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Realized and unrealized losses included in earnings during 2010 included $0.2 million of
other-than-temporary impairments (“OTTI”) of Level 3 mortgage-backed securities that were held by
the Company at December 31, 2010. OTTI is recorded in Net impairment losses on securities on the
Consolidated Statements of Earnings. Sales and redemptions in 2010 include sales of Lehman Brothers
debt securities in the third quarter, which resulted in no additional losses. The Company’s remaining
investment in Lehman Brothers debt securities is valued at $0.5 million.
For purposes of comparison, the following tables present additional information about Level 3 assets
measured at fair value on a recurring basis for the year ended December 31, 2009:
Twelve Months Ended,
December 31, 2009
Total Level 3
Securities
Corporate Debt
Securities
AB and MB
Securities
ARS - Muni Debt
Securities
ARS - Preferred
Securities
Balance, beginning of period . . . . $26.1 $ 0.9 $ 0.5 $20.8 $ 3.9
Pre-tax cumulative effect adj —
Retained Earnings . . . . . . . . . . 2.1 1.4 — 0.7 —
Pre-tax cumulative effect adj —
Accum Other Comp Loss . . . . . (2.1) (1.4) — (0.7) —
Realized and unrealized
gains/(losses) included in
earnings . . . . . . . . . . . . . . . . . . (2.9) (1.2) (0.3) (1.4) —
Unrealized gains/(losses)
included in comprehensive
income . . . . . . . . . . . . . . . . . . . 1.0 1.7 0.2 (0.4) (0.5)
Purchases, sales, issuances, and
settlements, net . . . . . . . . . . . . (1.5) (0.4) (0.7) (0.4) —
Transfers in and/or out of
Level3................... 2.7 — 2.7 — —
Balance, end of period . . . . . . . . . $25.4 $ 1.0 $ 2.4 $18.6 $ 3.4
AB = Asset-backed
MB = Mortgage-backed
ARS = Auction rate security
See Note 7 to the Consolidated Financial Statements regarding the cumulative effect transition adjustment
related to the FASB’s amended guidance for determining other-than-temporary impairment (“FASB OTTI
guidance”).
Realized and unrealized losses of $2.9 million during 2009 were recognized in the Consolidated
Statements of Earnings related to the Company’s Level 3 assets, nearly all of which related to assets
still held at the balance sheet date. Of this amount, $2.7 million was recognized in Net impairment losses
on securities and calculated in accordance with the new FASB OTTI guidance and $0.2 million was
recognized in Other (income) expense, net in the first quarter of 2009 as determined under the prior OTTI
guidance. The 2009 total is primarily driven by credit losses of $1.2 million related to Lehman Brothers debt
securities and $1.4 million related to one of the Company’s municipal auction rate securities. It should be
noted that all of the 2009 charges related to Lehman Brothers and $0.7 million of the 2009 charge related to
the municipal auction rate security are recycled charges that were recognized in 2008 Net earnings and
reversed through Retained earnings on April 1, 2009 in the transition adjustment required under the
amended FASB OTTI guidance.
There were no purchases of Level 3 securities in 2009. The Purchases, sales, issuances, and settlements,
net total relate to sales of various security types as indicated in the table above.
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