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Fair Value of Financial Instruments | 3 Months Ended
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Dec. 31, 2014
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s consolidated assets and liabilities measured at fair value are summarized according to the hierarchy previously described as follows:
| December 31, 2014 |  | September 30, 2014
| Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent purchase price reduction receivable | $ | — |  |  | $ | — |  |  | $ | 41.5 |  |  | $ | 41.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 41.5 |  |  | $ | 41.5 |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | — |  |  | 0.6 |  |  | — |  |  | 0.6 |  |  | — |  |  | 0.6 |  |  | — |  |  | 0.6 |
Commodity swap and option agreements | — |  |  | 19.9 |  |  | — |  |  | 19.9 |  |  | — |  |  | 3.2 |  |  | — |  |  | 3.2 |
Foreign exchange forward agreements | — |  |  | 17.3 |  |  | — |  |  | 17.3 |  |  | — |  |  | 12.8 |  |  | — |  |  | 12.8 |
Call options and futures contracts | — |  |  | 306.2 |  |  | — |  |  | 306.2 |  |  | — |  |  | 296.3 |  |  | — |  |  | 296.3 |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | — |  |  | 1,804.5 |  |  | 34.6 |  |  | 1,839.1 |  |  | — |  |  | 1,755.9 |  |  | 37.0 |  |  | 1,792.9 |
Commercial mortgage-backed securities | — |  |  | 548.0 |  |  | 120.4 |  |  | 668.4 |  |  | — |  |  | 553.8 |  |  | 83.1 |  |  | 636.9 |
Corporates | — |  |  | 8,813.8 |  |  | 907.6 |  |  | 9,721.4 |  |  | — |  |  | 8,945.8 |  |  | 850.0 |  |  | 9,795.8 |
Hybrids | — |  |  | 1,301.5 |  |  | — |  |  | 1,301.5 |  |  | — |  |  | 1,316.1 |  |  | — |  |  | 1,316.1 |
Municipals | — |  |  | 1,323.1 |  |  | 38.8 |  |  | 1,361.9 |  |  | — |  |  | 1,222.6 |  |  | 37.2 |  |  | 1,259.8 |
Residential mortgage-backed securities | — |  |  | 2,201.9 |  |  | — |  |  | 2,201.9 |  |  | — |  |  | 2,114.0 |  |  | — |  |  | 2,114.0 |
U.S. Government | 401.6 |  |  | 182.0 |  |  | — |  |  | 583.6 |  |  | 115.6 |  |  | 180.4 |  |  | — |  |  | 296.0 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale | 57.1 |  |  | 562.7 |  |  | 6.1 |  |  | 625.9 |  |  | 59.2 |  |  | 598.4 |  |  | 6.0 |  |  | 663.6 |
Trading | 91.5 |  |  | — |  |  | — |  |  | 91.5 |  |  | 104.5 |  |  | — |  |  | — |  |  | 104.5 |
Other invested assets | — |  |  | 2.0 |  |  | 11.8 |  |  | 13.8 |  |  | — |  |  | 2.1 |  |  | 11.2 |  |  | 13.3 |
Funds withheld receivable (a) | — |  |  | 512.6 |  |  | — |  |  | 512.6 |  |  | — |  |  | 154.4 |  |  | — |  |  | 154.4 |
Total financial assets | $ | 550.2 |  |  | $ | 17,596.1 |  |  | $ | 1,160.8 |  |  | $ | 19,307.1 |  |  | $ | 279.3 |  |  | $ | 17,156.4 |  |  | $ | 1,066.0 |  |  | $ | 18,501.7 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FIA embedded derivatives, included in contractholder funds | $ | — |  |  | $ | — |  |  | $ | 2,140.2 |  |  | $ | 2,140.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,908.1 |  |  | $ | 1,908.1 |
Front Street future policyholder benefit liability | — |  |  | — |  |  | 496.4 |  |  | 496.4 |  |  | — |  |  | — |  |  | 151.3 |  |  | 151.3 |
Foreign exchange forward agreements and contracts | — |  |  | 2.6 |  |  | — |  |  | 2.6 |  |  | — |  |  | 0.1 |  |  | — |  |  | 0.1 |
Futures contracts | — |  |  | 1.9 |  |  | — |  |  | 1.9 |  |  | — |  |  | 0.4 |  |  | — |  |  | 0.4 |
Commodity contracts | — |  |  | 0.9 |  |  | — |  |  | 0.9 |  |  | — |  |  | 0.5 |  |  | — |  |  | 0.5 |
Interest rate contracts | — |  |  | 1.9 |  |  | — |  |  | 1.9 |  |  | — |  |  | 1.8 |  |  | — |  |  | 1.8 |
Total financial liabilities | $ | — |  |  | $ | 7.3 |  |  | $ | 2,636.6 |  |  | $ | 2,643.9 |  |  | $ | — |  |  | $ | 2.8 |  |  | $ | 2,059.4 |  |  | $ | 2,062.2 |
