Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables provide information relating to investments in fixed maturity and equity securities by sector as of March 31, 2014 and December 31, 2013 (dollars in thousands):



March 31, 2014:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	11,858,578	$	762,137	$	102,415	$	12,518,300	56.4	%	$	—
Canadian and Canadian provincial governments	2,655,865		802,236		7,937		3,450,164		15.6		—
Residential mortgage-backed securities	969,944		45,270		13,343		1,001,871		4.5		(300		)
Asset-backed securities	933,130		23,247		11,798		944,579		4.3		(2,259		)
Commercial mortgage-backed securities	1,367,205		95,154		11,856		1,450,503		6.5		(1,609		)
U.S. government and agencies	447,071		18,158		2,967		462,262		2.1		—
State and political subdivisions	368,465		31,367		9,200		390,632		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	1,897,266		57,073		15,468		1,938,871		8.8		—
Total fixed maturity securities	$	20,497,524	$	1,834,642	$	174,984	$	22,157,182	100.0	%	$	(4,168	)
Non-redeemable preferred stock	$	84,156	$	7,273	$	2,662	$	88,767	31.5	%
Other equity securities	191,988		2,921		1,661		193,248		68.5
Total equity securities	$	276,144	$	10,194	$	4,323	$	282,015	100.0	%



December 31, 2013:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	11,697,394	$	616,147	$	202,786	$	12,110,755	56.4	%	$	—
Canadian and Canadian provincial governments	2,728,111		669,762		16,848		3,381,025		15.7		—
Residential mortgage-backed securities	970,434		38,126		18,917		989,643		4.6		(300		)
Asset-backed securities	891,751		18,893		15,812		894,832		4.2		(2,259		)
Commercial mortgage-backed securities	1,314,782		91,651		17,487		1,388,946		6.5		(1,609		)
U.S. government and agencies	489,631		16,468		4,748		501,351		2.3		—
State and political subdivisions	313,252		21,907		14,339		320,820		1.5		—
Other foreign government, supranational and foreign government-sponsored enterprises	1,865,379		45,347		23,962		1,886,764		8.8		—
Total fixed maturity securities	$	20,270,734	$	1,518,301	$	314,899	$	21,474,136	100.0	%	$	(4,168	)
Non-redeemable preferred stock	$	81,993	$	5,342	$	5,481	$	81,854	20.2	%
Other equity securities	327,479		618		4,220		323,877		79.8
Total equity securities	$	409,472	$	5,960	$	9,701	$	405,731	100.0	%

The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral. The Company pledged fixed maturity securities as collateral to derivative and reinsurance counterparties with an amortized cost of $60.8 million and $57.2 million, and an estimated fair value of $62.6 million and $58.0 million, as of March 31, 2014 and December 31, 2013 respectively. The pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets. Securities with an amortized cost of $8,051.4 million and $7,842.9 million, and an estimated fair value of $8,505.1 million and $8,125.4 million, as of March 31, 2014 and December 31, 2013, respectively, were held in trust to satisfy collateral requirements under certain third-party reinsurance treaties.

The Company received fixed maturity securities as collateral from derivative and reinsurance counterparties with an estimated fair value of $107.2 million and $94.1 million, as of March 31, 2014 and December 31, 2013, respectively. The collateral is held in separate custodial accounts and is not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral; however, as of March 31, 2014 and December 31, 2013, none of the collateral had been sold or re-pledged.

As of March 31, 2014, the Company held securities with a fair value of $1,245.7 million that were guaranteed or issued by the Canadian province of Ontario and $1,419.0 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity. As of December 31, 2013, the Company held securities with a fair value of $1,222.3 million that were guaranteed or issued by the Canadian province of Ontario and $1,389.1 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at March 31, 2014 are shown by contractual maturity in the table below (dollars in thousands). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date.



