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Investments | 6 Months Ended
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Jun. 30, 2015
Investments [Abstract] |
Investments | 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 June 30, 2015 and December 31, 2014 (dollars in thousands):
June 30, 2015: |  | Amortized |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of |  | Other-than- temporary impairments
|  | Cost |  | Gains |  | Losses |  | Value |  | Total |  | in AOCI
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 16,000,887 |  |  | $ | 730,409 |  |  | $ | 241,890 |  |  | $ | 16,489,406 |  |  | 58.8 | % |  | $ | — |
Canadian and Canadian provincial governments |  | 2,655,763 |  |  | 1,140,904 |  |  | 2,860 |  |  | 3,793,807 |  |  | 13.5 |  |  | — |
Residential mortgage-backed securities |  | 1,154,732 |  |  | 47,241 |  |  | 11,094 |  |  | 1,190,879 |  |  | 4.2 |  |  | (300 | )
Asset-backed securities |  | 1,051,093 |  |  | 19,915 |  |  | 8,384 |  |  | 1,062,624 |  |  | 3.8 |  |  | 354 |
Commercial mortgage-backed securities |  | 1,471,419 |  |  | 63,699 |  |  | 9,649 |  |  | 1,525,469 |  |  | 5.4 |  |  | (1,609 | )
U.S. government and agencies |  | 1,332,518 |  |  | 18,149 |  |  | 86,669 |  |  | 1,263,998 |  |  | 4.5 |  |  | — |
State and political subdivisions |  | 478,262 |  |  | 38,891 |  |  | 10,981 |  |  | 506,172 |  |  | 1.8 |  |  | — |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 2,160,658 |  |  | 88,674 |  |  | 17,712 |  |  | 2,231,620 |  |  | 8.0 |  |  | — |
Total fixed maturity securities |  | $ | 26,305,332 |  |  | $ | 2,147,882 |  |  | $ | 389,239 |  |  | $ | 28,063,975 |  |  | 100.0 | % |  | $ | (1,555 | )
Non-redeemable preferred stock |  | $ | 91,717 |  |  | $ | 2,477 |  |  | $ | 3,620 |  |  | $ | 90,574 |  |  | 70.9 | % |  |
Other equity securities |  | 37,642 |  |  | 434 |  |  | 982 |  |  | 37,094 |  |  | 29.1 |  |  |
Total equity securities |  | $ | 129,359 |  |  | $ | 2,911 |  |  | $ | 4,602 |  |  | $ | 127,668 |  |  | 100.0 | % |  |
December 31, 2014: |  | Amortized |  | Unrealized |  | Unrealized |  | Estimated Fair |  | % of |  | Other-than- temporary impairments
|  | Cost |  | Gains |  | Losses |  | Value |  | Total |  | in AOCI
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 14,010,604 |  |  | $ | 965,523 |  |  | $ | 90,544 |  |  | $ | 14,885,583 |  |  | 58.4 | % |  | $ | — |
Canadian and Canadian provincial governments |  | 2,668,852 |  |  | 1,196,420 |  |  | 7 |  |  | 3,865,265 |  |  | 15.2 |  |  | — |
Residential mortgage-backed securities |  | 991,867 |  |  | 52,640 |  |  | 6,611 |  |  | 1,037,896 |  |  | 4.1 |  |  | (300 | )
Asset-backed securities |  | 1,059,660 |  |  | 20,301 |  |  | 10,375 |  |  | 1,069,586 |  |  | 4.2 |  |  | 354 |
Commercial mortgage-backed securities |  | 1,453,657 |  |  | 87,593 |  |  | 8,659 |  |  | 1,532,591 |  |  | 6.0 |  |  | (1,609 | )
U.S. government and agencies |  | 501,352 |  |  | 25,014 |  |  | 515 |  |  | 525,851 |  |  | 2.0 |  |  | — |
State and political subdivisions |  | 378,457 |  |  | 51,117 |  |  | 3,498 |  |  | 426,076 |  |  | 1.7 |  |  | — |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 2,041,148 |  |  | 110,065 |  |  | 13,089 |  |  | 2,138,124 |  |  | 8.4 |  |  | — |
Total fixed maturity securities |  | $ | 23,105,597 |  |  | $ | 2,508,673 |  |  | $ | 133,298 |  |  | $ | 25,480,972 |  |  | 100.0 | % |  | $ | (1,555 | )
Non-redeemable preferred stock |  | $ | 93,540 |  |  | $ | 7,350 |  |  | $ | 1,527 |  |  | $ | 99,363 |  |  | 78.3 | % |  |
Other equity securities |  | 26,994 |  |  | 597 |  |  | 94 |  |  | 27,497 |  |  | 21.7 |  |  |
Total equity securities |  | $ | 120,534 |  |  | $ | 7,947 |  |  | $ | 1,621 |  |  | $ | 126,860 |  |  | 100.0 | % |  |
