    3.5
    
    
    
    36.7
    
    
    
    
    
    
    
    86.6
    
    
    
    
    
    
    
    1,214.9Marketable equity securities, available-for-sale
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    2.5Marketable equity securities, trading
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.3Investments in limited partnerships
    
    
    63.2
    
    
    
    2.2
    
    
    
    (20.1
    )
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    1.0
    
    
    
    46.6Other invested assets
    
    
    1.2
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    6.1Total Level 3
    
    $
    917.5
    
    
    $
    246.2
    
    
    $
    (24.1
    )
    
    $
    3.5
    
    
    $
    37.2
    
    
    $
    2.1
    
    
    $
    87.0
    
    
    $
    1.0
    
    
    $
    1,270.4
 Unrealized Gain (Loss)Transfers In
    
    
    
    
    
    
    Included in:Balance as
    
    
    
    
    
    
    
    
    
    
    and/or
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Realized
    
    
    Balance as ofof January 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    September 30,2009
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(2)
    
    
    Income(3)
    
    
    Loss
    
    
    (Losses)(3)
    
    
    2009Types of Investments:State and political subdivisions
    
    $
    6.3
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.7
    )
    
    $
    
    
    
    $
    
    
    
    $
    1.6
    
    
    $
    
    
    
    $
    7.2Corporate securities
    
    
    610.0
    
    
    
    129.7
    
    
    
    (4.0
    )
    
    
    (14.3
    )
    
    
    12.9
    
    
    
    
    
    
    
    129.8
    
    
    
    (4.0
    )
    
    
    860.1Residential mortgage-backed securities
    
    
    
    
    
    
    263.5
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    266.1Commercial mortgage-backed securities
    
    
    24.4
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    (2.2
    )
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    23.3Other debt obligations
    
    
    33.6
    
    
    
    18.0
    
    
    
    
    
    
    
    0.7
    
    
    
    (2.4
    )
    
    
    
    
    
    
    8.3
    
    
    
    
    
    
    
    58.2Total fixed maturities, available-for-sale
    
    
    674.3
    
    
    
    411.2
    
    
    
    (4.0
    )
    
    
    (15.0
    )
    
    
    8.5
    
    
    
    
    
    
    
    143.9
    
    
    
    (4.0
    )
    
    
    1,214.9Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2
    
    
    
    0.3
    
    
    
    
    
    
    
    (3.0
    )
    
    
    
    
    
    
    2.5Marketable equity securities, trading
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.3Investments in limited partnerships
    
    
    56.3
    
    
    
    4.6
    
    
    
    (23.0
    )
    
    
    
    
    
    
    
    
    
    
    9.5
    
    
    
    
    
    
    
    (0.8
    )
    
    
    46.6Other invested assets
    
    
    2.4
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    6.1Total Level 3
    
    $
    733.2
    
    
    $
    418.8
    
    
    $
    (27.0
    )
    
    $
    (9.8
    )
    
    $
    9.1
    
    
    $
    10.0
    
    
    $
    140.9
    
    
    $
    (4.8
    )
    
    $
    1,270.4
 
 (1)
    
    Transfers into and/or out of Level 3 are reported at the value as of the beginning of the
period in which the transfer occurs. Gross transfers into Level 3 were $8.2 and $14.7 for
the three and nine months ended September 30, 2009, respectively. Gross transfers out of
Level 3 were $(4.7) and $(24.5) for the three and nine months ended September 30, 2009,
respectively.(2)
    
    Other is comprised of transactions such as pay downs, calls, amortization, and redemptions.(3)
    
    Realized and unrealized gains and losses for investments in limited partnerships are
included in net investment income. All other realized and unrealized gains and losses are
included in net realized investment gains (losses). 19




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  As of September 30, 2010
    
    
    As of December 31, 2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Fixed maturities
    
    $
    21,450.1
    
    
    $
    21,450.1
    
    
    $
    18,594.3
    
    
    $
    18,594.3Marketable equity securities, available-for-sale
    
    
    45.4
    
    
    
    45.4
    
    
    
    36.7
    
    
    
    36.7Marketable equity securities, trading
    
    
    158.8
    
    
    
    158.8
    
    
    
    154.1
    
    
    
    154.1Mortgage loans
    
    
    1,493.4
    
    
    
    1,580.8
    
    
    
    1,199.6
    
    
    
    1,190.1Investments in limited partnerships:Hedge funds and private equity funds
    
    
    38.5
    
    
    
    38.5
    
    
    
    24.7
    
    
    
    24.7Affordable housing
    
    
    130.6
    
    
    
    132.8
    
    
    
    85.5
    
    
    
    89.9Other invested assets
    
    
    12.0
    
    
    
    12.0
    
    
    
    12.2
    
    
    
    12.2Cash and cash equivalents
    
    
    197.2
    
    
    
    197.2
    
    
    
    257.8
    
    
    
    257.8Separate account assets
    
    
    826.2
    
    
    
    826.2
    
    
    
    840.1
    
    
    
    840.1Financial liabilities:Funds held under deposit contracts:Deferred annuities
    
    
    8,351.6
    
    
    
    8,381.4
    
    
    
    7,212.1
    
    
    
    7,128.2Immediate annuities
    
    
    6,698.4
    
    
    
    7,497.3
    
    
    
    6,724.4
    
    
    
    6,937.8Notes payable:Capital Efficient Notes (CENts)
    
    
    149.8
    
    
    
    131.6
    
    
    
    149.8
    
    
    
    118.5Senior notes
    
    
    299.2
    
    
    
    310.1
    
    
    
    299.1
    
    
    
    276.8
 Other Financial Instruments
      20




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 6. Deferred Policy Acquisition Costs
  For the NineMonths Ended
    
    
    For the Year EndedSeptember 30, 2010
    
    
    December 31, 2009Unamortized balance at beginning of period
    
    $
    325.7
    
    
    $
    219.5Deferral of acquisition costs
    
    
    97.2
    
    
    
    148.3Adjustments related to investment (gains) losses
    
    
    (2.8
    )
    
    
    9.3Amortization
    
    
    (50.4
    )
    
    
    (51.4
    )Unamortized balance at end of period
    
    
    369.7
    
    
    
    325.7Accumulated effect of net unrealized investment gains
    
    
    (208.8
    )
    
    
    (75.3
    )Balance at end of period
    
    $
    160.9
    
    
    $
    250.4
 7. Deferred Sales Inducements
  For the NineMonths Ended
    
    
    For the Year EndedSeptember 30, 2010
    
    
    December 31, 2009Unamortized balance at beginning of period
    
    $
    67.6
    
    
    $
    33.0Capitalizations
    
    
    43.5
    
    
    
    42.5Adjustments related to investment (gains) losses
    
    
    (0.9
    )
    
    
    2.4Amortization
    
    
    (14.1
    )
    
    
    (10.3
    )Unamortized balance at end of period
    
    
    96.1
    
    
    
    67.6Accumulated effect of net unrealized investment gains
    
    
    (68.9
    )
    
    
    (18.4
    )Balance at end of period
    
    $
    27.2
    
    
    $
    49.2
 8. Stockholders Equity
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    56.6
    
    
    $
    44.1
    
    
    $
    138.7
    
    
    $
    96.2Other comprehensive income, net of taxes:Changes in unrealized gains and losses on available-for-sale securities(1)
    
    
    378.0
    
    
    
    743.0
    
    
    
    1,002.9
    
    
    
    1,191.7Reclassification adjustment for net realized investment (gains) losses
included in net income(2)
    
    
    (14.0
    )
    
    
    (6.4
    )
    
    
    (17.7
    )
    
    
    25.2Adjustment for deferred policy acquisition costs and deferred sales
inducements valuation allowance(3)
    
    
    (45.3
    )
    
    
    (68.5
    )
    
    
    (119.5
    )
    
    
    (80.4
    )Other-than-temporary-impairments on fixed maturities not related to
credit losses(4)
    
    
    (0.4
    )
    
    
    4.6
    
    
    
    3.4
    
    
    
    (38.4
    )Other comprehensive income
    
    
    318.3
    
    
    
    672.7
    
    
    
    869.1
    
    
    
    1,098.1Total comprehensive income
    
    $
    374.9
    
    
    $
    716.8
    
    
    $
    1,007.8
    
    
    $
    1,194.3
 
 (1)
    
    Net of taxes of $203.6, $400.1, $540.0 and $641.7 for the three and nine months ended September 30, 2010 and 2009, respectively.(2)
    
    Net of taxes of $(7.5), $(3.4), $(9.5) and $13.6 for the three and nine months ended September 30, 2010 and 2009, respectively. For
the three and nine months ended September 30, 2010, $3.6 (net of taxes of $1.9) and $13.5 (net of taxes of $7.2) of the
reclassification adjustment is related to losses previously classified as OTTI not related to credit losses. For the three and nine
months ended September 30, 2009, $22.0 (net of taxes of $11.8) and $22.9 (net of taxes of $12.2), respectively, of the
reclassification adjustment is related to losses previously classified as OTTI not related to credit losses.(3)
    
    Net of taxes of $(24.6), $(37.0), $(64.5) and $(43.3) for the three and nine months ended September 30, 2010 and 2009, respectively.(4)
    
    Net of taxes of $(0.2), $2.5, $1.8 and $(20.7) for the three and nine months ended September 30, 2010 and 2009, respectively. 21




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  Common SharesBalance at January 1, 2009
    
    
    92.646Restricted shares(1)
    
    
    0.083Balance at December 31, 2009
    
    
    92.729Balance at January 1, 2010
    
    
    92.729Common stock, issued in initial public offering
    
    
    25.260Restricted shares(1)
    
    
    0.230Treasury shares retired(2)
    
    
    (0.048
    )Balance at September 30, 2010
    
    
    118.171
 
 (1)
    
    Represents net restricted shares issued pursuant to the Companys Equity Plan.(2)
    
    Represents shares repurchased to satisfy employee income tax withholding,
pursuant to the Companys Equity Plan. 9. Stock-Based Compensation
  Compensation Cost
   Restricted Stock Activity
  22




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  Number of
    
    
    Weighted-AverageShares
    
    
    Fair ValueOutstanding as of January 1, 2010
    
    
    0.083
    
    
    $
    13.08Shares granted
    
    
    0.244
    
    
    $
    12.42Shares vested
    
    
    (0.131
    )
    
    $
    12.40Shares forfeited
    
    
    (0.014
    )
    
    $
    12.51Outstanding at September 30, 2010
    
    
    0.182
    
    
    $
    12.34
 Stock Option Activity
   For the Nine MonthsEnded September 30, 2010Expected term
    
    
    7.5
    yearsRisk-free interest rate
    
    
    2.6
    %Dividend yield
    
    
    1.6
    %Volatility
    
    
    45.6
    %
 10. Commitments and Contingencies
 Investments in Limited Partnerships
  Litigation
  Other Commitments
  23




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 11. Segment Information
  For the Three Months Ended September 30, 2010Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    109.9
    
    
    $
    
    
    
    $
    
    
    
    $
    10.3
    
    
    $
    
    
    