	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	616,796	$	624,013
Due after one year through five years	3,673,274		3,873,527
Due after five years through ten years	7,148,863		7,474,062
Due after ten years	5,788,312		6,788,627
Asset and mortgage-backed securities	3,270,279		3,396,953
Total	$	20,497,524	$	22,157,182

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of March 31, 2014 and December 31, 2013 (dollars in thousands):



March 31, 2014:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	3,993,669	$	4,204,783	33.6	%
Industrial	5,967,291		6,295,510		50.3
Utility	1,886,833		2,007,246		16.0
Other	10,785		10,761		0.1
Total	$	11,858,578	$	12,518,300	100.0	%

December 31, 2013:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	3,838,716	$	3,983,623	32.9	%
Industrial	5,943,353		6,138,150		50.7
Utility	1,904,100		1,978,218		16.3
Other	11,225		10,764		0.1
Total	$	11,697,394	$	12,110,755	100.0	%

Other-Than-Temporary Impairments - Fixed Maturity and Equity Securities

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2013 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are recognized in AOCI. For these securities the net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The following table sets forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI, and the corresponding changes in such amounts (dollars in thousands):



	Three months ended March 31,
	2014		2013
Balance, beginning of period	$	11,696	$	16,675
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	—		(1,902		)
Balance, end of period	$	11,696	$	14,773

Purchased Credit Impaired Fixed Maturity Securities Available-for-Sale

Securities acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired securities. For each security, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. At the date of acquisition, the timing and amount of the cash flows expected to be collected was determined based on a best estimate using key assumptions, such as interest rates, default rates and prepayment speeds. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI.

The following tables present information on the Company’s purchased credit impaired securities, which are included in fixed maturity securities available-for-sale (dollars in thousands):



	March 31, 2014		December 31, 2013
Outstanding principal and interest balance⁽¹⁾	$	208,044	$	192,644
Carrying value, including accrued interest⁽²⁾	165,740		148,822


(1)	Represents the contractually required payments which is the sum of contractual principal, whether or not currently due, and accrued interest.


(2)	Estimated fair value plus accrued interest.

The following table presents information about purchased credit impaired investments acquired during the periods, as of the acquisition dates (dollars in thousands):



	Three months ended March 31,
	2014		2013
Contractually required payments (including interest)	$	31,672	$	91,863
Cash flows expected to be collected⁽¹⁾	25,722		72,940
Fair value of investments acquired	18,151		50,874


(1)	Represents undiscounted principal and interest cash flow expectations at the date of acquisition.

The following table presents activity for the accretable yield on purchased credit impaired securities for the three months ended March 31, 2014 and 2013 (dollars in thousands):



	Three months ended March 31,
	2014			2013
Balance, beginning of period	$	69,469		$	39,239
Investments purchased	7,571			22,066
Accretion	(2,139		)	(1,943		)
Disposals	(379		)	—
Reclassification from nonaccretable difference	(1,155		)	553
Balance, end of period	$	73,367		$	59,915

Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 1,046 and 1,396 fixed maturity and equity securities as of March 31, 2014 and December 31, 2013, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	March 31, 2014				December 31, 2013
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	161,371	90.0	%	$	296,731	91.4	%
20% or more for less than six months	163		0.1		6,444		2.0
20% or more for six months or greater	17,773		9.9		21,425		6.6
Total	$	179,307	100.0	%	$	324,600	100.0	%

The Company’s determination of whether a decline in value is other-than-temporary includes analysis of the underlying credit and the extent and duration of a decline in value. The Company’s credit analysis of an investment includes determining whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. In the Company’s impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 1,046 and 1,396 fixed maturity and equity securities that have estimated fair values below amortized cost as of March 31, 2014 and December 31, 2013, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
March 31, 2014:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	2,057,301	$	64,535	$	311,738	$	31,273	$	2,369,039	$	95,808
Canadian and Canadian provincial governments	114,845		6,334		12,421		1,603		127,266		7,937
Residential mortgage-backed securities	190,212		9,802		32,621		3,294		222,833		13,096
Asset-backed securities	214,774		3,140		79,532		7,023		294,306		10,163
Commercial mortgage-backed securities	106,146		1,295		26,181		5,443		132,327		6,738
U.S. government and agencies	75,193		2,777		4,104		190		79,297		2,967
State and political subdivisions	103,058		5,440		8,158		3,760		111,216		9,200
Other foreign government, supranational and foreign government-sponsored enterprises	502,280		10,605		68,811		4,829		571,091		15,434
Total investment grade securities	3,363,809		103,928		543,566		57,415		3,907,375		161,343
Non-investment grade securities:
Corporate securities	191,113		3,886		43,178		2,721		234,291		6,607
Residential mortgage-backed securities	26,209		197		1,776		50		27,985		247
Asset-backed securities	1,694		10		8,483		1,625		10,177		1,635
Commercial mortgage-backed securities	—		—		5,969		5,118		5,969		5,118
Other foreign government, supranational and foreign government-sponsored enterprises	2,440		34		—		—		2,440		34
Total non-investment grade securities	221,456		4,127		59,406		9,514		280,862		13,641
Total fixed maturity securities	$	3,585,265	$	108,055	$	602,972	$	66,929	$	4,188,237	$	174,984
Non-redeemable preferred stock	$	20,765	$	2,660	$	1	$	2	$	20,766	$	2,662
Other equity securities	—		—		32,833		1,661		32,833		1,661
Total equity securities	$	20,765	$	2,660	$	32,834	$	1,663	$	53,599	$	4,323