(a) included in other assets in the accompanying unaudited Consolidated Balance Sheets. Valuation Methodologies Fixed Maturity Securities, Equity Securities and Other Invested Assets FGL measures the fair value of its securities based on assumptions used by market participants in pricing the security. The appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and FGL will then consistently apply the valuation methodology to measure the security’s fair value. FGL’s fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach include a third-party pricing service, independent broker quotations or pricing matrices. FGL uses observable and unobservable inputs in its valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. In addition, market indicators and industry and economic events are monitored and further market data will be acquired when certain thresholds are met. For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. The significant unobservable input used in the fair value measurement of equity securities available-for-sale for which the market-approach valuation technique is employed, is yields for comparable securities. Increase (decrease) in such yields, respectively, would result in lower or higher fair value measurements. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. Management believes the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices. FGL did not adjust prices received from third parties as of December 31, 2014 and September 30, 2014. However, FGL does analyze the third-party valuation methodologies and its related inputs to perform assessments to determine the appropriate level within the fair value hierarchy. Fair value of FGL's available-for-sale embedded derivative, included in "Other invested assets", is based on an unobservable input, the net asset value of the AnchorPath Fund at the balance sheet date. The available-for-sale embedded derivative is similar to a call option on the net asset value of the AnchorPath Fund with a strike price of zero since FGL will not be required to make any additional payments at maturity of the fund-linked note in order to receive the net asset value of the AnchorPath Fund on the maturity date. Therefore, the Black Scholes model returns the net asset value of the AnchorPath Fund as the fair value of the call option regardless of the values used for the other inputs to the option pricing model. The net asset value of the AnchorPath Fund is provided by the fund manager at the end of each calendar month and represents the value an investor would receive if it withdrew its investment on the balance sheet date. Therefore, the key unobservable input used in the Black Scholes model is the value of the AnchorPath Fund. As the value of the AnchorPath Fund increases or decreases, the fair value of the embedded derivative will increase or decrease. Funds Withheld Receivables and Future Policy Holder Benefits Reserve Front Street Re (Delaware) Ltd. and its subsidiaries ("Front Street") elected to apply the Fair Value Option to account for its Funds Withheld Receivables and Future Policy Holder Benefits Reserve related to its assumed reinsurance. Front Street measures fair value of the Funds Withheld Receivables based on the fair values of the securities in the underlying funds withheld portfolio held in trust by the cedant. Front Street uses a discounted cash flows approach to measure the fair value of the Future Policy Holder Benefits Reserve. The cash flows associated with future policy premiums and benefits are generated using best estimate assumptions (plus a risk margin, where applicable) and are consistent with market prices, where available. Risk margins are typically applied to non-observable, non-hedgeable market inputs such as long term volatility, mortality, morbidity, lapse, etc. Derivative Financial Instruments The fair value of derivative assets and liabilities is based upon valuation pricing models, which represents what FGL would expect to receive or pay at the balance sheet date if it canceled the options, entered into offsetting positions, or exercised the options. Fair values for these instruments are determined externally by using market-observable inputs, including interest rates, yield curve volatilities, and other factors. The fair value of the embedded derivatives in FGL’s FIA products are derived using market indices, pricing assumptions and historical data. The fair value of futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). Compass evaluates derivative assets and liabilities in accordance with master netting agreements with the derivative counterparties, but reports them on a gross basis on the Condensed Consolidated Balance Sheets. Net derivative asset values are determined primarily by quoted futures