    $
    120.2Net investment income
    
    
    4.7
    
    
    
    119.0
    
    
    
    105.6
    
    
    
    67.5
    
    
    
    7.6
    
    
    
    304.4Policy fees, contract charges, and other
    
    
    2.7
    
    
    
    4.7
    
    
    
    0.1
    
    
    
    29.6
    
    
    
    3.8
    
    
    
    40.9Net investment gains on fixed index annuity (FIA) options
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Total operating revenues
    
    
    117.3
    
    
    
    124.0
    
    
    
    105.7
    
    
    
    107.4
    
    
    
    11.4
    
    
    
    465.8Benefits and expenses:Policyholder benefits and claims
    
    
    73.1
    
    
    
    (0.5
    )
    
    
    
    
    
    
    12.8
    
    
    
    
    
    
    
    85.4Interest credited
    
    
    
    
    
    
    75.7
    
    
    
    90.1
    
    
    
    63.1
    
    
    
    (1.1
    )
    
    
    227.8Other underwriting and operating expenses
    
    
    25.4
    
    
    
    13.0
    
    
    
    5.5
    
    
    
    14.2
    
    
    
    5.0
    
    
    
    63.1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    8.0Amortization of deferred policy acquisition costs
    
    
    2.1
    
    
    
    13.3
    
    
    
    0.6
    
    
    
    2.0
    
    
    
    
    
    
    
    18.0Total benefits and expenses
    
    
    100.6
    
    
    
    101.5
    
    
    
    96.2
    
    
    
    92.1
    
    
    
    11.9
    
    
    
    402.3Segment pre-tax adjusted operating income (loss)
    
    $
    16.7
    
    
    $
    22.5
    
    
    $
    9.5
    
    
    $
    15.3
    
    
    $
    (0.5
    )
    
    $
    63.5Operating revenues
    
    $
    117.3
    
    
    $
    124.0
    
    
    $
    105.7
    
    
    $
    107.4
    
    
    $
    11.4
    
    
    $
    465.8Add: Net realized investment gains (losses), excluding FIA
options
    
    
    
    
    
    
    2.1
    
    
    
    16.3
    
    
    
    2.0
    
    
    
    (0.7
    )
    
    
    19.7Total revenues
    
    
    117.3
    
    
    
    126.1
    
    
    
    122.0
    
    
    
    109.4
    
    
    
    10.7
    
    
    
    485.5Total benefits and expenses
    
    
    100.6
    
    
    
    101.5
    
    
    
    96.2
    
    
    
    92.1
    
    
    
    11.9
    
    
    
    402.3Income (loss) before income taxes
    
    $
    16.7
    
    
    $
    24.6
    
    
    $
    25.8
    
    
    $
    17.3
    
    
    $
    (1.2
    )
    
    $
    83.2
 For the Three Months Ended September 30, 2009Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    106.5
    
    
    $
    
    
    
    $
    
    
    
    $
    10.1
    
    
    $
    
    
    
    
    116.6Net investment income
    
    
    4.5
    
    
    
    103.5
    
    
    
    104.7
    
    
    
    66.9
    
    
    
    4.0
    
    
    
    283.6Policy fees, contract charges, and other
    
    
    4.2
    
    
    
    4.6
    
    
    
    0.1
    
    
    
    28.5
    
    
    
    2.8
    
    
    
    40.2Net investment gains on FIA options
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4Total operating revenues
    
    
    115.2
    
    
    
    109.5
    
    
    
    104.8
    
    
    
    105.5
    
    
    
    6.8
    
    
    
    441.8Benefits and expenses:Policyholder benefits and claims
    
    
    71.7
    
    
    
    (1.3
    )
    
    
    
    
    
    
    15.2
    
    
    
    
    
    
    
    85.6Interest credited
    
    
    
    
    
    
    70.5
    
    
    
    90.7
    
    
    
    60.0
    
    
    
    (0.7
    )
    
    
    220.5Other underwriting and operating expenses
    
    
    25.6
    
    
    
    13.6
    
    
    
    5.4
    
    
    
    13.4
    
    
    
    3.7
    
    
    
    61.7Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.9
    
    
    
    7.9Amortization of deferred policy acquisition costs
    
    
    1.9
    
    
    
    10.5
    
    
    
    0.4
    
    
    
    1.0
    
    
    
    
    
    
    
    13.8Total benefits and expenses
    
    
    99.2
    
    
    
    93.3
    
    
    
    96.5
    
    
    
    89.6
    
    
    
    10.9
    
    
    
    389.5Segment pre-tax adjusted operating income
    
    $
    16.0
    
    
    $
    16.2
    
    
    $
    8.3
    
    
    $
    15.9
    
    
    $
    (4.1
    )
    
    $
    52.3Operating revenues
    
    $
    115.2
    
    
    $
    109.5
    
    
    $
    104.8
    
    
    $
    105.5
    
    
    $
    6.8
    
    
    $
    441.8Add: Net realized investment gains (losses),
excluding FIA options
    
    
    (1.5
    )
    
    
    (0.5
    )
    
    
    18.9
    
    
    
    (3.5
    )
    
    
    (3.5
    )
    
    
    9.9Total revenues
    
    
    113.7
    
    
    
    109.0
    
    
    
    123.7
    
    
    
    102.0
    
    
    
    3.3
    
    
    
    451.7Total benefits and expenses
    
    
    99.2
    
    
    
    93.3
    
    
    
    96.5
    
    
    
    89.6
    
    
    
    10.9
    
    
    
    389.5Income (loss) before income taxes
    
    $
    14.5
    
    
    $
    15.7
    
    
    $
    27.2
    
    
    $
    12.4
    
    
    $
    (7.6
    )
    
    $
    62.2
 24




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 For the Nine Months Ended September 30, 2010Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    324.5
    
    
    $
    
    
    
    $
    
    
    
    $
    30.2
    
    
    $
    
    
    
    $
    354.7Net investment income
    
    
    14.1
    
    
    
    342.1
    
    
    
    314.3
    
    
    
    201.9
    
    
    
    16.0
    
    
    
    888.4Policy fees, contract charges, and other
    
    
    8.6
    
    
    
    14.3
    
    
    
    0.5
    
    
    
    88.5
    
    
    
    11.3
    
    
    
    123.2Net investment losses on FIA options
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Total operating revenues
    
    
    347.2
    
    
    
    355.5
    
    
    
    314.8
    
    
    
    320.6
    
    
    
    27.3
    
    
    
    1,365.4Benefits and expenses:Policyholder benefits and claims
    
    
    215.5
    
    
    
    0.2
    
    
    
    
    
    
    
    39.2
    
    
    
    
    
    
    
    254.9Interest credited
    
    
    
    
    
    
    214.6
    
    
    
    275.0
    
    
    
    180.7
    
    
    
    (2.5
    )
    
    
    667.8Other underwriting and operating expenses
    
    
    75.1
    
    
    
    40.2
    
    
    
    16.0
    
    
    
    40.3
    
    
    
    15.3
    
    
    
    186.9Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.9
    
    
    
    23.9Amortization of deferred policy acquisition costs
    
    
    6.0
    
    
    
    40.1
    
    
    
    1.5
    
    
    
    2.8
    
    
    
    
    
    
    
    50.4Total benefits and expenses
    
    
    296.6
    
    
    
    295.1
    
    
    
    292.5
    
    
    
    263.0
    
    
    
    36.7
    
    
    
    1,183.9Segment pre-tax adjusted operating income (loss)
    
    $
    50.6
    
    
    $
    60.4
    
    
    $
    22.3
    
    
    $
    57.6
    
    
    $
    (9.4
    )
    
    $
    181.5Operating revenues
    
    $
    347.2
    
    
    $
    355.5
    
    
    $
    314.8
    
    
    $
    320.6
    
    
    $
    27.3
    
    
    $
    1,365.4Add: Net realized investment gains (losses), excluding
FIA options
    
    
    (0.2
    )
    
    
    7.7
    
    
    
    7.3
    
    
    
    4.5
    
    
    
    (1.6
    )
    
    
    17.7Total revenues
    
    
    347.0
    
    
    
    363.2
    
    
    
    322.1
    
    
    
    325.1
    
    
    
    25.7
    
    
    
    1,383.1Total benefits and expenses
    
    
    296.6
    
    
    
    295.1
    
    
    
    292.5
    
    
    
    263.0
    
    
    
    36.7
    
    
    
    1,183.9Income (loss) before income taxes
    
    $
    50.4
    
    
    $
    68.1
    
    
    $
    29.6
    
    
    $
    62.1
    
    
    $
    (11.0
    )
    
    $
    199.2As of September 30, 2010:Total assets
    
    $
    237.4
    
    
    $
    9,878.0
    
    
    $
    7,176.4
    
    
    $
    5,684.3
    
    
    $
    2,326.2
    
    
    $
    25,302.3
 For the Nine Months Ended September 30, 2009Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    324.1
    
    
    $
    
    
    
    $
    
    
    
    $
    28.8
    
    
    $
    
    
    
    $
    352.9Net investment income
    
    
    13.3
    
    
    
    281.8
    
    
    
    318.1
    
    
    
    198.0
    
    
    
    18.2
    
    
    
    829.4Policy fees, contract charges, and other
    
    
    12.7
    
    
    
    12.4
    
    
    
    0.4
    
    
    
    87.1
    
    
    
    7.9
    
    
    
    120.5Net investment gains on FIA options
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Total operating revenues
    
    
    350.1
    
    
    
    294.4
    
    
    
    318.5
    
    
    
    313.9
    
    
    
    26.1
    
    
    
    1,303.0Benefits and expenses:Policyholder benefits and claims
    
    
    219.9
    
    
    
    (2.2
    )
    
    
    
    
    
    
    44.4
    
    
    
    
    
    
    
    262.1Interest credited
    
    
    
    
    
    
    187.2
    
    
    
    268.7
    
    
    
    175.7
    
    
    
    (2.4
    )
    
    
    629.2Other underwriting and operating expenses
    
    
    79.7
    
    
    
    41.3
    
    
    
    15.6
    
    
    
    39.6
    
    
    
    10.5
    
    
    
    186.7Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.8
    
    
    
    23.8Amortization of deferred policy acquisition costs
    
    
    5.8
    
    
    
    26.8
    
    
    
    1.2
    
    
    
    2.6
    
    
    
    
    
    
    
    36.4Total benefits and expenses
    
    
    305.4
    
    
    
    253.1
    
    
    
    285.5
    
    
    
    262.3
    
    
    
    31.9
    
    
    
    1,138.2Segment pre-tax adjusted operating income (loss)
    
    $
    44.7
    
    
    $
    41.3
    
    
    $
    33.0
    
    
    $
    51.6
    
    
    $
    (5.8
    )
    
    $
    164.8Operating revenues
    
    $
    350.1
    
    
    $
    294.4
    
    
    $
    318.5
    
    
    $
    313.9
    
    
    $
    26.1
    
    
    $
    1,303.0Add: Net realized investment gains (losses),
excluding FIA options
    
    
    (2.9
    )
    
    
    (17.7
    )
    