The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral with derivative, repurchase agreement and reinsurance counterparties. Pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are 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 collateral it receives; however, as of June 30, 2015 and December 31, 2014, none of the collateral received had been sold or re-pledged. The Company also holds securities in trust to satisfy collateral requirements under certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and received as collateral, and assets in trust held to satisfy collateral requirements under certain third-party reinsurance treaties as of June 30, 2015 and December 31, 2014 (dollars in thousands):
| June 30, 2015 |  | December 31, 2014
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities pledged as collateral | $ | 181,681 |  |  | $ | 190,298 |  |  | $ | 127,229 |  |  | $ | 134,863 |
Fixed maturity securities received as collateral | n/a |  |  | 126,422 |  |  | n/a |  |  | 117,227 |
Securities held in trust | 9,948,045 |  |  | 10,501,206 |  |  | 10,197,489 |  |  | 10,922,947 |
The Company monitors its concentrations of financial instruments on an ongoing basis, and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies as of June 30, 2015, as well as the securities disclosed below as of June 30, 2015 and December 31, 2014 (dollars in thousands).
| June 30, 2015 |  | December 31, 2014
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities guaranteed or issued by: |  |  |  |  |  |  |
Canadian province of Ontario | $ | 921,150 |  |  | $ | 1,295,793 |  |  | $ | 979,908 |  |  | $ | 1,359,339 |
Canadian province of Quebec | 1,012,835 |  |  | 1,560,409 |  |  | 1,006,315 |  |  | 1,599,673 |
The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 2015 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 |  | Estimated Fair Value
Available-for-sale: |  |  |  |
Due in one year or less |  | $ | 686,582 |  |  | $ | 696,191 |
Due after one year through five years |  | 4,882,381 |  |  | 5,118,186 |
Due after five years through ten years |  | 7,920,478 |  |  | 8,213,365 |
Due after ten years |  | 9,138,647 |  |  | 10,257,261 |
Asset and mortgage-backed securities |  | 3,677,244 |  |  | 3,778,972 |
Total |  | $ | 26,305,332 |  |  | $ | 28,063,975 |
Corporate Fixed Maturity Securities The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2015 and December 31, 2014 (dollars in thousands):
June 30, 2015: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 5,238,400 |  |  | $ | 5,419,421 |  |  | 32.9 | %
Industrial |  | 9,057,282 |  |  | 9,281,262 |  |  | 56.2 |
Utility |  | 1,705,205 |  |  | 1,788,723 |  |  | 10.9 |
Total |  | $ | 16,000,887 |  |  | $ | 16,489,406 |  |  | 100.0 | %
December 31, 2014: |  |  |  | Estimated |  |
|  | Amortized Cost |  | Fair Value |  | % of Total
Finance |  | $ | 4,789,568 |  |  | $ | 5,066,408 |  |  | 34.0 | %
Industrial |  | 7,639,330 |  |  | 8,086,067 |  |  | 54.3 |
Utility |  | 1,581,706 |  |  | 1,733,108 |  |  | 11.7 |
Total |  | $ | 14,010,604 |  |  | $ | 14,885,583 |  |  | 100.0 | %
Other-Than-Temporary Impairments - Fixed Maturity and Equity Securities As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2014 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities is recognized in AOCI. For these securities the net amount recognized in the condensed consolidated statements of income (“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 June 30, |  | Six months ended June 30,
|  | 2015 |  | 2014 |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 7,284 |  |  | $ | 11,696 |  |  | $ | 7,284 |  |  | $ | 11,696 |
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period |  | — |  |  | (4,412 | ) |  | — |  |  | (4,412 | )
Balance, end of period |  | $ | 7,284 |  |  | $ | 7,284 |  |  | $ | 7,284 |  |  | $ | 7,284 |
Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale The following table presents the total gross unrealized losses for the 1,566 and 932 fixed maturity and equity securities as of June 30, 2015 and December 31, 2014, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