prices and utilization of the counterparties’ credit-adjusted risk-free rate curves and net derivative liabilities are determined by utilization of a credit-adjusted risk-free rate curve. The credit-adjusted risk-free rates of Compass’ counterparties are based on an independent market-quoted credit default swap rate curve for the counterparties’ debt plus the London Interbank Offered Rate (“LIBOR”) curve as of the end of the reporting period. Compass’ credit-adjusted risk-free rate is based on its cost of debt plus the LIBOR curve as of the end of the reporting period. Compass’ oil derivatives are swap contracts for notional Bbls of oil at fixed NYMEX West Texas Intermediate (“WTI”) oil prices. The asset and liability values attributable to oil derivatives as of the end of the reporting period are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for WTI oil, and (iii) the applicable estimated credit-adjusted risk-free rate curve, as described above. Compass’ natural gas derivatives are swap contracts for notional Mmbtus of natural gas at posted price indexes, including NYMEX HH swap contracts. The asset and liability values attributable to natural gas derivatives as of the end of the reporting period are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for HH for natural gas swaps, and (iii) the applicable credit-adjusted risk-free rate curve, as described above. Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of December 31, 2014 and September 30, 2014 were as follows:
|  | Fair Value at |  |  |  |  |  | Range (Weighted average)
Assets |  | December 31, 2014 |  | September 30, 2014 |  | Valuation Technique |  | Unobservable Input(s) |  | December 31, 2014 |  | September 30, 2014
Contingent purchase price reduction receivable |  | $ | 41.5 |  |  | $ | 41.5 |  |  | Discounted cash flow |  | Probability of collection |  | 88% - 96% (92%) |  | 88% - 96% (92%)
|  |  |  |  |  |  |  | Expected term |  | 1.8 months |  | 4.5 months
|  |  |  |  |  |  |  | Discount rate |  | 1% |  | 1%
|  |  |  |  |  |  |  | Credit insurance risk premium |  | 12% |  | 12%
Asset-backed securities |  | 34.6 |  |  | 37.0 |  |  | Broker-quoted |  | Offered quotes |  | 100% - 109% (100%) |  | 100% - 109% (101%)
Commercial mortgage-backed securities |  | 120.4 |  |  | 83.1 |  |  | Broker-quoted |  | Offered quotes |  | 100% - 122% (115%) |  | 105% - 121% (118%)
Corporates |  | 905.5 |  |  | 848.0 |  |  | Broker-quoted |  | Offered quotes |  | 65% - 122% (102%) |  | 62% - 120% (100%)
Corporates |  | 2.1 |  |  | 2.0 |  |  | Matrix Pricing |  | Quoted prices |  | 148% |  | 142%
Municipal |  | 38.8 |  |  | 37.2 |  |  | Broker-quoted |  | Offered quotes |  | 112% |  | 107%
Equity |  | 6.1 |  |  | 6.0 |  |  | Broker-quoted |  | Offered quotes |  | 100% |  | 100%
Other invested assets |  | 11.8 |  |  | 11.2 |  |  | Black Scholes model |  | Net asset value of AnchorPath Fund |  | 100% |  | 100%
Total |  | $ | 1,160.8 |  |  | $ | 1,066.0 |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
FIA embedded derivatives, included in contractholder funds |  | $ | 2,140.2 |  |  | $ | 1,908.1 |  |  | Discounted cash flow |  | Market value of option |  | 0% - 43% (3%) |  | 0% - 50% (3%)
|  |  |  |  |  |  |  | SWAP rates |  | 2% |  | 2% - 3% (2%)
|  |  |  |  |  |  |  | Mortality multiplier |  | 80% |  | 80%
|  |  |  |  |  |  |  | Surrender rates |  | 0.50% - 75% (7%) |  | 0.50% - 75% (7%)
|  |  |  |  |  |  |  | Non-performance risk spread |  | 0.25% |  | 0.25%
Front Street future policyholder benefit liability |  | 496.4 |  |  | 151.3 |  |  | Discounted cash flow |  | Non-performance risk spread |  | 0.50% - 1.50% |  | 0.50% - 1.50%
|  |  |  |  |  |  |  | Risk margin to reflect uncertainty |  | 0.50% |  | 0.50%
Total |  | $ | 2,636.6 |  |  | $ | 2,059.4 |  |  |  |  |  |  |  |  |