    
    7.7
    
    
    
    (7.9
    )
    
    
    (8.4
    )
    
    
    (29.2
    )Total revenues
    
    
    347.2
    
    
    
    276.7
    
    
    
    326.2
    
    
    
    306.0
    
    
    
    17.7
    
    
    
    1,273.8Total benefits and expenses
    
    
    305.4
    
    
    
    253.1
    
    
    
    285.5
    
    
    
    262.3
    
    
    
    31.9
    
    
    
    1,138.2Income (loss) before income taxes
    
    $
    41.8
    
    
    $
    23.6
    
    
    $
    40.7
    
    
    $
    43.7
    
    
    $
    (14.2
    )
    
    $
    135.6As of September 30, 2009:Total assets
    
    $
    285.5
    
    
    $
    8,157.3
    
    
    $
    6,664.1
    
    
    $
    5,076.2
    
    
    $
    2,040.9
    
    
    $
    22,224.0
 25




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 12. Subsequent Events
  26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Unless the context otherwise requires, references in this report on Form 10-Q to Symetra
refer to Symetra Financial Corporation on a stand-alone, non-consolidated basis. References to
we, our, us and the Company are to Symetra Financial Corporation together with its
subsidiaries.
 This discussion contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those discussed in or implied by any of the
forward-looking statements as a result of various factors, including but not limited to those
listed under Forward-Looking Statements. You should read the following discussion in conjunction
with the unaudited interim consolidated financial statements and accompanying condensed notes
included in Item 1  Financial Statements included in this Form 10-Q, as well as our Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010
(2009 10-K), as well as our current reports on Form 8-K and other publicly available information.
Our fiscal year ends on December 31 of each calendar year.
 Management considers certain non-GAAP financial measures, including adjusted operating income,
adjusted book value, adjusted book value per common share, adjusted book value per common share, as
converted, and operating ROAE to be useful to investors in evaluating our financial performance and
condition. These measures have been reconciled to their most comparable GAAP financial measures.
For a definition of these non-GAAP measures, see  Use of non-GAAP Financial Measures.
 All amounts, except per share data, are in millions unless otherwise stated.
 Overview
  Our Operations
  
    
    Group.We offer medical stop-loss insurance, limited benefit medical plans, group life
insurance, accidental death and dismemberment insurance and disability income insurance
mainly to employer groups of 50 to 5,000 individuals. In addition to our insurance
products, we offer managing general underwriting services.
    
    Retirement Services.We offer fixed and variable deferred annuities, including tax
sheltered annuities, individual retirement accounts, or IRAs, and group annuities to
qualified retirement plans, including Section 401(k), 403(b) and 457 plans.
    
    Income Annuities.We offer single premium immediate annuities, or SPIAs, for customers
seeking a reliable source of retirement income and structured settlement annuities to fund
third-party personal injury settlements. In addition, we offer funding services options to
existing structured settlement clients.
    
    Individual.We offer a wide array of term and universal life insurance as well as
bank-owned life insurance, or BOLI.
    
    Other.This segment consists of unallocated corporate income, composed primarily of
investment income on unallocated surplus, returns from our investments in limited
partnerships, unallocated corporate expenses, interest expense on debt, tax credits from
our tax preferred affordable housing investments, the results of small, non-insurance
businesses that are managed outside of our operating segments, and inter-segment
elimination entries.
 Current Outlook
  27




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##### Table of Contents




    
    developing new distribution partnerships, especially with financial institutions and
broker-dealers;
    
    adding additional products with existing partners;
    
    expanding our less interest-rate sensitive products in the Group and Individual segments
while maintaining our solid position in fixed deferred and income annuities;
    
    developing transparent products that capitalize on favorable demographic trends such as
the need for retirement savings, life insurance and employers need to provide affordable
health care to employees; and
    
    disciplined balance sheet management.
  Critical Accounting Policies and Estimates
  
    
    Valuation of investments at fair value;
    
    The evaluation of OTTI of investments;
    
    The balance, recoverability and amortization of deferred policy acquisition costs;
    
    The liabilities for funds held under deposit contracts, future policy benefits, and
policy and contract claims; and
    
    The recoverability of deferred tax assets.
   28




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##### Table of Contents



New Accounting Standards
  Sources of Revenues and Expenses
   Revenues
 Premiums
  Net investment income
  Policy fees, contract charges and other
  Net realized investment gains (losses)
  Benefits and Expenses
 Policyholder benefits and claims
  Interest credited
  29




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##### Table of Contents



Other underwriting and operating expenses
  Interest expense
  Amortization of deferred policy acquisition costs
  Use of non-GAAP Financial Measures
  As of
    
    
    As ofSeptember 30,
    
    
    December 31,2010
    
    
    2009Total stockholders equity
    
    $
    2,711.3
    
    
    $
    1,433.3Less: AOCI
    
    
    819.4
    
    
    
    (49.7
    )Adjusted book value*
    
    
    1,891.9
    
    
    
    1,483.0Add: Assumed proceeds from exercise of warrants
    
    
    218.1
    
    
    
    218.1Adjusted book value, as converted*
    
    $
    2,110.0
    
    
    $
    1,701.1Book value per common share
    
    $
    19.77
    
    
    $
    12.83Adjusted book value per common share*
    
    $
    16.01
    
    
    $
    15.99Adjusted book value per common share, as converted*
    
    $
    15.38
    
    
    $
    15.23
 For the Twelve Months EndedSeptember 30,
    
    December 31,2010
    
    2009Return on stockholders equity, ROE
    
    
    8.6
    %
    
    
    15.4
    %Average stockholders equity
    
    $
    1,987.9
    
    
    $
    832.4Operating return on average equity, or ROAE*
    
    
    9.4
    %
    
    
    10.5
    %Average adjusted book value*
    
    $
    1,695.9
    
    
    $
    1,407.8
 
 *
    
    Represents non-GAAP measures. Adjusted Operating Income
  30




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##### Table of Contents




    
    OTTI related to available-for-sale securities, which depend on the timing and severity
of market credit cycles and management judgments regarding recoverability;
    
    Net gains (losses) on changes in fair value of our trading securities, which depend on
equity market performance and broader market conditions; and
    
    Net realized gains (losses) on sales of securities, which are subject to our discretion
and influenced by market opportunities.
    31




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##### Table of Contents



Adjusted Book Value, Adjusted Book Value per Common Share and Adjusted Book Value per Common
Share, as Converted
 Adjusted book value
        Adjusted book value per common share
  32




---



##### Table of Contents



Adjusted book value per common share, as converted
       33




---



##### Table of Contents



Operating ROAE
       34




---



##### Table of Contents



Results of Operations
  Total Company
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Revenues:Premiums
    
    $
    120.2
    
    
    $
    116.6
    
    
    
    3.1
    %
    
    $
    354.7
    
    
    $
    352.9
    
    
    
    0.5
    %Net investment income
    
    
    304.4
    
    
    
    283.6
    
    
    
    7.3
    
    
    
    888.4
    
    
    
    829.4
    
    
    
    7.1Policy fees, contract charges, and other
    
    
    40.9
    
    
    
    40.2
    
    
    
    1.7
    
    
    
    123.2
    
    
    
    120.5
    
    
    
    2.2Net realized investment gains (losses):Net impairment losses recognized in earnings
    
    
    (3.5
    )
    
    
    (17.4
    )
    
    
    79.9
    
    
    
    (14.7
    )
    
    
    (73.7
    )
    
    
    80.1Other net realized investment gains
    
    
    23.5
    
    
    
    28.7
    
    
    
    (18.1
    )
    
    
    31.5
    
    
    
    44.7
    
    
    
    (29.5
    )Total net realized investment gains (losses)
    
    
    20.0
    
    
    
    11.3
    
    
    
    77.0
    
    
    
    16.8
    
    
    
    (29.0
    )
    
    
    *Total revenues
    
    
    485.5
    
    
    
    451.7
    
    
    
    7.5
    
    
    
    1,383.1
    
    
    
    1,273.8
    
    
    
    8.6Benefits and expenses:Policyholder benefits and claims
    
    
    85.4
    
    
    
    85.6
    
    
    
    (0.2
    )
    
    
    254.9
    
    
    
    262.1
    
    
    
    (2.7
    )Interest credited
    
    
    227.8
    
    
    
    220.5
    
    
    
    3.3
    
    
    
    667.8
    
    
    
    629.2
    
    
    
    6.1Other underwriting and operating expenses
    
    
    63.1
    
    
    
    61.7
    
    
    
    2.3
    
    
    
    186.9
    
    
    
    186.7
    
    
    
    0.1Interest expense
    
    
    8.0
    
    
    
    7.9
    
    
    
    1.3
    
    
    
    23.9
    
    
    
    23.8
    
    
    
    0.4Amortization of deferred policy acquisition costs
    
    
    18.0
    
    
    
    13.8
    
    
    
    30.4
    
    
    
    50.4
    
    
    
    36.4
    
    
    
    38.5Total benefits and expenses
    
    
    402.3
    
    
    
    389.5
    
    
    
    3.3
    
    
    
    1,183.9
    
    
    
    1,138.2
    
    
    
    4.0Income from operations before income taxes
    
    
    83.2
    
    
    
    62.2
    
    
    
    33.8
    
    
    
    199.2
    
    
    
    135.6
    
    
    
    46.9Provision (benefit) for income taxes:Current
    
    
    18.8
    
    
    
    (15.7
    )
    
    
    *
    
    
    
    46.1
    
    
    
    (4.2
    )
    
    
    *Deferred
    
    
    7.8
    
    
    
    33.8
    
    
    
    (76.9
    )
    
    
    14.4
    
    
    
    43.6
    
    
    
    (67.0
    )Total provision for income taxes:
    
    
    26.6
    
    
    
    18.1
    
    
    
    47.0
    
    
    
    60.5
    
    
    
    39.4
    
    
    
    53.6Net income
    
    $
    56.6
    
    
    $
    44.1
    
    
    
    28.3
    %
    
    $
    138.7
    
    
    $
    96.2
    
    
    
    44.2
    %Net income per common share(1):Basic
    
    $
    0.41
    
    
    $
    0.40
    
    
    
    2.5
    %
    
    $
    1.03
    
    
    $
    0.86
    
    
    
    19.8
    %Diluted
    
    $
    0.41
    
    
    $
    0.40
    
    
    
    2.5
    %
    
    $
    1.03
    
    
    $
    0.86
    
    
    
    19.8
    %Weighted-average common shares outstanding:Basic
    
    
    137.140
    
    
    
    111.622
    
    
    
    *
    
    
    
    135.082
    
    
    
    111.622
    
    
    
    *Diluted
    
    
    137.145
    
    
    
    111.624
    
    
    
    *
    
    
    
    135.096
    
    
    
    111.623
    
    
    
    *Non-GAAP Financial Measures(2):Adjusted operating income
    
    $
    43.8
    
    
    $
    37.7
    
    
    
    16.2
    %
    
    $
    127.2
    
    
    $
    115.2
    
    
    
    10.4
    %Reconciliation to net income:Net income
    
    $
    56.6
    
    
    $
    44.1
    
    
    
