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BUSINESS SEGMENTS
 6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
BUSINESS SEGMENTS
BUSINESS SEGMENTS

We view our operations as three insurance product lines (annuity, health and life) and the investment and fee revenue segments. Our segments are aligned based on their common characteristics, comparability of profit margins and the way management makes operating decisions and assesses the performance of the business.

Our insurance product line segments (including annuity, health and life) include marketing, underwriting and administration of the policies our insurance subsidiaries sell. The business written in each of the three product categories through all of our insurance subsidiaries is aggregated allowing management and investors to assess the performance of each product category. When analyzing profitability of these segments, we use insurance product margin as the measure of profitability, which is: (i) insurance policy income; and (ii) net investment income allocated to the insurance product lines; less (i) insurance policy benefits and interest credited to policyholders; and (ii) amortization, non-deferred commissions and advertising expense. Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average insurance liabilities, net of insurance intangibles, for the block in each period.

Income from insurance products is the sum of the insurance margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our fee income business, investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes insurance product margin and income from insurance products help provide a better understanding of the business and a more meaningful analysis of the results of our insurance product lines.

We market our insurance products through the Consumer and Worksite Divisions that reflect the customers served by the Company.

The Consumer Division serves individual consumers, engaging with them on the phone, online, face-to-face with agents, or through a combination of sales channels. This structure unifies consumer capabilities into a single division and integrates the strength of our agent sales forces and industry-leading direct-to-consumer business with proven experience in advertising, web/digital and call center support.

The Worksite Division focuses on worksite and group sales for businesses, associations, and other membership groups, interacting with customers at their place of employment. By creating a dedicated Worksite Division, we are bringing a sharper focus to this high-growth business while further capitalizing on the strength of our recent acquisitions of Web Benefits Design Corporation ("WBD") in April 2019 and DirectPath in February 2021. Sales in the Worksite Division have been particularly adversely impacted by the COVID-19 pandemic given the challenges of interacting with customers at their place of employment.

The Consumer and Worksite Divisions are primarily focused on marketing insurance products, several types of which are sold in both divisions and underwritten in the same manner. Sales of group underwritten policies are currently not significant, but are expected to increase within the Worksite Division.

The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability of this segment is the total net investment income not allocated to the insurance products. Investment income not allocated to product lines represents net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable and investment borrowings; and (iv) certain expenses related to benefit plans that are offset by special-purpose investment income. Investment income not allocated to product lines includes investment income on investments in excess of average insurance liabilities, investments held by our holding companies, the spread we earn from the Federal Home Loan Bank ("FHLB") investment borrowing program and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from company-owned life insurance ("COLI") and alternative investments income not allocated to product lines), net of interest expense on corporate debt.

Our fee and other revenue segment includes the earnings generated from sales of third-party insurance products, services provided by WBD (our wholly owned on-line benefit administration firm), DirectPath (a national provider of year-round technology-driven employee benefits management services) and the operations of our broker-dealer and registered investment advisor.
Expenses not allocated to product lines include the expenses of our corporate operations, excluding interest expense on debt.

We measure segment performance by excluding net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), fair value changes related to the agent deferred compensation plan, income taxes and other non-operating items consisting primarily of earnings attributable to VIEs ("pre-tax operating earnings") because we believe that this performance measure is a better indicator of the ongoing business and trends in our business.  Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of net realized investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.

The net realized investment gains (losses), fair value changes in embedded derivative liabilities (net of related amortization), fair value changes related to the agent deferred compensation plan and other non-operating items consisting primarily of earnings attributable to VIEs depend on market conditions or represent unusual items that do not necessarily relate to the underlying business of our segments.  Net realized investment gains (losses) and fair value changes in embedded derivative liabilities (net of related amortization) may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business.