The significant unobservable inputs used in the fair value measurement of the contingent purchase price reduction receivable are the probability of collection depending on the outcomes of litigation and regulatory action, the expected term until payment, discount rate and the credit insurance risk premium. Generally, an increase in the assumptions for the expected term, discount rate and credit insurance risk premium would decrease the fair value of the contingent purchase price receivable. An increase in the probability of collection would increase the fair value of the contingent purchase price reduction receivable. The significant unobservable inputs used in the fair value measurement of the equity investment are revenue multiple and probability of the transaction closing. Significant increases (decreases) in the revenue multiple and the probability of the transaction closing would result in a higher (lower) fair value measurement. Generally, a change in any one unobservable input would not result in a change in any other unobservable input. The significant unobservable inputs used in the fair value measurement of FIA embedded derivatives included in contractholder funds are market value of option, interest swap rates, mortality multiplier, surrender rates, and non-performance spread. The mortality multiplier at December 31, 2014 and September 30, 2014, is based on the 2000 and 1983 annuity tables, respectively, and assumes the contractholder population is 50% female and 50% male. Significant increases (decreases) in the market value of option in isolation would result in a higher (lower) fair value measurement. Significant increases (decreases) in interest swap rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower (higher) fair value measurement. Generally, a change in any one unobservable input would not result in a change in any other unobservable input. The significant unobservable inputs used in the fair value measurement of the Front Street future policyholder benefit liability are non-performance risk spread and risk spread to reflect uncertainty. Significant increases (decreases) in non-performance risk spread and risk margin to reflect uncertainty would result in a lower (higher) fair value measurement. The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended December 31, 2014 and 2013. This summary excludes any impact of amortization of value of business acquired ("VOBA") and deferred acquisition costs ("DAC"). The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
| Three months ended December 31, 2014
| Balance at Beginning of Period |  | Total Gains (Losses) |  |  |  |  |  |  |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period
|  | Included in Earnings |  | Included in AOCI |  | Purchases |  | Sales |  | Settlements |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent purchase price reduction receivable | $ | 41.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 41.5 |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | 37.0 |  |  | — |  |  | — |  |  | 3.5 |  |  | — |  |  | — |  |  | (5.9 | ) |  | 34.6 |
Commercial mortgage-backed securities | 83.1 |  |  | — |  |  | 0.8 |  |  | 36.8 |  |  | — |  |  | (0.3 | ) |  | — |  |  | 120.4 |
Corporates | 850.0 |  |  | (0.1 | ) |  | 8.4 |  |  | 51.9 |  |  | — |  |  | (2.6 | ) |  | — |  |  | 907.6 |
Municipals | 37.2 |  |  | — |  |  | 1.8 |  |  | — |  |  | — |  |  | (0.2 | ) |  | — |  |  | 38.8 |
Equity securities - available-for-sale | 6.0 |  |  | — |  |  | 0.1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.1 |
Other invested assets | 11.2 |  |  | 0.6 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 11.8 |
Total assets at fair value | $ | 1,066.0 |  |  | $ | 0.5 |  |  | $ | 11.1 |  |  | $ | 92.2 |  |  | $ | — |  |  | $ | (3.1 | ) |  | $ | (5.9 | ) |  | $ | 1,160.8 |
| Balance at Beginning of Period |  | Total (Gains) Losses |  |  |  |  |  |  |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period
|  | Included in Earnings |  | Included in AOCI |  | Purchases |  | Sales |  | Settlements |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FIA embedded derivatives, included in contractholder funds | $ | 1,908.1 |  |  | $ | 232.1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,140.2 |
Front Street future policyholder benefit liability | 151.3 |  |  | (1.3 | ) |  | — |  |  | 346.9 |  |  | — |  |  | (0.5 | ) |  | — |  |  | 496.4 |
Total liabilities at fair value | $ | 2,059.4 |  |  | $ | 230.8 |  |  | $ | — |  |  | $ | 346.9 |  |  | $ | — |  |  | $ | (0.5 | ) |  | $ | — |  |  | $ | 2,636.6 |
(a) The net transfers out of Level 3 during the three months ended December 31, 2014 were exclusively to Level 2.