    28.3
    
    
    $
    138.7
    
    
    $
    96.2
    
    
    
    44.2Less: Net realized investment gains (losses)
(net of taxes of $7.0, $4.0, $5.9 and $(10.1))
    
    
    13.0
    
    
    
    7.3
    
    
    
    78.1
    
    
    
    10.9
    
    
    
    (18.9
    )
    
    
    *Add: Net investment gains (losses) on FIA
options (net of taxes of $0.1, $0.5, $(0.3) and
$0.1)
    
    
    0.2
    
    
    
    0.9
    
    
    
    (77.8
    )
    
    
    (0.6
    )
    
    
    0.1
    
    
    
    *Adjusted operating income
    
    $
    43.8
    
    
    $
    37.7
    
    
    
    16.2
    %
    
    $
    127.2
    
    
    $
    115.2
    
    
    
    10.4
    %
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances.(1)
    
    For further information on the calculation of basic and diluted net income per common share, see Note 3 to the
accompanying unaudited interim financial statements.(2)
    
    For a definition and discussion of the uses and limitations of this non-GAAP measure and other metrics used in our
analysis, see  Use of non-GAAP Financial Measures above. 35




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##### Table of Contents



Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
    Further discussion of adjusted operating income drivers described above:
    Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
    36




---



##### Table of Contents



Further discussion of adjusted operating income drivers described above:
     Segment Operating Results
  Group
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Premiums
    
    $
    109.9
    
    
    $
    106.5
    
    
    
    3.2
    %
    
    $
    324.5
    
    
    $
    324.1
    
    
    
    0.1
    %Net investment income
    
    
    4.7
    
    
    
    4.5
    
    
    
    4.4
    
    
    
    14.1
    
    
    
    13.3
    
    
    
    6.0Policy fees, contract charges, and other
    
    
    2.7
    
    
    
    4.2
    
    
    
    (35.7
    )
    
    
    8.6
    
    
    
    12.7
    
    
    
    (32.3
    )Total operating revenues
    
    
    117.3
    
    
    
    115.2
    
    
    
    1.8
    
    
    
    347.2
    
    
    
    350.1
    
    
    
    (0.8
    )Benefits and expenses:Policyholder benefits and claims
    
    
    73.1
    
    
    
    71.7
    
    
    
    2.0
    
    
    
    215.5
    
    
    
    219.9
    
    
    
    (2.0
    )Other underwriting and operating expenses
    
    
    25.4
    
    
    
    25.6
    
    
    
    (0.8
    )
    
    
    75.1
    
    
    
    79.7
    
    
    
    (5.8
    )Amortization of deferred policy acquisition
costs
    
    
    2.1
    
    
    
    1.9
    
    
    
    10.5
    
    
    
    6.0
    
    
    
    5.8
    
    
    
    3.4Total benefits and expenses
    
    
    100.6
    
    
    
    99.2
    
    
    
    1.4
    
    
    
    296.6
    
    
    
    305.4
    
    
    
    (2.9
    )Segment pre-tax adjusted operating income
    
    $
    16.7
    
    
    $
    16.0
    
    
    
    4.4
    %
    
    $
    50.6
    
    
    $
    44.7
    
    
    
    13.2
    %
 37




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Group loss ratio(1)
    
    
    66.5
    %
    
    
    67.3
    %
    
    
    66.4
    %
    
    
    67.8
    %Expense ratio(2)
    
    
    24.0
    %
    
    
    23.9
    %
    
    
    24.2
    %
    
    
    24.2
    %Combined ratio(3)
    
    
    90.5
    %
    
    
    91.2
    %
    
    
    90.6
    %
    
    
    92.0
    %Medical stop-loss  loss ratio(4)
    
    
    68.7
    %
    
    
    68.7
    %
    
    
    68.1
    %
    
    
    69.4
    %Total sales(5)
    
    $
    18.4
    
    
    $
    27.1
    
    
    $
    80.4
    
    
    $
    77.9
 
 (1)
    
    Group loss ratio represents policyholder benefits and claims incurred divided by premiums earned.(2)
    
    Expense ratio is equal to other underwriting and operating expenses of our insurance operations
and amortization of DAC divided by premiums earned.(3)
    
    Combined ratio is equal to the sum of the loss ratio and the expense ratio.(4)
    
    Medical stop-loss  loss ratio represents medical stop-loss policyholder benefits and incurred
claims divided by medical stop-loss premiums earned.(5)
    
    Total sales represents annualized first-year premiums. Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
   Operating Revenues
  Benefits and Expenses
  Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
  38




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##### Table of Contents



Operating Revenues
  Benefits and Expenses
  Retirement Services
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    119.0
    
    
    $
    103.5
    
    
    
    15.0
    %
    
    $
    342.1
    
    
    $
    281.8
    
    
    
    21.4
    %Policy fees, contract charges, and other
    
    
    4.7
    
    
    
    4.6
    
    
    
    2.2
    
    
    
    14.3
    
    
    
    12.4
    
    
    
    15.3Net investment gains (losses) on FIA options
    
    
    0.3
    
    
    
    1.4
    
    
    
    (78.6
    )
    
    
    (0.9
    )
    
    
    0.2
    
    
    
    *Total operating revenues
    
    
    124.0
    
    
    
    109.5
    
    
    
    13.2
    
    
    
    355.5
    
    
    
    294.4
    
    
    
    20.8Benefits and expenses:Policyholder benefits and claims
    
    
    (0.5
    )
    
    
    (1.3
    )
    
    
    61.5
    
    
    
    0.2
    
    
    
    (2.2
    )
    
    
    *Interest credited
    
    
    75.7
    
    
    
    70.5
    
    
    
    7.4
    
    
    
    214.6
    
    
    
    187.2
    
    
    
    14.6Other underwriting and operating expenses
    
    
    13.0
    
    
    
    13.6
    
    
    
    (4.4
    )
    
    
    40.2
    
    
    
    41.3
    
    
    
    (2.7
    )Amortization of deferred policy acquisition costs
    
    
    13.3
    
    
    
    10.5
    
    
    
    26.7
    
    
    
    40.1
    
    
    
    26.8
    
    
    
    49.6Total benefits and expenses
    
    
    101.5
    
    
    
    93.3
    
    
    
    8.8
    
    
    
    295.1
    
    
    
    253.1
    
    
    
    16.6Segment pre-tax adjusted operating income
    
    $
    22.5
    
    
    $
    16.2
    
    
    
    38.9
    %
    
    $
    60.4
    
    
    $
    41.3
    
    
    
    46.2
    %
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances.  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Account values  Fixed annuities
    
    $
    8,805.6
    
    
    $
    7,464.1Account values  Variable annuities
    
    
    742.6
    
    
    
    736.9Interest spread on average account values(1)
    
    
    1.85
    %
    
    
    1.90
    %
    
    
    1.89
    %
    
    
    1.81
    %Total sales(2)
    
    $
    286.4
    
    
    $
    486.9
    
    
    $
    1,287.8
    
    
    $
    1,966.5
 
 (1)
    
    Interest spread is the difference between net investment yield
earned and the credited interest rate to policyholders. The
investment yield is the approximate yield on invested assets in
the general account attributed to the segment. The credited
interest rate is the approximate rate credited on policyholder
fixed account values within the segment. Interest credited is
subject to contractual terms, including minimum guarantees.(2)
    
    Total sales represent deposits for new policies. 39




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##### Table of Contents



Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
   Operating Revenues
  Benefits and Expenses
   Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
   Operating Revenues
  Benefits and Expenses
   40




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##### Table of Contents



Income Annuities
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    105.6
    
    
    $
    104.7
    
    
    
    0.9
    %
    
    $
    314.3
    
    
    $
    318.1
    
    
    
    (1.2
    )%Policy fees, contract charges, and other
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    25.0Total operating revenues
    
    
    105.7
    
    
    
    104.8
    
    
    
    0.9
    
    
    
    314.8
    
    
    
    318.5
    
    
    
    (1.2
    )Benefits and expenses:Interest credited
    
    
    90.1
    
    
    
    90.7
    
    
    
    (0.7
    )
    
    
    275.0
    
    
    
    268.7
    
    
    
    2.3Other underwriting and operating expenses
    
    
    5.5
    
    
    
    5.4
    
    
    
    1.9
    
    
    
    16.0
    
    
    
    15.6
    
    
    
    2.6Amortization of deferred policy acquisition costs
    
    
    0.6
    
    
    
    0.4
    
    
    
    50.0
    
    
    
    1.5
    
    
    
    1.2
    
    
    
    25.0Total benefits and expenses
    
    
    96.2
    
    
    
    96.5
    
    
    
    (0.3
    )
    
    
    292.5
    
    
    
    285.5
    
    
    
    2.5Segment pre-tax adjusted operating income
    
    $
    9.5
    
    
    $
    8.3
    
    
    
    14.5
    %
    
    $
    22.3
    
    
    $
    33.0
    
    
    
    (32.4
    )%
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Reserves(1)
    
    $
    6,676.8
    
    
    $
    6,722.7Interest spread on reserves(2)
    
    
    0.59
    %
    
    
    0.48
    %
    
    
    0.50
    %
    
    
    0.56
    %Mortality gains (losses)(3)
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    (2.0
    )
    
    $
    3.8Prepayment speed adjustment on mortgage-backed securities(4)
    
    
    0.1
    
    
    
    
    
    
    
    (0.2
    )
    
    
    2.5Total sales(5)
    
    
    58.0
    
    
    
    70.7
    
    
    
    192.1
    
    
    
    168.0
 
 (1)
    
    Reserves represent the present value of future income annuity benefits and assumed expenses, discounted by the assumed interest rate.
This metric represents the amount of our in-force book of business.(2)
    
    Interest spread is the difference between net investment yield earned and the credited interest rate on policyholder reserves. The
investment yield is the approximate yield on invested assets, excluding equities, in the general account attributed to the segment. The
credited interest rate is the approximate rate credited on policyholder reserves and excludes the gains and losses from funding services
and mortality.(3)
    
    Mortality gains (losses) represent the difference between actual and expected reserves released on death of our life contingent annuities.(4)
    
    Prepayment speed adjustment on mortgage-backed securities is the impact to net investment income due to the change in prepayment speeds
on the underlying collateral of mortgage-backed securities.(5)
    
    Sales represent deposits for new policies. Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
   41




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##### Table of Contents



Operating Revenues
  Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
   Operating Revenues
  Benefits and Expenses
  Individual
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Premiums
    
    $
    10.3
    
    
    $
    10.1
    
    
    
    2.0
    %
    
    $
    30.2
    
    
    $
    28.8
    
    
    
    4.9
    %Net investment income
    
    
    67.5
    
    
    
    66.9
    
    
    
    0.9
    
    
    
    201.9
    
    
    
    198.0
    
    
    
    2.0Policy fees, contract charges, and other
    
    
    29.6
    
    
    
    28.5
    
    
    
    3.9
    
    
    
    88.5
    
    
    
    87.1
    
    
    
    1.6Total operating revenues
    
    
    107.4
    
    
    