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2013:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	3,141,179	$	148,895	$	301,303	$	40,548	$	3,442,482	$	189,443
Canadian and Canadian provincial governments	188,491		14,419		12,029		2,429		200,520		16,848
Residential mortgage-backed securities	283,967		15,900		23,068		1,688		307,035		17,588
Asset-backed securities	255,656		4,916		56,668		4,983		312,324		9,899
Commercial mortgage-backed securities	219,110		3,725		20,068		5,745		239,178		9,470
U.S. government and agencies	133,697		4,469		4,406		279		138,103		4,748
State and political subdivisions	120,193		9,723		15,202		4,616		135,395		14,339
Other foreign government, supranational and foreign government-sponsored enterprises	665,313		21,075		36,212		2,847		701,525		23,922
Total investment grade securities	5,007,606		223,122		468,956		63,135		5,476,562		286,257
Non-investment grade securities:
Corporate securities	283,603		9,451		38,256		3,892		321,859		13,343
Residential mortgage-backed securities	62,146		1,075		3,945		254		66,091		1,329
Asset-backed securities	28,670		415		32,392		5,498		61,062		5,913
Commercial mortgage-backed securities	15,762		81		10,980		7,936		26,742		8,017
Other foreign government, supranational and foreign government-sponsored enterprises	9,403		40		—		—		9,403		40
Total non-investment grade securities	399,584		11,062		85,573		17,580		485,157		28,642
Total fixed maturity securities	$	5,407,190	$	234,184	$	554,529	$	80,715	$	5,961,719	$	314,899
Non-redeemable preferred stock	$	51,386	$	5,479	$	1	$	2	$	51,387	$	5,481
Other equity securities	218,834		1,748		32,550		2,472		251,384		4,220
Total equity securities	$	270,220	$	7,227	$	32,551	$	2,474	$	302,771	$	9,701

As of March 31, 2014, the Company does not intend to sell these fixed maturity securities and does not believe it is more likely than not that it will be required to sell these fixed maturity securities before the recovery of the fair value up to the current amortized cost of the investment, which may be maturity. As of March 31, 2014, the Company has the ability and intent to hold the equity securities until the recovery of the fair value up to the current cost of the investment. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality, asset-liability management and liquidity guidelines.

Unrealized losses on non-investment grade securities as of March 31, 2014 are primarily related to high-yield corporate securities and commercial mortgage-backed securities. Unrealized losses decreased across all security types as interest rates decreased during the first three months of 2014.

Investment Income, Net of Related Expenses

Major categories of investment income, net of related expenses, consist of the following (dollars in thousands):



	Three months ended March 31,
	2014			2013
Fixed maturity securities available-for-sale	$	243,962		$	239,244
Mortgage loans on real estate	33,092			28,243
Policy loans	13,438			17,910
Funds withheld at interest	112,739			137,259
Short-term investments	965			813
Other invested assets	14,501			13,922
Investment income	418,697			437,391
Investment expense	(14,322		)	(12,260		)
Investment income, net of related expenses	$	404,375		$	425,131

Investment Related Gains (Losses), Net

Investment related gains (losses), net consist of the following (dollars in thousands):



