Western Union 2008 Annual Report Download - page 63

6161
Notes to Consolidated
Financial Statements
short-term liquidity needs and are held for short peri-
ods of time, typically less than 30 days. As a result, this
has increased the frequency of purchases and proceeds
received by the Company. At December 31, 2008, 53%
of the Company’s investments in state and municipal
debt securities were variable rate demand notes and the
remainder are fixed rate securities.
Gains and losses on investments are calculated using
the specific-identification method and are recognized
during the period the investment is sold or when an invest-
ment experiences an other-than-temporary decline in
value below cost or amortized cost. When an investment
is deemed to have an other-than-temporary decline in
value it is reduced to its fair value, which becomes the
new cost basis of the investment. Western Union con-
siders both qualitative and quantitative indicators when
judging whether a decline in value of an investment is
other-than-temporary in nature, including, but not limited
to, the length of time the investment has been in an unre-
alized loss position, the significance of the unrealized loss
relative to the carrying amount of the investment and our
intent and ability to hold the investment until a forecasted
recovery.
Actual maturities may differ from contractual maturi-
ties because issuers may have the right to call or prepay
the obligations or the Company may have the right to put
the obligation back to the issuer prior to its contractual
maturity.
During the year ended December 31, 2008, the
Company recognized an other-than-temporary impair-
ment of $1.7 million on its preferred stock investments
in the Federal Home Loan Mortgage Corporation, a
government sponsored enterprise, and a realized loss of
$2.9 million on the later sale of these investments during
the year ended December 31, 2008, for a total impact of
$4.6 million. As of December 31, 2008, the Company has
no remaining investments in preferred stock of government
sponsored enterprises.
On July 18, 2008, the Company entered into an agree-
ment with IPS, a subsidiary of First Data, which modified the
existing business relationship with respect to the issuance
and processing of money orders. Under the terms of the
agreement, beginning on October 1, 2009 (the “Transition
Date”), IPS will assign and transfer to the Company certain
operating assets used by IPS to issue money orders and an
amount of cash sufficient to satisfy all outstanding money
order liabilities. On the Transition Date, the Company will
assume IPS’s role as issuer of the money orders, includ-
ing its obligation to pay outstanding money orders, and
will terminate the existing agreement whereby IPS pays
Western Union a fixed return on the outstanding money
order balances (which vary from day to day but approxi-
mate $800 million). Following the Transition Date, Western
The components of investment securities, all of which are classified as available-for-sale, are as follows (in millions):
Gross Gross Net
Amortized Fair Unrealized Unrealized Unrealized
December 31, 2008 Cost Value Gains Losses Gains/(Losses)
State and municipal obligations $400.1 $401.7 $2.5 $(0.9) $ 1.6
Debt securities issued by foreign governments 4.0 3.9 — (0.1) (0.1)
$404.1 $405.6 $2.5 $(1.0) $ 1.5
Gross Gross Net
Amortized Fair Unrealized Unrealized Unrealized
December 31, 2007 Cost Value Gains Losses Gains/(Losses)
State and municipal obligations $187.3 $188.0 $0.7 $ — $ 0.7
Preferred stock of a government sponsored enterprise 6.9 5.8 — (1.1) (1.1)
$194.2 $193.8 $0.7 $(1.1) $(0.4)
There were no investments with a single issuer or individual securities representing greater than 10% of total
investment securities as of December31, 2008 and 2007.
The following summarizes contractual maturities of investment securities as of December31, 2008 (in millions):
Amortized Fair
Cost Value
Due within 1 year $ 45.9 $ 46.2
Due after 1 year through 5 years 127.8 128.7
Due after 5 years through 10 years 2.4 2.5
Due after 10 years 228.0 228.2
$404.1 $405.6