    105.5
    
    
    
    1.8
    
    
    
    320.6
    
    
    
    313.9
    
    
    
    2.1Benefits and expenses:Policyholder benefits and claims
    
    
    12.8
    
    
    
    15.2
    
    
    
    (15.8
    )
    
    
    39.2
    
    
    
    44.4
    
    
    
    (11.7
    )Interest credited
    
    
    63.1
    
    
    
    60.0
    
    
    
    5.2
    
    
    
    180.7
    
    
    
    175.7
    
    
    
    2.8Other underwriting and operating expenses
    
    
    14.2
    
    
    
    13.4
    
    
    
    6.0
    
    
    
    40.3
    
    
    
    39.6
    
    
    
    1.8Amortization of deferred policy acquisition costs
    
    
    2.0
    
    
    
    1.0
    
    
    
    *
    
    
    
    2.8
    
    
    
    2.6
    
    
    
    7.7Total benefits and expenses
    
    
    92.1
    
    
    
    89.6
    
    
    
    2.8
    
    
    
    263.0
    
    
    
    262.3
    
    
    
    0.3Segment pre-tax adjusted operating income
    
    $
    15.3
    
    
    $
    15.9
    
    
    
    (3.8
    )%
    
    $
    57.6
    
    
    $
    51.6
    
    
    
    11.6
    %
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances. 42




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Insurance in force(1)
    
    $
    49,792.9
    
    
    $
    50,215.6Mortality ratio(2)
    
    
    71.1
    %
    
    
    72.7
    %
    
    
    77.9
    %
    
    
    77.9
    %BOLI account value(3)
    
    $
    3,969.7
    
    
    $
    3,754.9UL account value(3)
    
    
    596.9
    
    
    
    584.8BOLI ROA(4)
    
    
    0.92
    %
    
    
    1.09
    %
    
    
    1.09
    %
    
    
    1.23
    %UL interest spread(5)
    
    
    1.57
    %
    
    
    1.27
    %
    
    
    1.49
    %
    
    
    1.24
    %Total sales, excluding BOLI(6)
    
    $
    2.6
    
    
    $
    2.9
    
    
    $
    7.8
    
    
    $
    7.8BOLI sales(7)
    
    
    7.5
    
    
    
    
    
    
    
    10.2
    
    
    
    2.5
 
 (1)
    
    Insurance in force represents dollar face amounts of policies.(2)
    
    Mortality ratio represents actual mortality experience (excluding BOLI) as a percentage of industry mortality
ratio benchmark. This benchmark is an expected level of claims derived by applying our current in force
business to the Society of Actuaries 1990-95 Basic Select and Ultimate Mortality Table.(3)
    
    BOLI account value and UL account value represent our liability to our policyholders.(4)
    
    BOLI ROA is a measure of the gross margin on our BOLI book of business. This metric is calculated as the
difference between our BOLI revenue earnings rate and our BOLI policy benefits rate. The revenue earnings
rate is calculated as revenues divided by average invested assets. The policy benefits rate is calculated as
total policy benefits divided by average account value. The policy benefits used in this metric do not
include expenses.(5)
    
    UL interest spread is the difference between net investment yield earned and the credited interest rate to
policyholders. The investment yield is the approximate yield on invested assets in the general account
attributed to the UL policies. The credited interest rate is the approximate rate credited on UL policyholder
fixed account values. Interest credited to UL policyholders account values is subject to contractual terms,
including minimum guarantees. Interest credited tends to move gradually over time to reflect actions by
management to respond to competitive pressures and profit targets. The 2010 year-to-date third quarter
credited rate to policyholders has been adjusted to exclude a reserve adjustment related to a persistency
bonus. Without this adjustment, the 2010 year-to-date third quarter the UL interest spread would have been
2.83%.(6)
    
    Total sales, excluding BOLI represents annualized first year premiums, and 10% of single premium new deposits.(7)
    
    BOLI sales represent 10% of new BOLI total deposits. Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
   Benefits and Expenses
   43




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##### Table of Contents



Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
   Benefits and Expenses
  Other
  Three Months Ended
    
    
    QTD
    
    
    Nine Months Ended
    
    
    YTDSeptember 30,
    
    
    Variance (%)
    
    
    September 30,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009
    
    
    2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    7.6
    
    
    $
    4.0
    
    
    
    90.0
    %
    
    $
    16.0
    
    
    $
    18.2
    
    
    
    (12.1
    )%Policy fees, contract charges, and other
    
    
    3.8
    
    
    
    2.8
    
    
    
    35.7
    
    
    
    11.3
    
    
    
    7.9
    
    
    
    43.0Total operating revenues
    
    
    11.4
    
    
    
    6.8
    
    
    
    67.6
    
    
    
    27.3
    
    
    
    26.1
    
    
    
    4.6Benefits and expenses:Interest credited
    
    
    (1.1
    )
    
    
    (0.7
    )
    
    
    (57.1
    )
    
    
    (2.5
    )
    
    
    (2.4
    )
    
    
    (4.2
    )Other underwriting and operating expenses
    
    
    5.0
    
    
    
    3.7
    
    
    
    35.1
    
    
    
    15.3
    
    
    
    10.5
    
    
    
    45.7Interest expense
    
    
    8.0
    
    
    
    7.9
    
    
    
    1.3
    
    
    
    23.9
    
    
    
    23.8
    
    
    
    0.4Total benefits and expenses
    
    
    11.9
    
    
    
    10.9
    
    
    
    9.2
    
    
    
    36.7
    
    
    
    31.9
    
    
    
    15.0Segment pre-tax adjusted operating loss
    
    $
    (0.5
    )
    
    $
    (4.1
    )
    
    
    87.8
    %
    
    $
    (9.4
    )
    
    $
    (5.8
    )
    
    
    (62.1
    )%
 Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Summary of Results
  Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Summary of Results
  44




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##### Table of Contents



Investments
   As of September 30, 2010
    
    
    As of December 31, 2009Types of Investments
    
    Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalFixed maturities, available-for-sale:Public
    
    $
    20,552.2
    
    
    
    87.8
    %
    
    $
    17,693.0
    
    
    
    87.7
    %Private
    
    
    897.9
    
    
    
    3.8
    
    
    
    901.3
    
    
    
    4.5Marketable equity securities, available-for-sale(1)
    
    
    45.4
    
    
    
    0.2
    
    
    
    36.7
    
    
    
    0.2Marketable equity securities, trading(2)
    
    
    158.8
    
    
    
    0.7
    
    
    
    154.1
    
    
    
    0.7Mortgage loans, net
    
    
    1,493.4
    
    
    
    6.4
    
    
    
    1,199.6
    
    
    
    5.9Policy loans
    
    
    71.7
    
    
    
    0.3
    
    
    
    73.9
    
    
    
    0.4Investments in limited partnerships(3)Private equity and hedge funds
    
    
    38.5
    
    
    
    0.2
    
    
    
    24.7
    
    
    
    0.1Affordable housing projects
    
    
    130.6
    
    
    
    0.5
    
    
    
    85.5
    
    
    
    0.4Other invested assets
    
    
    12.0
    
    
    
    0.1
    
    
    
    12.2
    
    
    
    0.1Total
    
    $
    23,400.5
    
    
    
    100.0
    %
    
    $
    20,181.0
    
    
    
    100.0
    %
 
 (1)
    
    Amount primarily represents non-redeemable preferred stock.(2)
    
    Amount represents investments in common stock.(3)
    
    Investments in private equity and hedge funds are carried at fair
value, while our investments in affordable housing projects and
state tax credits are carried at amortized cost. In 2009, we
submitted liquidation notices to all of our hedge fund
partnerships. As of September 30, 2010, our remaining investment
in hedge funds was $3.7.  45




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##### Table of Contents



Investment Returns
 Net Investment Income
  Three Months Ended
    
    
    Three Months EndedSeptember 30, 2010
    
    
    September 30, 2009Yield(1)
    
    
    Amount
    
    
    Yield(1)
    
    
    AmountTypes of InvestmentsFixed maturities, available-for-sale
    
    
    5.70
    %
    
    $
    282.0
    
    
    
    5.90
    %
    
    $
    267.0Marketable equity securities, available-for-sale
    
    
    4.43
    
    
    
    0.6
    
    
    
    4.41
    
    
    
    0.6Marketable equity securities, trading
    
    
    1.92
    
    
    
    0.7
    
    
    
    1.70
    
    
    
    0.7Mortgage loans, net
    
    
    6.53
    
    
    
    23.2
    
    
    
    6.40
    
    
    
    17.2Policy loans
    
    
    5.99
    
    
    
    1.1
    
    
    
    6.16
    
    
    
    1.1Investments in limited partnerships:Private equity and hedge funds
    
    
    22.93
    
    
    
    2.1
    
    
    
    9.50
    
    
    
    1.3Affordable housing(2)
    
    
    (6.21
    )
    
    
    (2.4
    )
    
    
    (7.79
    )
    
    
    (2.2
    )Other income producing assets(3)
    
    
    2.22
    
    
    
    1.8
    
    
    
    2.01
    
    
    
    2.8Gross investment income before investment expenses
    
    
    5.62
    
    
    
    309.1
    
    
    
    5.72
    
    
    
    288.5Investment expenses
    
    
    (0.09
    )
    
    
    (4.7
    )
    
    
    (0.10
    )
    
    
    (4.9
    )Net investment income
    
    
    5.53
    %
    
    $
    304.4
    
    
    
    5.62
    %
    
    $
    283.6
 
 (1)
    
    Yields are determined based on monthly averages calculated
using beginning and end-of-period balances. Yields are
based on carrying values except for fixed maturities and
equity securities. Yields for fixed maturities are based
on amortized cost. Yields for equity securities are based
on cost.(2)
    
    The negative yield from affordable housing investments is
offset by U.S. federal income tax benefits. The resulting
overall impact to net income was $1.0 and $0.9 for the
three months ended September 30, 2010 and 2009,
respectively.(3)
    
    Other income producing assets includes income from other
invested assets, short-term investments and cash and cash
equivalents.   46




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##### Table of Contents



Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2009Yield(1)
    
    
    Amount
    
    
    Yield(1)
    
    
    Amount(Dollars in millions)Types of InvestmentsFixed maturities, available-for-sale
    
    
    5.75
    %
    
    $
    833.4
    
    
    
    5.93
    %
    
    $
    781.4Marketable equity securities, available-for-sale
    
    
    5.77
    
    
    
    2.3
    
    
    
    5.76
    
    
    
    2.3Marketable equity securities, trading
    
    
    1.88
    
    
    
    2.2
    
    
    
    1.61
    
    
    
    1.9Mortgage loans, net
    
    
    6.39
    
    
    
    62.9
    
    
    
    6.34
    
    
    
    49.3Policy loans
    
    
    5.97
    
    
    
    3.3
    
    
    
    5.91
    
    
    
    3.3Investments in limited partnerships:Private equity and hedge funds
    
    
    10.73
    
    
    
    2.6
    
    
    
    17.87
    
    
    
    8.6Affordable housing(2)
    
    
    (6.58
    )
    
