Western Union 2012 Annual Report Download - page 110

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
105
7. Investment Securities
Investment securities, classified within “Settlement assets” in the Consolidated Balance Sheets, consist primarily of highly-
rated state and municipal debt securities, including variable rate demand notes. Variable rate demand note securities can be put
(sold at par) typically on a daily basis with settlement periods ranging from the same day to one week, but that have varying
maturities through 2049. Generally, these securities are used by the Company for short-term liquidity needs and are held for short
periods of time, typically less than 30 days. The Company is required to hold specific highly-rated, investment grade securities
and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable state and foreign
country requirements. The substantial majority of the Company's investment securities are classified as available-for-sale and
recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk. Western
Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through
investment diversification. As of December 31, 2012, the majority of the Company's investment securities had credit ratings of
“AA-” or better from a major credit rating agency.
Unrealized gains and losses on available-for-sale securities are excluded from earnings and presented as a component of
accumulated other comprehensive income or loss, net of related deferred taxes. Proceeds from the sale and maturity of available-
for-sale securities during the years ended December 31, 2012, 2011 and 2010 were $16.3 billion, $14.2 billion and $14.7 billion,
respectively.
Gains and losses on investments are calculated using the specific-identification method and are recognized during the period
in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could
indicate an impairment exists include, but are not limited to: earnings performance, changes in credit rating or adverse changes in
the regulatory or economic environment of the asset. If potential impairment exists, the Company assesses whether it has the intent
to sell the debt security, more likely than not will be required to sell the debt security before its anticipated recovery or expects
that some of the contractual cash flows will not be received. The Company had no material other-than-temporary impairments
during the periods presented.
The components of investment securities are as follows (in millions):
December 31, 2012
Amortized
Cost
Fair
Val ue
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Unrealized
Gains/
(Losses)
State and municipal debt securities (a) . . . . . . . . . . . . . . . $ 991.5 $ 1,003.7 $ 12.5 $ (0.3) $ 12.2
State and municipal variable rate demand notes . . . . . . . . 463.3 463.3———
Corporate debt and other . . . . . . . . . . . . . . . . . . . . . . . . . . 47.7 47.8 0.1 — 0.1
$ 1,502.5 $ 1,514.8 $ 12.6 $ (0.3) $ 12.3
December 31, 2011
Amortized
Cost
Fair
Val ue
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Unrealized
Gains/
(Losses)
State and municipal debt securities (a) . . . . . . . . . . . . . . . $ 858.5 $ 866.5 $ 10.4 $ (2.4) $ 8.0
State and municipal variable rate demand notes . . . . . . . . 376.9 376.9———
Corporate debt and other . . . . . . . . . . . . . . . . . . . . . . . . . . 88.7 88.6 0.6 (0.7)(0.1)
$ 1,324.1 $ 1,332.0 $ 11.0 $ (3.1) $ 7.9
____________
(a) The majority of these securities are fixed rate instruments.
There were no investments with a single issuer or individual securities representing greater than 10% of total investment
securities as of December 31, 2012 and 2011.