|  | Gross Unrealized Losses |  | % of Total |  | Gross Unrealized Losses |  | % of Total
Less than 20% |  | $ | 373,312 |  |  | 94.8 | % |  | $ | 111,965 |  |  | 83.0 | %
20% or more for less than six months |  | 10,201 |  |  | 2.6 |  |  | 13,698 |  |  | 10.1 |
20% or more for six months or greater |  | 10,328 |  |  | 2.6 |  |  | 9,256 |  |  | 6.9 |
Total |  | $ | 393,841 |  |  | 100.0 | % |  | $ | 134,919 |  |  | 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 1,566 and 932 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 2015 and December 31, 2014, 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
June 30, 2015: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 4,719,168 |  |  | $ | 194,881 |  |  | $ | 299,379 |  |  | $ | 17,451 |  |  | $ | 5,018,547 |  |  | $ | 212,332 |
Canadian and Canadian provincial governments |  | 117,996 |  |  | 2,860 |  |  | — |  |  | — |  |  | 117,996 |  |  | 2,860 |
Residential mortgage-backed securities |  | 309,772 |  |  | 6,659 |  |  | 64,855 |  |  | 3,772 |  |  | 374,627 |  |  | 10,431 |
Asset-backed securities |  | 294,220 |  |  | 3,101 |  |  | 126,602 |  |  | 3,504 |  |  | 420,822 |  |  | 6,605 |
Commercial mortgage-backed securities |  | 220,262 |  |  | 4,376 |  |  | 22,831 |  |  | 1,392 |  |  | 243,093 |  |  | 5,768 |
U.S. government and agencies |  | 862,953 |  |  | 86,669 |  |  | — |  |  | — |  |  | 862,953 |  |  | 86,669 |
State and political subdivisions |  | 157,210 |  |  | 7,399 |  |  | 13,180 |  |  | 3,582 |  |  | 170,390 |  |  | 10,981 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 402,345 |  |  | 13,050 |  |  | 33,829 |  |  | 1,988 |  |  | 436,174 |  |  | 15,038 |
Total investment grade securities |  | 7,083,926 |  |  | 318,995 |  |  | 560,676 |  |  | 31,689 |  |  | 7,644,602 |  |  | 350,684 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | 553,615 |  |  | 23,667 |  |  | 58,910 |  |  | 5,891 |  |  | 612,525 |  |  | 29,558 |
Residential mortgage-backed securities |  | 31,443 |  |  | 268 |  |  | 11,779 |  |  | 395 |  |  | 43,222 |  |  | 663 |
Asset-backed securities |  | 5,305 |  |  | 84 |  |  | 12,102 |  |  | 1,695 |  |  | 17,407 |  |  | 1,779 |
Commercial mortgage-backed securities |  | 6,523 |  |  | 534 |  |  | 7,544 |  |  | 3,347 |  |  | 14,067 |  |  | 3,881 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 62,974 |  |  | 2,502 |  |  | 3,921 |  |  | 172 |  |  | 66,895 |  |  | 2,674 |
Total below investment grade securities |  | 659,860 |  |  | 27,055 |  |  | 94,256 |  |  | 11,500 |  |  | 754,116 |  |  | 38,555 |
Total fixed maturity securities |  | $ | 7,743,786 |  |  | $ | 346,050 |  |  | $ | 654,932 |  |  | $ | 43,189 |  |  | $ | 8,398,718 |  |  | $ | 389,239 |
Non-redeemable preferred stock |  | $ | 39,466 |  |  | $ | 2,178 |  |  | $ | 6,225 |  |  | $ | 1,442 |  |  | $ | 45,691 |  |  | $ | 3,620 |
Other equity securities |  | 26,791 |  |  | 982 |  |  | — |  |  | — |  |  | 26,791 |  |  | 982 |
Total equity securities |  | $ | 66,257 |  |  | $ | 3,160 |  |  | $ | 6,225 |  |  | $ | 1,442 |  |  | $ | 72,482 |  |  | $ | 4,602 |
|  | Less than 12 months |  | 12 months or greater |  | Total
|  |  |  | Gross |  |  |  | Gross |  |  |  | Gross
December 31, 2014: |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |  | Estimated |  | Unrealized
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 1,225,767 |  |  | $ | 27,784 |  |  | $ | 614,294 |  |  | $ | 30,040 |  |  | $ | 1,840,061 |  |  | $ | 57,824 |
Canadian and Canadian provincial governments |  | — |  |  | — |  |  | 1,235 |  |  | 7 |  |  | 1,235 |  |  | 7 |
Residential mortgage-backed securities |  | 78,864 |  |  | 846 |  |  | 135,414 |  |  | 5,247 |  |  | 214,278 |  |  | 6,093 |
Asset-backed securities |  | 332,785 |  |  | 4,021 |  |  | 109,411 |  |  | 4,289 |  |  | 442,196 |  |  | 8,310 |