    
    (6.7
    )
    
    
    (8.65
    )
    
    
    (6.9
    )Other income producing assets(3)
    
    
    1.21
    
    
    
    3.6
    
    
    
    1.00
    
    
    
    4.0Gross investment income before investment expenses
    
    
    5.61
    
    
    
    903.6
    
    
    
    5.74
    
    
    
    843.9Investment expenses
    
    
    (0.10
    )
    
    
    (15.2
    )
    
    
    (0.10
    )
    
    
    (14.5
    )Net investment income
    
    
    5.51
    %
    
    $
    888.4
    
    
    
    5.64
    %
    
    $
    829.4
 
 (1)
    
    Yields are determined based on monthly averages calculated
using beginning and end-of-period balances. Yields are
based on carrying values except for fixed maturities and
equity securities. Yields for fixed maturities are based
on amortized cost. Yields for equity securities are based
on cost.(2)
    
    The negative yield from affordable housing investments is
offset by U.S. federal income tax benefits. The resulting
impact to net income was $3.8 and $2.7 for the nine months
ended September 30, 2010 and 2009, respectively.(3)
    
    Other income producing assets includes income from other
invested assets, short-term investments and cash and cash
equivalents.   Net Realized Investment Gains (Losses)
  47




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross realized gains on sales of fixed maturities
    
    $
    6.6
    
    
    $
    10.7
    
    
    $
    24.0
    
    
    $
    17.0Gross realized losses on sales of fixed maturities
    
    
    (2.1
    )
    
    
    (12.7
    )
    
    
    (3.4
    )
    
    
    (14.9
    )Impairments:Public fixed maturities(1)
    
    
    (0.5
    )
    
    
    (14.7
    )
    
    
    (4.3
    )
    
    
    (42.6
    )Private fixed maturities
    
    
    (2.1
    )
    
    
    (0.8
    )
    
    
    (7.2
    )
    
    
    (4.9
    )Total credit-related
    
    
    (2.6
    )
    
    
    (15.5
    )
    
    
    (11.5
    )
    
    
    (47.5
    )Other
    
    
    (0.9
    )
    
    
    (1.9
    )
    
    
    (3.2
    )
    
    
    (26.2
    )Total impairments
    
    
    (3.5
    )
    
    
    (17.4
    )
    
    
    (14.7
    )
    
    
    (73.7
    )Net gains on trading securities
    
    
    15.2
    
    
    
    21.6
    
    
    
    14.0
    
    
    
    25.9Other net investment gains (losses)(2):Other gross gains
    
    
    6.0
    
    
    
    10.1
    
    
    
    14.4
    
    
    
    25.2Other gross losses
    
    
    (2.2
    )
    
    
    (1.0
    )
    
    
    (17.5
    )
    
    
    (8.5
    )Net realized investment gains (losses) before taxes
    
    $
    20.0
    
    
    $
    11.3
    
    
    $
    16.8
    
    
    $
    (29.0
    )
 
 (1)
    
    Public fixed maturities includes publicly traded securities and
highly marketable private placements for which there is an
actively traded market.(2)
    
    This primarily consists of changes in fair value on derivatives
instruments, gains (losses) on calls and redemptions, and the
impact of net realized investment gains (losses) on DAC and
deferred sales inducements. Impairments
   Fixed Maturity Securities
  Fixed Maturity Securities Credit Quality
  48




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##### Table of Contents



As of September 30, 2010
    
    
    As of December 31, 2009Amortized
    
    
    Fair
    
    
    % of Total
    
    
    Amortized
    
    
    Fair
    
    
    % of TotalNAIC
    
    
    S&P Equivalent
    
    Cost
    
    
    Value
    
    
    Fair Value
    
    
    Cost
    
    
    Value
    
    
    Fair Value1
    
    
    AAA, AA, A
    
    $
    11,793.4
    
    
    $
    12,798.7
    
    
    
    59.7
    %
    
    $
    10,917.3
    
    
    $
    11,031.3
    
    
    
    59.3
    %2
    
    
    BBB
    
    
    7,095.0
    
    
    
    7,681.7
    
    
    
    35.8
    
    
    
    6,471.3
    
    
    
    6,530.9
    
    
    
    35.1Total investment grade
    
    
    18,888.4
    
    
    
    20,480.4
    
    
    
    95.5
    
    
    
    17,388.6
    
    
    
    17,562.2
    
    
    
    94.43
    
    
    BB
    
    
    589.9
    
    
    
    570.4
    
    
    
    2.7
    
    
    
    717.9
    
    
    
    641.3
    
    
    
    3.54
    
    
    B
    
    
    286.0
    
    
    
    268.1
    
    
    
    1.2
    
    
    
    251.0
    
    
    
    219.2
    
    
    
    1.25
    
    
    CCC & lower
    
    
    108.6
    
    
    
    111.0
    
    
    
    0.5
    
    
    
    128.0
    
    
    
    113.5
    
    
    
    0.66
    
    
    In or near default
    
    
    23.5
    
    
    
    20.2
    
    
    
    0.1
    
    
    
    68.2
    
    
    
    58.1
    
    
    
    0.3Total below investment grade
    
    
    1,008.0
    
    
    
    969.7
    
    
    
    4.5
    
    
    
    1,165.1
    
    
    
    1,032.1
    
    
    
    5.6Total
    
    
    
    $
    19,896.4
    
    
    $
    21,450.1
    
    
    
    100.0
    %
    
    $
    18,553.7
    
    
    $
    18,594.3
    
    
    
    100.0
    %
    49




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##### Table of Contents



Fixed Maturity Securities and Unrealized Gains and Losses by Security Sector
  As of September 30, 2010Other-Than-Cost or
    
    
    Gross
    
    
    Gross
    
    
    
    
    
    
    % of
    
    
    TemporaryAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Total Fair
    
    
    ImpairmentsCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Value
    
    
    in AOCISecurity SectorCorporate Securities:Consumer discretionary
    
    $
    1,491.1
    
    
    $
    119.4
    
    
    $
    (10.7
    )
    
    $
    1,599.8
    
    
    
    7.4
    %
    
    $
    (2.8
    )Consumer staples
    
    
    1,943.8
    
    
    
    233.2
    
    
    
    (6.4
    )
    
    
    2,170.6
    
    
    
    10.1
    
    
    
    (1.4
    )Energy
    
    
    652.2
    
    
    
    74.9
    
    
    
    (2.9
    )
    
    
    724.2
    
    
    
    3.4
    
    
    
    Financials
    
    
    2,090.2
    
    
    
    106.0
    
    
    
    (56.0
    )
    
    
    2,140.2
    
    
    
    10.0
    
    
    
    (4.7
    )Health care
    
    
    1,143.4
    
    
    
    146.1
    
    
    
    (1.2
    )
    
    
    1,288.3
    
    
    
    6.0
    
    
    
    (1.9
    )Industrials
    
    
    2,286.0
    
    
    
    284.5
    
    
    
    (4.0
    )
    
    
    2,566.5
    
    
    
    12.0
    
    
    
    (0.4
    )Information technology
    
    
    393.1
    
    
    
    51.8
    
    
    
    (0.1
    )
    
    
    444.8
    
    
    
    2.1
    
    
    
    Materials
    
    
    1,197.8
    
    
    
    96.0
    
    
    
    (28.3
    )
    
    
    1,265.5
    
    
    
    5.9
    
    
    
    (12.7
    )Telecommunication services
    
    
    579.2
    
    
    
    50.4
    
    
    
    (6.3
    )
    
    
    623.3
    
    
    
    2.9
    
    
    
    (0.9
    )Utilities
    
    
    1,799.9
    
    
    
    168.7
    
    
    
    (12.5
    )
    
    
    1,956.1
    
    
    
    9.1
    
    
    
    (0.4
    )Total corporate securities
    
    
    13,576.7
    
    
    
    1,331.0
    
    
    
    (128.4
    )
    
    
    14,779.3
    
    
    
    68.9
    
    
    
    (25.2
    )U.S. government and agencies
    
    
    87.6
    
    
    
    8.4
    
    
    
    
    
    
    
    96.0
    
    
    
    0.5
    
    
    
    (0.1
    )State and political subdivisions
    
    
    468.8
    
    
    
    12.1
    
    
    
    (7.6
    )
    
    
    473.3
    
    
    
    2.2
    
    
    
    (0.2
    )Residential mortgage-backed securities:Agency
    
    
    3,170.8
    
    
    
    204.3
    
    
    
    (0.5
    )
    
    
    3,374.6
    
    
    
    15.7
    
    
    
    Non-agency:Prime
    
    
    374.5
    
    
    
    5.9
    
    
    
    (34.4
    )
    
    
    346.0
    
    
    
    1.6
    
    
    
    (30.5
    )Alt-A
    
    
    122.4
    
    
    
    4.7
    
    
    
    (7.7
    )
    
    
    119.4
    
    
    
    0.6
    
    
    
    (8.6
    )Total residential mortgage-backed securities
    
    
    3,667.7
    
    
    
    214.9
    
    
    
    (42.6
    )
    
    
    3,840.0
    
    
    
    17.9
    
    
    
    (39.1
    )Commercial mortgage-backed securities
    
    
    1,766.9
    
    
    
    152.3
    
    
    
    (8.2
    )
    
    
    1,911.0
    
    
    
    8.9
    
    
    
    (3.6
    )Other debt obligations
    
    
    328.7
    
    
    
    29.7
    
    
    
    (7.9
    )
    
    
    350.5
    
    
    
    1.6
    
    
    
    (8.5
    )Total
    
    $
    19,896.4
    
    
    $
    1,748.4
    
    
    $
    (194.7
    )
    
    $
    21,450.1
    
    
    
    100.0
    %
    
    $
    (76.7
    )
   50




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##### Table of Contents



As of December 31, 2009Other-Than-Cost or
    
    
    Gross
    
    
    Gross
    
    
    
    
    
    
    % of
    
    
    TemporaryAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Total Fair
    
    
    ImpairmentsCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Value
    
    
    in AOCISecurity SectorCorporate Securities:Consumer discretionary
    
    $
    1,083.4
    
    
    $
    41.9
    
    
    $
    (27.8
    )
    
    $
    1,097.5
    
    
    
    5.9
    %
    
    $
    (7.9
    )Consumer staples
    
    
    1,686.4
    
    
    
    84.3
    
    
    
    (14.3
    )
    
    
    1,756.4
    
    
    
    9.4
    
    
    
    (1.4
    )Energy
    
    
    651.4
    
    
    
    28.3
    
    
    
    (8.8
    )
    
    
    670.9
    
    
    
    3.6
    
    
    
    Financials
    
    
    2,109.2
    
    
    
    39.8
    
    
    
    (189.2
    )
    
    
    1,959.8
    
    
    
    10.6
    
    
    
    (5.8
    )Health care
    
    
    861.1
    
    
    
    59.1
    
    
    
    (4.1
    )
    
    
    916.1
    
    
    
    4.9
    
    
    
    (1.9
    )Industrials
    
    
    2,022.3
    
    
    
    90.3
    
    
    