| Three months ended December 31, 2013
| Balance at Beginning of Period |  | Total Gains (Losses) |  |  |  |  |  |  |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period
|  | Included in Earnings |  | Included in AOCI |  | Purchases |  | Sales |  | Settlements |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent purchase price reduction receivable | $ | 41.0 |  |  | $ | 0.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 41.5 |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | 5.0 |  |  | — |  |  | (0.2 | ) |  | 5.0 |  |  | — |  |  | — |  |  | — |  |  | 9.8 |
Commercial mortgage-backed securities | 5.7 |  |  | — |  |  | 0.3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6.0 |
Corporates | 461.1 |  |  | — |  |  | (6.1 | ) |  | 152.6 |  |  | — |  |  | (0.5 | ) |  | — |  |  | 607.1 |
Municipals | — |  |  | — |  |  | (0.7 | ) |  | 35.0 |  |  | — |  |  | — |  |  | — |  |  | 34.3 |
Equity securities available-for-sale | 10.7 |  |  | 0.1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10.8 |
Total assets at fair value | $ | 523.5 |  |  | $ | 0.6 |  |  | $ | (6.7 | ) |  | $ | 192.6 |  |  | $ | — |  |  | $ | (0.5 | ) |  | $ | — |  |  | $ | 709.5 |
| Balance at Beginning of Period |  | Total (Gains) Losses |  |  |  |  |  |  |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period
|  | Included in Earnings |  | Included in AOCI |  | Purchases |  | Sales |  | Settlements |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FIA embedded derivatives, included in contractholder funds | $ | 1,544.4 |  |  | $ | 100.3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,644.7 |
Front Street future policyholder benefit liability | — |  |  | (0.7 | ) |  | — |  |  | 150.6 |  |  | — |  |  | — |  |  | — |  |  | 149.9 |
Equity conversion feature of preferred stock | 330.8 |  |  | 47.2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 378.0 |
Total liabilities at fair value | $ | 1,875.2 |  |  | $ | 146.8 |  |  | $ | — |  |  | $ | 150.6 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,172.6 |
(a) There were no net transfers in and/or out of Level 3 during the three months ended December 31, 2013. FGL reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. There were no transfers between Level 1 and Level 2 for the three months ended December 31, 2014 and 2013. Primary market issuance and secondary market activity for certain asset-backed securities during the three months ended December 31, 2014 increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in FGL's conclusion that there was sufficient trading activity in similar instruments to support classifying these securities as Level 2 as of December 31, 2014. Accordingly, FGL’s assessment resulted in net transfers out of Level 3 of $5.9 related to asset backed securities during the three months ended December 31, 2014. During the three months ended December 31, 2013, there were no transfers in or out of Level 3. Non-Recurring Fair Value Measurements Goodwill, intangible assets and other long-lived assets are tested annually or if an event occurs that indicates an impairment loss may have been incurred using fair value measurements with unobservable inputs (Level 3). Financial Assets and Liabilities Not Measured at Fair Value The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial instrument assets and liabilities which are not measured at fair value on the unaudited Condensed Consolidated Balance Sheets are summarized as follows:
| December 31, 2014
| Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Carrying Amount
Assets (a) |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,311.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,311.4 |  |  | $ | 1,311.4 |
Asset-based loans | — |  |  | — |  |  | 791.9 |  |  | 791.9 |  |  | 791.9 |
Other invested assets | — |  |  | — |  |  | 233.2 |  |  | 233.2 |  |  | 233.2 |