Commercial mortgage-backed securities |  | 78,632 |  |  | 564 |  |  | 28,375 |  |  | 2,461 |  |  | 107,007 |  |  | 3,025 |
U.S. government and agencies |  | 81,317 |  |  | 89 |  |  | 32,959 |  |  | 426 |  |  | 114,276 |  |  | 515 |
State and political subdivisions |  | 13,780 |  |  | 17 |  |  | 18,998 |  |  | 3,438 |  |  | 32,778 |  |  | 3,455 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 156,725 |  |  | 7,007 |  |  | 76,111 |  |  | 2,946 |  |  | 232,836 |  |  | 9,953 |
Total investment grade securities |  | 1,967,870 |  |  | 40,328 |  |  | 1,016,797 |  |  | 48,854 |  |  | 2,984,667 |  |  | 89,182 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | 415,886 |  |  | 29,316 |  |  | 32,567 |  |  | 3,404 |  |  | 448,453 |  |  | 32,720 |
Residential mortgage-backed securities |  | 22,836 |  |  | 293 |  |  | 6,284 |  |  | 225 |  |  | 29,120 |  |  | 518 |
Asset-backed securities |  | 12,448 |  |  | 274 |  |  | 7,108 |  |  | 1,791 |  |  | 19,556 |  |  | 2,065 |
Commercial mortgage-backed securities |  | 3,288 |  |  | 249 |  |  | 5,580 |  |  | 5,385 |  |  | 8,868 |  |  | 5,634 |
State and political subdivisions |  | 964 |  |  | 43 |  |  | — |  |  | — |  |  | 964 |  |  | 43 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 13,986 |  |  | 3,136 |  |  | — |  |  | — |  |  | 13,986 |  |  | 3,136 |
Total below investment grade securities |  | 469,408 |  |  | 33,311 |  |  | 51,539 |  |  | 10,805 |  |  | 520,947 |  |  | 44,116 |
Total fixed maturity securities |  | $ | 2,437,278 |  |  | $ | 73,639 |  |  | $ | 1,068,336 |  |  | $ | 59,659 |  |  | $ | 3,505,614 |  |  | $ | 133,298 |
Non-redeemable preferred stock |  | $ | 11,619 |  |  | $ | 235 |  |  | $ | 19,100 |  |  | $ | 1,292 |  |  | $ | 30,719 |  |  | $ | 1,527 |
Other equity securities |  | — |  |  | — |  |  | 3,545 |  |  | 94 |  |  | 3,545 |  |  | 94 |
Total equity securities |  | $ | 11,619 |  |  | $ | 235 |  |  | $ | 22,645 |  |  | $ | 1,386 |  |  | $ | 34,264 |  |  | $ | 1,621 |
The Company has no intention to sell nor does it expect to be required to sell the securities outlined in the table above, as of the dates indicated. 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 and liquidity guidelines. Unrealized losses on below investment grade securities as of June 30, 2015 are primarily related to high-yield corporate securities and commercial mortgage-backed securities. Unrealized losses increased across most security types as interest rates increased during the first six months of 2015. 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 June 30, |  | Six months ended June 30,
|  | 2015 |  | 2014 |  | 2015 |  | 2014
Fixed maturity securities available-for-sale |  | $ | 303,792 |  |  | $ | 253,456 |  |  | $ | 573,560 |  |  | $ | 497,418 |
Mortgage loans on real estate |  | 37,121 |  |  | 30,373 |  |  | 71,893 |  |  | 63,465 |
Policy loans |  | 16,248 |  |  | 13,751 |  |  | 30,288 |  |  | 27,189 |
Funds withheld at interest |  | 87,325 |  |  | 108,059 |  |  | 199,585 |  |  | 220,798 |
Short-term investments |  | 814 |  |  | 80 |  |  | 1,509 |  |  | 1,045 |
Other invested assets |  | 22,418 |  |  | 19,021 |  |  | 34,445 |  |  | 33,522 |
Investment income |  | 467,718 |  |  | 424,740 |  |  | 911,280 |  |  | 843,437 |
Investment expense |  | (17,179 | ) |  | (14,133 | ) |  | (33,850 | ) |  | (28,455 | )
Investment income, net of related expenses |  | $ | 450,539 |  |  | $ | 410,607 |  |  | $ | 877,430 |  |  | $ | 814,982 |
Investment Related Gains (Losses), Net Investment related gains (losses), net consist of the following (dollars in thousands):
| Three months ended June 30, |  | Six months ended June 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Fixed maturity and equity securities available for sale: |  |  |  |  |  |  |
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings | $ | (4,137 | ) |  | $ | (870 | ) |  | $ | (6,664 | ) |  | $ | (1,173 | )