    (27.5
    )
    
    
    2,085.1
    
    
    
    11.2
    
    
    
    (0.9
    )Information technology
    
    
    357.2
    
    
    
    27.9
    
    
    
    (0.3
    )
    
    
    384.8
    
    
    
    2.1
    
    
    
    Materials
    
    
    1,111.7
    
    
    
    39.1
    
    
    
    (49.0
    )
    
    
    1,101.8
    
    
    
    5.9
    
    
    
    (12.7
    )Telecommunication services
    
    
    572.0
    
    
    
    20.3
    
    
    
    (16.7
    )
    
    
    575.6
    
    
    
    3.1
    
    
    
    (1.2
    )Utilities
    
    
    1,837.5
    
    
    
    52.4
    
    
    
    (46.3
    )
    
    
    1,843.6
    
    
    
    9.9
    
    
    
    (0.5
    )Other
    
    
    8.0
    
    
    
    0.4
    
    
    
    
    
    
    
    8.4
    
    
    
    0.1
    
    
    
    Total corporate securities
    
    
    12,300.2
    
    
    
    483.8
    
    
    
    (384.0
    )
    
    
    12,400.0
    
    
    
    66.7
    
    
    
    (32.3
    )U.S. government and agencies
    
    
    41.6
    
    
    
    2.4
    
    
    
    (0.1
    )
    
    
    43.9
    
    
    
    0.2
    
    
    
    (0.1
    )State and political subdivisions
    
    
    518.4
    
    
    
    1.9
    
    
    
    (37.3
    )
    
    
    483.0
    
    
    
    2.6
    
    
    
    (1.3
    )Residential mortgage-backed securities:Agency
    
    
    2,936.8
    
    
    
    102.6
    
    
    
    (6.7
    )
    
    
    3,032.7
    
    
    
    16.3
    
    
    
    Non-agency:Prime
    
    
    449.8
    
    
    
    0.6
    
    
    
    (72.4
    )
    
    
    378.0
    
    
    
    2.0
    
    
    
    (31.7
    )Alt-A
    
    
    145.3
    
    
    
    2.1
    
    
    
    (21.9
    )
    
    
    125.5
    
    
    
    0.7
    
    
    
    (8.2
    )Subprime
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    Total residential mortgage-backed securities
    
    
    3,532.1
    
    
    
    105.3
    
    
    
    (101.0
    )
    
    
    3,536.4
    
    
    
    19.0
    
    
    
    (39.9
    )Commercial mortgage-backed securities
    
    
    1,805.6
    
    
    
    44.5
    
    
    
    (60.7
    )
    
    
    1,789.4
    
    
    
    9.7
    
    
    
    (4.0
    )Other debt obligations
    
    
    355.8
    
    
    
    13.1
    
    
    
    (27.3
    )
    
    
    341.6
    
    
    
    1.8
    
    
    
    (4.3
    )Total
    
    $
    18,553.7
    
    
    $
    651.0
    
    
    $
    (610.4
    )
    
    $
    18,594.3
    
    
    
    100.0
    %
    
    $
    (81.9
    )
 Fixed Maturity Securities by Contractual Maturity Date
  Residential Mortgage-Backed Securities (RMBS)
  51




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##### Table of Contents



As of September 30, 2010
    
    
    As of December 31, 2009% of Total
    
    
    
    
    
    
    % of TotalFair Value
    
    
    Invested Assets
    
    
    Fair Value
    
    
    Invested AssetsAgency
    
    $
    3,374.6
    
    
    
    14.4
    %
    
    $
    3,032.7
    
    
    
    15.0
    %Non-agency:Prime
    
    
    346.0
    
    
    
    1.5
    
    
    
    378.0
    
    
    
    1.9Alt-A
    
    
    119.4
    
    
    
    0.5
    
    
    
    125.5
    
    
    
    0.6Subprime
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    Subtotal non-agency
    
    
    465.4
    
    
    
    2.0
    
    
    
    503.7
    
    
    
    2.5Total
    
    $
    3,840.0
    
    
    
    16.4
    %
    
    $
    3,536.4
    
    
    
    17.5
    %
   As of September 30, 2010Highest Rating Agency RatingTotal as ofBB and
    
    
    
    
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Total
    
    
    20092007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    47.2
    
    
    $
    47.2
    
    
    $
    91.02006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.6
    
    
    
    122.7
    
    
    
    139.3
    
    
    
    177.02005
    
    
    
    
    
    
    9.2
    
    
    
    10.3
    
    
    
    58.9
    
    
    
    40.0
    
    
    
    118.4
    
    
    
    113.62004 & prior
    
    
    177.3
    
    
    
    14.1
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    192.0
    
    
    
    213.7Total amortized cost
    
    $
    177.3
    
    
    $
    23.3
    
    
    $
    10.3
    
    
    $
    75.5
    
    
    $
    210.5
    
    
    $
    496.9
    
    
    $
    595.3Total unrealized losses
    
    
    (0.5
    )
    
    
    (5.9
    )
    
    
    
    
    
    
    (8.5
    )
    
    
    (16.6
    )
    
    
    (31.5
    )
    
    
    (91.6
    )Total fair value
    
    $
    176.8
    
    
    $
    17.4
    
    
    $
    10.3
    
    
    $
    67.0
    
    
    $
    193.9
    
    
    $
    465.4
    
    
    $
    503.7
   52




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##### Table of Contents



Commercial Mortgage-Backed Securities (CMBS)
  As of September 30, 2010
    
    
    As of December 31, 2009% of Total
    
    
    
    
    
    
    % of TotalFair Value
    
    
    Invested Assets
    
    
    Fair Value
    
    
    Invested AssetsAgency
    
    $
    606.3
    
    
    
    2.6
    %
    
    $
    425.6
    
    
    
    2.1
    %Non-agency
    
    
    1,304.7
    
    
    
    5.6
    
    
    
    1,363.8
    
    
    
    6.8Total
    
    $
    1,911.0
    
    
    
    8.2
    %
    
    $
    1,789.4
    
    
    
    8.9
    %
   As of September 30, 2010Highest Rating Agency RatingAs ofBB and
    
    
    
    
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Total
    
    
    20092008
    
    $
    47.8
    
    
    $
    18.4
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66.2
    
    
    $
    66.02007
    
    
    447.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    449.1
    
    
    
    471.02006
    
    
    136.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.3
    
    
    
    147.9
    
    
    
    148.02005
    
    
    288.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288.8
    
    
    
    311.42004 & prior
    
    
    227.9
    
    
    
    
    
    
    
    5.5
    
    
    
    
    
    
    
    10.4
    
    
    
    243.8
    
    
    
    391.9Total amortized cost
    
    $
    1,148.9
    
    
    $
    18.4
    
    
    $
    5.5
    
    
    $
    
    
    
    $
    23.0
    
    
    $
    1,195.8
    
    
    $
    1,388.3Total unrealized gains (losses)
    
    
    115.5
    
    
    
    (2.0
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (4.3
    )
    
    
    108.9
    
    
    
    (24.5
    )Total fair value
    
    $
    1,264.4
    
    
    $
    16.4
    
    
    $
    5.2
    
    
    $
    
    
    
    $
    18.7
    
    
    $
    1,304.7
    
    
    $
    1,363.8
   As of September 30, 2010Super Senior (Post 2004)
    
    
    Other Structures (2005 and Prior)
    
    
    Total AAASecurities atOther
    
    
    
    
    
    
    AmortizedVintage
    
    Super Senior
    
    
    Mezzanine
    
    
    Junior
    
    
    Other Senior
    
    
    Subordinate
    
    
    Other
    
    
    Cost2008
    
    $
    47.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    47.82007
    
    
    447.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447.82006
    
    
    136.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.62005
    
    
    136.1
    
    
    
    31.2
    
    
    
    
    
    
    
    121.5
    
    
    
    
    
    
    
    
    
    
    
    288.82004 & prior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187.7
    
    
    
    40.2
    
    
    
    
    
    
    
    227.9Total
    
    $
    768.3
    
    
    $
    31.2
    
    
    $
    
    
    
    $
    309.2
    
    
    $
    40.2
    
    
    $
    
    
    
    $
    1,148.9
 53




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##### Table of Contents



As of December 31, 2009Total AAASuper Senior (Post 2004)
    
    
    Other Structures (2005 and Prior)
    
    
    Securities atOther
    
    
    
    
    
    
    AmortizedVintage
    
    Super Senior
    
    
    Mezzanine
    
    
    Junior
    
    
    Other Senior
    
    
    Subordinate
    
    
    Other
    
    
    Cost2008
    
    $
    66.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66.02007
    
    
    469.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    469.72006
    
    
    135.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135.72005
    
    
    147.4
    
    
    
    31.1
    
    
    
    
    
    
    
    132.8
    
    
    
    
    
    
    
    
    
    
    
    311.32004 & prior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310.6
    
    
    
    42.1
    
    
    
    19.4
    
    
    
    372.1Total
    
    $
    818.8
    
    
    $
    31.1
    
    
    $
    
    
    
    $
    443.4
    
    
    $
    42.1
    
    
    $
    19.4
    
    
    $
    1,354.8
  Asset-Backed Securities
  As of September 30, 2010
    
    
    As of December 31, 2009Other asset-backed securities
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueCredit cards
    
    $
    71.8
    
    
    $
    81.4
    
    
    $
    73.0
    
    
    $
    78.5Lease payments
    
    
    68.6
    
    
    
    71.1
    
    
    
    71.4
    
    
    
    67.6Trains
    
    
    29.3
    
    
    
    34.4
    
    
    
    30.6
    
    
    
    32.5Airplanes
    
    
    31.0
    
    
    
    31.9
    
    
    
    35.5
    
    
    
    35.5Other
    
    
    69.0
    
    
    
    68.1
    
    
    
    77.1
    
    
    
    69.9Total other asset-backed securities
    
    $
    269.7
    
    
    $
    286.9
    
    
    $
    287.6
    
    
    $
    284.0
 Return on Equity-Like Investments
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Public equity
    
    
    10.3
    %
    
    
    17.9
    %
    
    
    10.8
    %
    
    
    25.2
    %S&P 500 Total Return Index
    
    
    11.3
    
    
    
    15.6
    
    
    
    3.9
    
    
    
    19.3Difference
    
    
    (1.0
    )%
    
    
    2.3
    %
    
    
    6.9
    %
    
    
    5.9
    %
 Mortgage Loans
  54




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##### Table of Contents



Composition of Mortgage Loans
    As of September 30, 2010
    
    
    As of December 31, 2009% of
    
    
    
    
    
    
    % ofLoan-to-Value Ratio
    
    Carrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total< or = 50%
    
    $
    531.3
    
    
    
    35.4
    %
    
    $
    484.2
    
    
    
    40.1
    %51%  60%
    
    
    291.3
    
    
    
    19.4
    
    
    
    348.5
    
    
    
    28.961%  70%
    
    
    394.4
    
    
    
    26.3
    
    
    
    195.8
    
    
    
    16.271%  75%
    
    
    97.7
    
    
    
    6.5
    
    
    