	Three months ended March 31,
	2014			2013
Fixed maturities and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturities	$	(303	)	$	(202	)
Portion of loss recognized in accumulated other comprehensive income (before taxes)	—			—
Net other-than-temporary impairment losses on fixed maturity securities recognized in earnings	(303		)	(202		)
Impairment losses on equity securities	—			—
Gain on investment activity	8,067			21,680
Loss on investment activity	(6,583		)	(11,212		)
Other impairment losses and change in mortgage loan provision	1,664			(1,626		)
Derivatives and other, net	81,726			85,731
Total investment related gains (losses), net	$	84,571		$	94,371

During the three months ended March 31, 2014 and 2013, the Company sold fixed maturity and equity securities with fair values of $235.1 million and $204.3 million at losses of $6.6 million and $11.2 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing and Other

The Company participates in a securities borrowing program whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from a third party. The Company is required to maintain a minimum of 100% of the fair value of the borrowed securities as collateral, which consists of rights to reinsurance treaty cash flows. The Company had borrowed securities with an amortized cost of $184.5 million and $93.0 million, and an estimated fair value of $183.4 million and $93.0 million, as of March 31, 2014 and December 31, 2013, respectively. The borrowed securities are used to provide collateral under an affiliated reinsurance transaction.

The Company also participates in a repurchase/reverse repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to a third party. In return, the Company receives securities from the third party with an estimated fair value equal to a minimum of 100% of the securities pledged. The securities received are not reflected on the Company’s condensed consolidated balance sheets. As of March 31, 2014 the Company had pledged securities with an amortized cost of $300.5 million and an estimated fair value of $312.8 million, in return the Company received securities with an estimated fair value of $349.7 million. As of December 31, 2013 the Company had pledged securities with an amortized cost of $300.3 million and an estimated fair value of $310.8 million, in return the Company received securities with an estimated fair value of $344.2 million.

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.6% and 7.7% of the Company’s total investments as of March 31, 2014 and December 31, 2013. The Company makes mortgage loans on income producing properties, such as apartments, retail and office buildings, light warehouses and light industrial facilities. Loan-to-value ratios at the time of loan approval are 75% or less. The distribution of mortgage loans, gross of valuation allowances, by property type is as follows as of March 31, 2014 and December 31, 2013 (dollars in thousands):



	March 31, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Apartment	$	346,918	13.7	%	$	289,394	11.6	%
Retail	720,921		28.4		748,731		30.0
Office building	917,985		36.2		917,284		36.7
Industrial	412,322		16.3		439,890		17.6
Other commercial	136,548		5.4		101,487		4.1
Total	$	2,534,694	100.0	%	$	2,496,786	100.0	%

As of March 31, 2014 and December 31, 2013, the Company’s mortgage loans, gross of valuation allowances, were distributed throughout the United States as follows (dollars in thousands):



	March 31, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Pacific	$	678,578	26.8	%	$	671,822	26.9	%
South Atlantic	521,853		20.6		543,658		21.8
Mountain	374,874		14.8		334,446		13.4
Middle Atlantic	251,235		10.0		266,802		10.7
West North Central	160,561		6.3		138,442		5.5
East North Central	243,936		9.6		236,766		9.5
West South Central	167,894		6.6		168,246		6.7
East South Central	59,384		2.3		59,625		2.4
New England	76,379		3.0		76,979		3.1
Total	$	2,534,694	100.0	%	$	2,496,786	100.0	%

The maturities of the mortgage loans, gross of valuation allowances, as of March 31, 2014 and December 31, 2013 are as follows (dollars in thousands):



	March 31, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	968,162	38.2	%	$	987,109	39.5	%
Due after five years through ten years	998,196		39.4		984,289		39.4
Due after ten years	568,336		22.4		525,388		21.1
Total	$	2,534,694	100.0	%	$	2,496,786	100.0	%

Information regarding the Company’s credit quality indicators, as determined by the Company's internal evaluation methodology for its recorded investment in mortgage loans, gross of valuation allowances, as of March 31, 2014 and December 31, 2013 is as follows (dollars in thousands):



	March 31, 2014				December 31, 2013
Internal credit quality grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	1,266,653	50.0	%	$	1,437,244	57.5	%
Investment grade	1,023,250		40.4		827,993		33.2
Average	183,250		7.2		155,914		6.2
Watch list	32,936		1.3		49,404		2.0
In or near default	28,605		1.1		26,231		1.1
Total	$	2,534,694	100.0	%	$	2,496,786	100.0	%