Gain on investment activity | 20,009 |  |  | 34,887 |  |  | 39,210 |  |  | 42,954 |
Loss on investment activity | (14,475 | ) |  | (6,877 | ) |  | (28,071 | ) |  | (13,460 | )
Other impairment losses and change in mortgage loan provision | 143 |  |  | (5,309 | ) |  | (4,025 | ) |  | (3,645 | )
Derivatives and other, net | (17,718 | ) |  | 96,696 |  |  | (9,045 | ) |  | 178,422 |
Total investment related gains (losses), net | $ | (16,178 | ) |  | $ | 118,527 |  |  | $ | (8,595 | ) |  | $ | 203,098 |
The fluctuations in investment related gains (losses) for derivatives and other for the three and six months ended June 30, 2015, compared to the same periods in 2014, are primarily due to changes in the fair value of interest rate swaps and the embedded derivatives related to modified coinsurance and funds withheld treaties, as a result of changes in interest rates. During the three months ended June 30, 2015 and 2014, the Company sold fixed maturity and equity securities with fair values of $651.3 million and $222.8 million at losses of $14.5 million and $6.9 million, respectively. During the six months ended June 30, 2015 and 2014, the Company sold fixed maturity and equity securities with fair values of $850.9 million and $457.9 million at losses of $28.1 million and $13.5 million, respectively. The Company generally does not engage in short-term buying and selling of securities. Securities Borrowing and Other The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from third parties. The borrowed securities are used to provide collateral under affiliated reinsurance transactions. The Company is required to maintain a minimum of 100% of the fair value, or par value under certain programs, of the borrowed securities as collateral. The collateral consists of rights to reinsurance treaty cash flows. If cash flows from the reinsurance treaties are insufficient to maintain the minimum collateral requirement, the Company may substitute cash or securities to meet the requirement. No cash or securities have been pledged by the Company for this purpose. During the year, the Company participated in a repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, were pledged to a third party. In return, the Company received cash from the third party, reflected as a payable to the third party, included in other liabilities on the condensed consolidated balance sheets. The Company was required to maintain a minimum collateral balance with a fair value of 105% of the cash received. The Company terminated the program and all cash was returned prior to June 30, 2015. The gross balance of the repurchase agreement payable was $101.4 million as of December 31, 2014. This was fully collateralized by securities with a fair value of $107.2 million as of December 31, 2014. Additionally, the Company 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. The following table includes the amount of borrowed securities, repurchased securities pledged and repurchased/reverse repurchased securities pledged and received as of June 30, 2015 and December 31, 2014 (dollars in thousands).
| June 30, 2015 |  | December 31, 2014
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Borrowed securities | $ | 275,060 |  |  | $ | 284,602 |  |  | $ | 201,050 |  |  | $ | 212,946 |
Repurchase program securities pledged | — |  |  | — |  |  | 92,446 |  |  | 107,158 |
Repurchase program/reverse repurchase program: |  |  |  |  |  |  |
Securities pledged | 298,900 |  |  | 313,771 |  |  | 298,466 |  |  | 314,160 |
Securities received | n/a |  |  | 340,201 |  |  | n/a |  |  | 338,929 |
The following table presents information on the securities pledged as collateral by the Company related to its repurchase/reverse repurchase program as of June 30, 2015 (dollars in thousands). Collateral associated with certain borrowed securities is not included within the table as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.