    68.2
    
    
    
    5.676%  80%
    
    
    52.8
    
    
    
    3.5
    
    
    
    17.7
    
    
    
    1.581%  100%
    
    
    100.1
    
    
    
    6.7
    
    
    
    85.1
    
    
    
    7.1> 100%
    
    
    33.4
    
    
    
    2.2
    
    
    
    7.4
    
    
    
    0.6$
    1,501.0
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
    55




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##### Table of Contents



As of September 30, 2010
    
    
    As of December 31, 2009Region
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalCalifornia
    
    $
    449.4
    
    
    
    29.9
    %
    
    $
    346.0
    
    
    
    28.6
    %Washington
    
    
    259.7
    
    
    
    17.3
    
    
    
    222.9
    
    
    
    18.5Texas
    
    
    150.3
    
    
    
    10.0
    
    
    
    125.6
    
    
    
    10.4Oregon
    
    
    88.7
    
    
    
    5.9
    
    
    
    88.0
    
    
    
    7.3Florida
    
    
    52.0
    
    
    
    3.5
    
    
    
    23.9
    
    
    
    2.0Other
    
    
    500.9
    
    
    
    33.4
    
    
    
    400.5
    
    
    
    33.2Total
    
    $
    1,501.0
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
  As of September 30, 2010
    
    
    As of December 31, 2009Property Type
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalShopping Centers and Retail
    
    $
    634.9
    
    
    
    42.3
    %
    
    $
    472.9
    
    
    
    39.2
    %Office Buildings
    
    
    407.7
    
    
    
    27.2
    
    
    
    339.2
    
    
    
    28.1Industrial
    
    
    394.1
    
    
    
    26.3
    
    
    
    345.7
    
    
    
    28.6Multi-Family
    
    
    45.4
    
    
    
    3.0
    
    
    
    34.9
    
    
    
    2.9Other
    
    
    18.9
    
    
    
    1.2
    
    
    
    14.2
    
    
    
    1.2Total
    
    $
    1,501.0
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
 Maturity Date of Mortgage Loans
  As of September 30, 2010
    
    
    As of December 31, 2009Years to Maturity
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalDue in one year or less
    
    $
    7.0
    
    
    
    0.5
    %
    
    $
    2.4
    
    
    
    0.2
    %Due after one year through five years
    
    
    112.0
    
    
    
    7.5
    
    
    
    100.0
    
    
    
    8.3Due after five years through ten years
    
    
    770.9
    
    
    
    51.4
    
    
    
    541.8
    
    
    
    44.9Due after ten years
    
    
    611.1
    
    
    
    40.6
    
    
    
    562.7
    
    
    
    46.6Total
    
    $
    1,501.0
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
 Mortgage Loan Quality
   Investments in Limited Partnerships  Affordable Housing Investments
  56




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Amortization related to
affordable housing
investments, net of taxes
    
    $
    (1.5
    )
    
    $
    (1.5
    )
    
    $
    (4.3
    )
    
    $
    (4.5
    )Affordable housing tax credits
    
    
    2.5
    
    
    
    2.4
    
    
    
    8.1
    
    
    
    7.2Impact to net income
    
    $
    1.0
    
    
    $
    0.9
    
    
    $
    3.8
    
    
    $
    2.7
  EstimatedImpact to NetIncomeRemainder of 2010
    
    $
    1.32011
    
    
    7.42012
    
    
    11.02013 and beyond
    
    
    36.2Estimated impact to net income
    
    $
    55.9
 Liquidity and Capital Resources
    
    
    Sales for the nine months ended September 30, 2010 were
solid across all distribution
channels. Although below the record levels for the same period in 2009, sales continued to
generate strong cash inflows on our deposit contracts (annuities and universal life
policies, including BOLI).
    
    While certain lapses and surrenders occur in the normal course of business, these
lapses and surrenders have not deviated materially from management expectations.
    
    The amount of accumulated other comprehensive income (loss), net of taxes, on our
consolidated balance sheets increased to income of $819.4 as of September 30, 2010, from a
loss of $49.7 as of December 31, 2009. The primary driver was an increase in the fair value
of our available-for-sale securities, due to the bond markets showing signs of
stabilization and credit spreads tightening.
    
    As of September 30, 2010, we had the ability to borrow, on an unsecured basis, up to a
maximum principal amount of $200.0 under a revolving line of credit arrangement.
 57




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##### Table of Contents




    
    To support the sales of our products and maintain financial strength ratings, we target
a risk-based capital level of at least 350% in our life insurance company, Symetra Life
Insurance Company. As of September 30, 2010, Symetra Life Insurance Company had an
estimated risk-based capital ratio of 501%.
 Liquidity Requirements and Sources of Liquidity
   As of September 30, 2010
    
    
    As of December 31, 2009Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalIlliquid LiabilitiesStructured settlements & other SPIAs(1)
    
    $
    6,671.6
    
    
    
    32.7
    %
    
    $
    6,703.6
    
    
    
    35.1
    %Deferred annuities with 5-year payout provision or MVA(2)
    
    
    378.6
    
    
    
    1.9
    
    
    
    381.0
    
    
    
    2.0Traditional insurance (net of reinsurance)(3)
    
    
    186.7
    
    
    
    0.9
    
    
    
    185.8
    
    
    
    1.0Group health & life (net of reinsurance)(3)
    
    
    106.8
    
    
    
    0.5
    
    
    
    97.2
    
    
    
    0.5Total illiquid liabilities
    
    
    7,343.7
    
    
    
    36.0
    
    
    
    7,367.6
    
    
    
    38.6Somewhat Liquid LiabilitiesBank-owned life insurance (BOLI)(4)
    
    
    4,047.6
    
    
    
    19.8
    
    
    
    3,865.1
    
    
    
    20.2Deferred annuities with surrender charges of 5% or higher
    
    
    5,782.6
    
    
    
    28.4
    
    
    
    4,788.2
    
    
    
    25.1Universal life with surrender charges of 5% or higher
    
    
    171.4
    
    
    
    0.8
    
    
    
    152.5
    
    
    
    0.8Total somewhat liquid liabilities
    
    
    10,001.6
    
    
    
    49.0
    
    
    
    8,805.8
    
    
    
    46.1Fully Liquid LiabilitiesDeferred annuities with surrender charges of:3% up to 5%
    
    
    430.1
    
    
    
    2.1
    
    
    
    412.4
    
    
    
    2.2Less than 3%
    
    
    226.8
    
    
    
    1.1
    
    
    
    87.6
    
    
    
    0.5No surrender charges(5)
    
    
    1,935.1
    
    
    
    9.5
    
    
    
    1,950.7
    
    
    
    10.2Universal life with surrender charges less than 5%
    
    
    440.3
    
    
    
    2.2
    
    
    
    441.7
    
    
    
    2.3BOLI(6)
    
    
    1.5
    
    
    
    0.0
    
    
    
    3.7
    
    
    
    0.0Traditional insurance (net of reinsurance)(6)
    
    
    2.2
    
    
    
    0.0
    
    
    
    2.1
    
    
    
    0.0Group health & life (net of reinsurance)(6)
    
    
    14.5
    
    
    
    0.1
    
    
    
    18.4
    
    
    
    0.1Total fully liquid liabilities
    
    
    3,050.5
    
    
    
    15.0
    
    
    
    2,916.6
    
    
    
    15.3Total
    
    $
    20,395.8
    
    
    
    100.0
    %
    
    $
    19,090.0
    
    
    
    100.0
    %
 
 (1)
    
    These contracts cannot be surrendered. The benefits are specified in the contracts as fixed amounts to be paid over the next several decades.(2)
    
    In a liquidity crisis situation, we could invoke the five-year payout provision so that the contract value with interest is paid out ratably
over five years.(3)
    
    The surrender value on these contracts is generally zero. Represents incurred but not reported claim liabilities.(4)
    
    The biggest deterrent to surrender is the taxation on the gain within these contracts, which includes a 10% non-deductible penalty tax. Banks
can exchange certain of these contracts with other carriers, tax-free. However, a significant portion of this business does not qualify for this
tax-free treatment due to the employment status of the original covered employees.    footnotes
continued on following page
 58




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##### Table of Contents



(5)
    
    Approximately half of this business has been with the Company for over a decade, contains lifetime minimum interest guarantees of 4.0% to 4.5%,
and has been free of surrender charges for many years. This business has experienced high persistency given the high lifetime guarantees that
have not been available in the market on new issues for many years.(6)
    
    Represents reported claim liabilities. Liquid Assets
     Capitalization
  As of,
    
    
    As ofSeptember 30, 2010
    
    
    December 31, 2009Notes payable
    
    $
    449.0
    
    
    $
    448.9Stockholders equity
    
    
    2,711.3
    
    
    
    1,433.3Total capital
    
    $
    3,160.3
    
    
    $
    1,882.2
  Dividends
  59




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##### Table of Contents



Cash Flows
  Nine Months Ended September 30,2010
    
    
    2009Net cash flows provided by operating activities
    
    $
    665.2
    
    
    $
    575.4Net cash flows used in investing activities
    
    
    (1,645.0
    )
    
    
    (1,895.5
    )Net cash flows provided by financing activities
    
    
    919.2
    
    
    
    1,093.8
 Operating Activities
   Investing Activities
   Financing Activities
   Off-Balance Sheet Transactions
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  60




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Limitations on Controls
  Changes in Internal Control Over Financial Reporting
  61




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##### Table of Contents



PART II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description10.1
    
    Form of Stock Option Award Agreement*10.2
    
    Group Short Term Disability Reinsurance Agreement dated as of January 1, 1999 (the Short
Term Agreement) between Safeco Life Insurance Company and Reliance Standard Life Insurance
Company, doing business as Custom Disability Solutions, successor to Duncanson & Holt
Services, Inc. (including Amendment No. 1 to the Short Term Agreement dated as of July 1, 2006
and Amendment No. 2 to the Short Term Agreement dated as of December 8, 2006)*10.3
    
    Group Long Term Disability Reinsurance Agreement dated as of January 1, 1999 (the Long Term
Agreement) between Safeco Life Insurance Company and Reliance Standard Life Insurance
Company, doing business as Custom Disability Solutions, successor to Duncanson & Holt
Services, Inc. (including Amendment No. 1 to the Long Term Agreement dated as of January 1,
2000, Amendment to the Long Term Agreement dated as of January 1, 2006, Amendment No. 3 to the
Long Term Agreement dated as of July 1, 2006, Amendment No. 4 to the Long Term Agreement dated
as of December 8, 2006 and Amendment No. 5 to the Long Term Agreement dated as of September 1,
2008)*31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended*31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended*32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith. 62




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##### Table of Contents



SIGNATURES
  SYMETRA FINANCIAL CORPORATIONDate:  November 10, 2010
    By:
    /s/ Thomas M. MarraName:
    Thomas M. MarraTitle:
    President and Chief Executive OfficerDate:  November 10, 2010
    By:
    /s/ Margaret A. MeisterName:
    Margaret A. MeisterTitle:
    Executive Vice President and Chief Financial Officer 63