Operating information by segment is as follows (dollars in millions):

Three months endedSix months ended
June 30,June 30,
 2021202020212020
Revenues:  
Annuity:  
Insurance policy income$4.3 $4.5 $9.7 $10.1 
Net investment income114.9 116.6 230.6 234.0 
Total annuity revenues119.2 121.1 240.3 244.1 
Health:
Insurance policy income415.4 426.5 831.9 855.5 
Net investment income71.6 70.1 143.1 140.5 
Total health revenues 487.0 496.6 975.0 996.0 
Life:
Insurance policy income210.8 194.3 421.3 388.4 
Net investment income36.1 34.7 71.9 69.0 
Total life revenues246.9 229.0 493.2 457.4 
Change in market values of the underlying options supporting the fixed index annuity and life products (offset by market value changes credited to policyholder balances)76.1 50.7 118.6 (85.8)
Investment income not allocated to product lines72.5 37.1 137.4 109.5 
Fee revenue and other income:
Fee income31.1 20.7 63.4 49.5 
Amounts netted in expenses not allocated to product lines1.8 1.7 8.6 3.5 
Total segment revenues$1,034.6 $956.9 $2,036.5 $1,774.2 


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Three months endedSix months ended
June 30,June 30,
 2021202020212020
Expenses:
Annuity:
Insurance policy benefits$1.3 $(107.7)$7.5 $(102.2)
Interest credited36.9 43.6 75.6 85.6 
Amortization and non-deferred commissions15.0 61.4 33.3 77.4 
Total annuity expenses 53.2 (2.7)116.4 60.8 
Health:
Insurance policy benefits323.3 359.0 629.9 712.8 
Amortization and non-deferred commissions42.8 42.1 99.5 100.8 
Total health expenses366.1 401.1 729.4 813.6 
Life:
Insurance policy benefits149.5 147.8 313.1 279.7 
Interest credited 11.0 10.9 21.6 21.2 
Amortization, non-deferred commissions and advertising expense46.7 34.2 91.7 76.1 
Total life expenses207.2 192.9 426.4 377.0 
Allocated expenses 141.6 128.1 282.7 264.7 
Expenses not allocated to product lines25.6 40.2 54.4 55.8 
Market value changes of options credited to fixed index annuity and life policyholders76.1 50.7 118.6 (85.8)
Amounts netted in investment income not allocated to product lines:
Interest expense 18.1 19.4 36.3 42.1 
Other expenses 6.6 9.5 10.3 1.8 
Expenses netted in fee revenue:
Distribution and commission expenses24.5 15.5 49.5 36.5 
Total segment expenses919.0 854.7 1,824.0 1,566.5 
Pre-tax measure of profitability:
Annuity margin66.0 123.8 123.9 183.3 
Health margin120.9 95.5 245.6 182.4 
Life margin39.7 36.1 66.8 80.4 
Total insurance product margin226.6 255.4 436.3 446.1 
Allocated expenses(141.6)(128.1)(282.7)(264.7)
Income from insurance products85.0 127.3 153.6 181.4 
Fee income6.6 5.2 13.9 13.0 
Investment income not allocated to product lines47.8 8.2 90.8 65.6 
Expenses not allocated to product lines(23.8)(38.5)(45.8)(52.3)
Operating earnings before taxes 115.6 102.2 212.5 207.7 
Income tax expense on operating income 26.5 22.8 48.2 44.0 
Net operating income $89.1 $79.4 $164.3 $163.7 
A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income is as follows (dollars in millions):
Three months endedSix months ended
June 30,June 30,
 2021202020212020
Total segment revenues$1,034.6 $956.9 $2,036.5 $1,774.2 
Net realized investment gains (losses)31.3 43.8 28.5 (71.7)
Revenues related to earnings attributable to VIEs7.2 8.7 14.1 19.4 
Fee revenue related to transition services agreement— 4.8 — 9.5 
Consolidated revenues1,073.1 1,014.2 2,079.1 1,731.4 
Total segment expenses919.0 854.7 1,824.0 1,566.5 
Insurance policy benefits - fair value changes in embedded derivative liabilities
59.3 36.0 (49.8)119.8 
Amortization related to fair value changes in embedded derivative liabilities
(14.4)(8.9)12.6 (26.0)
Amortization related to net realized investment gains (losses)1.3 .3 1.3 (3.1)
Expenses attributable to VIEs6.3 9.4 12.6 20.4 
Fair value changes related to agent deferred compensation plan— 13.2 (13.2)13.2 
Expenses related to transition services agreement— 4.1 — 6.2 
Consolidated expenses971.5 908.8 1,787.5 1,697.0 
Income before tax101.6 105.4 291.6 34.4 
Income tax expense (benefit):
Tax expense on period income23.6 23.4 66.2 7.6 
Valuation allowance for deferred tax assets and other tax items— — — (34.0)
Net income$78.0 $82.0 $225.4 $60.8