Total financial assets | $ | 1,311.4 |  |  | $ | — |  |  | $ | 1,025.1 |  |  | $ | 2,336.5 |  |  | $ | 2,336.5 |
Liabilities (a) |  |  |  |  |  |  |  |  |
Total debt (b) | $ | — |  |  | $ | 5,842.6 |  |  | $ | — |  |  | $ | 5,842.6 |  |  | $ | 5,666.0 |
Investment contracts, included in contractholder funds | — |  |  | — |  |  | 13,442.9 |  |  | 13,442.9 |  |  | 15,019.9 |
Total financial liabilities | $ | — |  |  | $ | 5,842.6 |  |  | $ | 13,442.9 |  |  | $ | 19,285.5 |  |  | $ | 20,685.9 |
| September 30, 2014
| Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Carrying Amount
Assets (a) |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,319.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,319.2 |  |  | $ | 1,319.2 |
Asset-based loans | — |  |  | — |  |  | 811.6 |  |  | 811.6 |  |  | 811.6 |
Other invested assets | — |  |  | — |  |  | 151.7 |  |  | 151.7 |  |  | 151.7 |
Total financial assets | $ | 1,319.2 |  |  | $ | — |  |  | $ | 963.3 |  |  | $ | 2,282.5 |  |  | $ | 2,282.5 |
Liabilities (a) |  |  |  |  |  |  |  |  |
Total debt (b) | $ | — |  |  | $ | 5,308.5 |  |  | $ | — |  |  | $ | 5,308.5 |  |  | $ | 5,157.8 |
Investment contracts, included in contractholder funds | — |  |  | — |  |  | 13,108.8 |  |  | 13,108.8 |  |  | 14,555.4 |
Total financial liabilities | $ | — |  |  | $ | 5,308.5 |  |  | $ | 13,108.8 |  |  | $ | 18,417.3 |  |  | $ | 19,713.2 |
(a) | The carrying amounts of trade receivables, accounts payable, accrued investment income and portions of other insurance liabilities approximate fair value due to their short duration and, accordingly, they are not presented in the tables above.
(b) | The fair values of debt set forth above are generally based on quoted or observed market prices.
Valuation Methodology Asset-based loans The fair value of the asset-based loans originated by Salus approximate their carrying value. Such loans carry a variable rate that are typically revolving in nature and can be settled at the demand of either party. Other Invested Assets - Mortgage Loans on Real Estate The fair value of mortgage loans on real estate is established using a discounted cash flow method based on credit rating, maturity and future income. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, loan-to-value, quality of tenancy, borrower and payment record. As these loans were originated in the past sixteen months, none are past due, or have material credit issues and given that there has not been material changes in market interest since origination, FGL views amortized cost as representative of fair value. The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of the mortgage loans on real estate are classified as Level 3 within the fair value hierarchy. Other Invested Assets - Policy Loans Also included in other invested assets are policy loans. FGL has not attempted to determine the fair values associated with its policy loans, as they believe any differences between carrying value and the fair values afforded these instruments are immaterial to its consolidated financial position and, accordingly, the cost to provide such disclosure does not justify the benefit to be derived. Investment Contracts Included in Contractholder Funds Investment contracts include deferred annuities, FIAs, indexed universal life ("IUL") and immediate annuities. The fair values of deferred annuity, FIAs, and IUL contracts are based on their cash surrender value (i.e. the cost FGL would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of immediate annuities contracts is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. At December 31, 2014 and September 30, 2014, this resulted in lower fair value reserves relative to the carrying value. FGL is not required to and has not estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosure of fair value.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
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