| June 30, 2015
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Collateral on repurchase program |  |  |  |  |  |  |  |  |
U.S. treasury and agency securities | $ | — |  |  | $ | — |  |  | $ | 23,237 |  |  | $ | 177,294 |  |  | $ | 200,531 |
Residential mortgage-backed securities | — |  |  | — |  |  | — |  |  | 104,144 |  |  | 104,144 |
Other debt instruments | 9,096 |  |  | — |  |  | — |  |  | — |  |  | 9,096 |
Total borrowings | $ | 9,096 |  |  | $ | — |  |  | $ | 23,237 |  |  | $ | 281,438 |  |  | $ | 313,771 |
Gross amount of recognized liabilities for repurchase agreement in preceding table |  | $ | 340,201 |
Amounts related to agreements not included in offsetting disclosure |  | $ | 26,430 |
Mortgage Loans on Real Estate Mortgage loans represented approximately 7.8% and 7.4% of the Company’s total investments as of June 30, 2015 and December 31, 2014. The Company makes mortgage loans on income producing properties that are geographically diversified throughout the U.S., with the largest concentration being in California, which represented 20.6% and 18.7% of mortgage loans on real estate as of June 30, 2015 and December 31, 2014, respectively. 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 June 30, 2015 and December 31, 2014 (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
Property type: |  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
Office building |  | $ | 957,724 |  |  | 31.1 | % |  | $ | 851,749 |  |  | 31.3 | %
Retail |  | 964,540 |  |  | 31.4 |  |  | 802,466 |  |  | 29.6 |
Industrial |  | 535,856 |  |  | 17.4 |  |  | 466,583 |  |  | 17.2 |
Apartment |  | 410,213 |  |  | 13.3 |  |  | 376,430 |  |  | 13.8 |
Other commercial |  | 210,922 |  |  | 6.8 |  |  | 221,481 |  |  | 8.1 |
Total |  | $ | 3,079,255 |  |  | 100.0 | % |  | $ | 2,718,709 |  |  | 100.0 | %
The maturities of the mortgage loans, gross of valuation allowances, as of June 30, 2015 and December 31, 2014 are as follows (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
|  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
Due within five years |  | $ | 877,270 |  |  | 28.5 | % |  | $ | 860,362 |  |  | 31.6 | %
Due after five years through ten years |  | 1,459,108 |  |  | 47.4 |  |  | 1,165,530 |  |  | 42.9 |
Due after ten years |  | 742,877 |  |  | 24.1 |  |  | 692,817 |  |  | 25.5 |
Total |  | $ | 3,079,255 |  |  | 100.0 | % |  | $ | 2,718,709 |  |  | 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 June 30, 2015 and December 31, 2014 is as follows (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
Internal credit quality grade: |  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
High investment grade |  | $ | 1,553,149 |  |  | 50.5 | % |  | $ | 1,326,199 |  |  | 48.8 | %
Investment grade |  | 1,405,901 |  |  | 45.7 |  |  | 1,235,046 |  |  | 45.4 |
Average |  | 81,284 |  |  | 2.6 |  |  | 118,152 |  |  | 4.4 |
Watch list |  | 22,036 |  |  | 0.7 |  |  | 22,285 |  |  | 0.8 |
In or near default |  | 16,885 |  |  | 0.5 |  |  | 17,027 |  |  | 0.6 |
Total |  | $ | 3,079,255 |  |  | 100.0 | % |  | $ | 2,718,709 |  |  | 100.0 | %
None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of June 30, 2015 and December 31, 2014. The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of June 30, 2015 and December 31, 2014 (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
Mortgage loans: |  |  |  |
Individually measured for impairment |  | $ | 16,885 |  |  | $ | 17,027 |
Collectively measured for impairment |  | 3,062,370 |  |  | 2,701,682 |
Mortgage loans, gross of valuation allowances |  | 3,079,255 |  |  | 2,718,709 |
Valuation allowances: |  |  |  |
Individually measured for impairment |  | 671 |  |  | 816 |
Collectively measured for impairment |  | 5,271 |  |  | 5,655 |
Total valuation allowances |  | 5,942 |  |  | 6,471 |
Mortgage loans, net of valuation allowances |  | $ | 3,073,313 |  |  | $ | 2,712,238 |
Information regarding the Company’s loan valuation allowances for mortgage loans for the three and six months ended June 30, 2015 and 2014 is as follows (dollars in thousands):
