Western Union 2014 Annual Report Download - page 252

2014 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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6. Related Party Transactions
The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The
Company pays these agents, as it does its other agents, commissions for money transfer and other services provided on the
Company's behalf. Commission expense recognized for these agents for the years ended December 31, 2014, 2013 and 2012 totaled
$70.2 million, $65.5 million and $66.1 million, respectively.
Prior to 2014, the Company had a director who was also a director for a company that previously held significant investments
in two of the Company's existing agents. During the first quarter of 2012, this company sold its interest in one of these agents, so
that for the year ended December 31, 2013, this company held a significant investment in only one agent. These agents had been
agents of the Company prior to the director being appointed to the board. The Company recognized commission expense of $15.1
million and $28.9 million for the years ended December 31, 2013 and 2012, respectively, related to these agents during the periods
the agents were affiliated with the Company's director. In 2014, this director did not stand for re-election as a director with the
Company.
7. Investment Securities
Investment securities included in "Settlement assets" in the Consolidated Balance Sheets consist primarily of highly-rated
state and municipal debt securities, including fixed rate term notes, variable rate demand notes and a short-term bond mutual fund.
The short-term bond mutual fund can be redeemed daily and holds fixed income securities with combined average maturities of
one year or less. 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 have varying maturities through 2050. 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 highly-rated, investment grade securities and such investments are restricted to satisfy outstanding settlement obligations
in accordance with applicable state and foreign country requirements.
In 2013, the Company invested in a short-term taxable bond mutual fund which held a diversified portfolio of fixed income
securities. During the first quarter of 2014, the Company sold this investment for $100.2 million, which was also the fair value of
this investment as of December 31, 2013. The investment was included in "Other assets" in the Company's Consolidated Balance
Sheets as of December 31, 2013.
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.
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, 2014, 2013 and 2012 were $17.7 billion, $19.0 billion and $16.3 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.