The age analysis of the Company’s past due recorded investment in mortgage loans, gross of valuation allowances, as of March 31, 2014 and December 31, 2013 is as follows (dollars in thousands):



	March 31, 2014		December 31, 2013
31-60 days past due	$	—	$	—
61-90 days past due	—		—
Greater than 90 days	7,087		—
Total past due	7,087		—
Current	2,527,607		2,496,786
Total	$	2,534,694	$	2,496,786

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of March 31, 2014 and December 31, 2013 (dollars in thousands):



	March 31, 2014		December 31, 2013
Mortgage loans:
Individually measured for impairment	$	32,344	$	37,841
Collectively measured for impairment	2,502,350		2,458,945
Mortgage loans, gross of valuation allowances	2,534,694		2,496,786
Valuation allowances:
Individually measured for impairment	1,677		3,211
Collectively measured for impairment	6,789		6,895
Total valuation allowances	8,466		10,106
Mortgage loans, net of valuation allowances	$	2,526,228	$	2,486,680

Information regarding the Company’s loan valuation allowances for mortgage loans for the three months ended March 31, 2014 and 2013 is as follows (dollars in thousands):



	Three months ended March 31,
	2014			2013
Balance, beginning of period	$	10,106		$	11,580
Recoveries	24			—
Charge-offs	—			(852		)
Provision (release)	(1,664		)	(804		)
Balance, end of period	$	8,466		$	9,924

Information regarding the portion of the Company’s mortgage loans that were impaired as of March 31, 2014 and December 31, 2013 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
March 31, 2014:
Impaired mortgage loans with no valuation allowance recorded	$	20,610	$	20,007	$	—	$	20,007
Impaired mortgage loans with valuation allowance recorded	12,308		12,337		1,677		10,660
Total impaired mortgage loans	$	32,918	$	32,344	$	1,677	$	30,667
December 31, 2013:
Impaired mortgage loans with no valuation allowance recorded	$	21,698	$	21,100	$	—	$	21,100
Impaired mortgage loans with valuation allowance recorded	16,772		16,741		3,211		13,530
Total impaired mortgage loans	$	38,470	$	37,841	$	3,211	$	34,630

The Company’s average investment in impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):
	Three months ended March 31,
	2014				2013
	Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	14,539	$	318	$	13,378	$	135
Impaired mortgage loans with valuation allowance recorded	20,554		193		27,184		240
Total	$	35,093	$	511	$	40,562	$	375

(1) Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

The Company did not acquire any impaired mortgage loans during the three months ended March 31, 2014 and 2013. The Company had $7.1 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at March 31, 2014. The Company had no mortgage loans that were on a nonaccrual status at December 31, 2013.

Policy Loans

Policy loans comprised approximately 3.9% and 3.8% of the Company’s total investments as of both March 31, 2014 and December 31, 2013, substantially all of which are associated with one client. These policy loans present no credit risk because the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. As policy loans represent premature distributions of policy liabilities, they have the effect of reducing future disintermediation risk. In addition, the Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

Funds withheld at interest comprised approximately 17.5% and 17.8% of the Company’s total investments as of March 31, 2014 and December 31, 2013, respectively. Of the $5.8 billion funds withheld at interest balance, net of embedded derivatives, as of March 31, 2014, $4.1 billion of the balance is associated with one client. For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances with amounts owed to the Company from the ceding company. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, real estate joint ventures, structured loans, derivative contracts, fair value option ("FVO") contractholder-directed unit-linked investments, Federal Home Loan Bank of Des Moines ("FHLB") common stock (included in other), and real estate held-for-investment (included in other). The fair value option was elected for contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation and reporting as separate accounts. Other invested assets represented approximately 3.7% and 4.1% of the Company’s total investments as of both March 31, 2014 and December 31, 2013. Carrying values of these assets as of March 31, 2014 and December 31, 2013 are as follows (dollars in thousands):



	March 31, 2014		December 31, 2013
Equity securities	$	282,015	$	405,731
Limited partnerships and real estate joint ventures	403,874		411,456
Structured loans	209,590		223,549
Derivatives	121,173		75,227
FVO contractholder-directed unit-linked investments	147,342		138,892
Other	70,785		70,105
Total other invested assets	$	1,234,779	$	1,324,960