|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2015 |  | 2014 |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 6,130 |  |  | $ | 8,466 |  |  | $ | 6,471 |  |  | $ | 10,106 |
Charge-offs, net of recoveries |  | — |  |  | — |  |  | — |  |  | 24 |
Provision (release) |  | (188 | ) |  | 1,226 |  |  | (529 | ) |  | (438 | )
Balance, end of period |  | $ | 5,942 |  |  | $ | 9,692 |  |  | $ | 5,942 |  |  | $ | 9,692 |
Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2015 and December 31, 2014 is as follows (dollars in thousands):
|  | Unpaid Principal Balance |  | Recorded Investment |  | Related Allowance |  | Carrying Value
June 30, 2015: |  |  |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 4,414 |  |  | $ | 4,354 |  |  | $ | — |  |  | $ | 4,354 |
Impaired mortgage loans with valuation allowance recorded |  | 13,039 |  |  | 12,531 |  |  | 671 |  |  | 11,860 |
Total impaired mortgage loans |  | $ | 17,453 |  |  | $ | 16,885 |  |  | $ | 671 |  |  | $ | 16,214 |
December 31, 2014: |  |  |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 7,314 |  |  | $ | 6,711 |  |  | $ | — |  |  | $ | 6,711 |
Impaired mortgage loans with valuation allowance recorded |  | 10,279 |  |  | 10,316 |  |  | 816 |  |  | 9,500 |
Total impaired mortgage loans |  | $ | 17,593 |  |  | $ | 17,027 |  |  | $ | 816 |  |  | $ | 16,211 |
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 June 30,
|  | 2015 |  | 2014
|  | Average Recorded Investment(1) |  | Interest Income |  | Average Recorded Investment(1) |  | Interest Income
Impaired mortgage loans with no valuation allowance recorded |  | $ | 5,524 |  |  | $ | 35 |  |  | $ | 14,589 |  |  | $ | 71 |
Impaired mortgage loans with valuation allowance recorded |  | 11,397 |  |  | 229 |  |  | 15,855 |  |  | 259 |
Total impaired mortgage loans |  | $ | 16,921 |  |  | $ | 264 |  |  | $ | 30,444 |  |  | $ | 330 |
|  | Six months ended June 30,
|  | 2015 |  | 2014
|  | Average Recorded Investment(1) |  | Interest Income |  | Average Recorded Investment(1) |  | Interest Income
Impaired mortgage loans with no valuation allowance recorded |  | $ | 5,920 |  |  | $ | 141 |  |  | $ | 16,759 |  |  | $ | 389 |
Impaired mortgage loans with valuation allowance recorded |  | 11,036 |  |  | 384 |  |  | 16,151 |  |  | 452 |
Total impaired mortgage loans |  | $ | 16,956 |  |  | $ | 525 |  |  | $ | 32,910 |  |  | $ | 841 |
(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 six months ended June 30, 2015 and 2014. The Company had no mortgage loans that were on a nonaccrual status at June 30, 2015 and December 31, 2014. Policy Loans Policy loans comprised approximately 3.6% and 3.5% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively, the majority 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 14.7% and 16.1% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively. Of the $5.8 billion funds withheld at interest balance, net of embedded derivatives, as of June 30, 2015, $4.2 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 against amounts owed to the Company from the ceding company. Other Invested Assets Other invested assets include equity securities, limited partnership interests, joint ventures (other than operating 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 in the table below), real estate held-for-investment (included in other in the table below), and equity release mortgages (included in other in the table below). 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 2.8% and 3.3% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively. Carrying values of these assets as of June 30, 2015 and December 31, 2014 are as follows (dollars in thousands):
|  | June 30, 2015 |  | December 31, 2014
Equity securities |  | $ | 127,668 |  |  | $ | 126,860 |
Limited partnerships and real estate joint ventures |  | 492,465 |  |  | 446,604 |
Structured loans |  | 52,185 |  |  | 164,309 |
Derivatives |  | 194,276 |  |  | 216,966 |
FVO contractholder-directed unit-linked investments |  | 137,529 |  |  | 140,344 |
Other |  | 105,984 |  |  | 103,236 |
Total other invested assets |  | $ | 1,110,107 |  |  | $ | 1,198,319 |

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