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Investments | 12 Months Ended
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Dec. 31, 2016
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 December 31, 2016 and 2015 (dollars in thousands):
December 31, 2016: |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value |  | % of Total |  | Other-than- temporary impairments in AOCI
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 18,924,711 |  |  | $ | 911,618 |  |  | $ | 217,245 |  |  | $ | 19,619,084 |  |  | 61.1 | % |  | $ | — |
Canadian and Canadian provincial governments |  | 2,561,605 |  |  | 1,085,982 |  |  | 3,541 |  |  | 3,644,046 |  |  | 11.4 |  |  | — |
Residential mortgage-backed securities |  | 1,258,039 |  |  | 33,917 |  |  | 13,380 |  |  | 1,278,576 |  |  | 4.0 |  |  | (375 | )
Asset-backed securities |  | 1,443,822 |  |  | 9,350 |  |  | 23,828 |  |  | 1,429,344 |  |  | 4.5 |  |  | 275 |
Commercial mortgage-backed securities |  | 1,342,440 |  |  | 28,973 |  |  | 7,759 |  |  | 1,363,654 |  |  | 4.2 |  |  | — |
U.S. government and agencies |  | 1,518,702 |  |  | 12,644 |  |  | 63,044 |  |  | 1,468,302 |  |  | 4.6 |  |  | — |
State and political subdivisions |  | 566,761 |  |  | 37,499 |  |  | 12,464 |  |  | 591,796 |  |  | 1.8 |  |  | — |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 2,595,707 |  |  | 123,054 |  |  | 19,938 |  |  | 2,698,823 |  |  | 8.4 |  |  | — |
Total fixed maturity securities |  | $ | 30,211,787 |  |  | $ | 2,243,037 |  |  | $ | 361,199 |  |  | $ | 32,093,625 |  |  | 100.0 | % |  | $ | (100 | )
Non-redeemable preferred stock |  | $ | 55,812 |  |  | $ | 1,648 |  |  | $ | 6,337 |  |  | $ | 51,123 |  |  | 18.6 | % |  |
Other equity securities |  | 229,767 |  |  | 1,792 |  |  | 7,321 |  |  | 224,238 |  |  | 81.4 |  |  |
Total equity securities |  | $ | 285,579 |  |  | $ | 3,440 |  |  | $ | 13,658 |  |  | $ | 275,361 |  |  | 100.0 | % |  |
December 31, 2015: |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value |  | % of Total |  | Other-than- temporary impairments in AOCI
Available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 17,575,507 |  |  | $ | 599,718 |  |  | $ | 467,069 |  |  | $ | 17,708,156 |  |  | 59.7 | % |  | $ | — |
Canadian and Canadian provincial governments |  | 2,469,009 |  |  | 1,110,282 |  |  | 2,532 |  |  | 3,576,759 |  |  | 12.1 |  |  | — |
Residential mortgage-backed securities |  | 1,277,998 |  |  | 45,152 |  |  | 11,673 |  |  | 1,311,477 |  |  | 4.4 |  |  | (300 | )
Asset-backed securities |  | 1,219,000 |  |  | 12,052 |  |  | 18,376 |  |  | 1,212,676 |  |  | 4.1 |  |  | 354 |
Commercial mortgage-backed securities |  | 1,456,848 |  |  | 37,407 |  |  | 11,168 |  |  | 1,483,087 |  |  | 5.0 |  |  | (1,609 | )
U.S. government and agencies |  | 1,423,791 |  |  | 15,586 |  |  | 57,718 |  |  | 1,381,659 |  |  | 4.7 |  |  | — |
State and political subdivisions |  | 480,067 |  |  | 40,014 |  |  | 9,067 |  |  | 511,014 |  |  | 1.7 |  |  | — |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 2,420,757 |  |  | 78,964 |  |  | 41,644 |  |  | 2,458,077 |  |  | 8.3 |  |  | — |
Total fixed maturity securities |  | $ | 28,322,977 |  |  | $ | 1,939,175 |  |  | $ | 619,247 |  |  | $ | 29,642,905 |  |  | 100.0 | % |  | $ | (1,555 | )
Non-redeemable preferred stock |  | $ | 85,645 |  |  | $ | 7,837 |  |  | $ | 5,962 |  |  | $ | 87,520 |  |  | 69.5 | % |  |
Other equity securities |  | 40,584 |  |  | — |  |  | 2,242 |  |  | 38,342 |  |  | 30.5 |  |  |
Total equity securities |  | $ | 126,229 |  |  | $ | 7,837 |  |  | $ | 8,204 |  |  | $ | 125,862 |  |  | 100.0 | % |  |
The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of fixed maturity securities as collateral. Pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of December 31, 2016 and 2015, none of the collateral received had been sold or repledged. The Company also holds assets 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 derivative transactions and certain third-party reinsurance treaties as of December 31, 2016 and 2015 (dollars in thousands):
| 2016 |  | 2015
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities pledged as collateral | $ | 207,066 |  |  | $ | 210,676 |  |  | $ | 169,678 |  |  | $ | 176,782 |
Fixed maturity securities received as collateral | n/a |  |  | 300,925 |  |  | n/a |  |  | 242,914 |
Assets in trust held to satisfy collateral requirements | 12,135,258 |  |  | 12,874,370 |  |  | 10,535,729 |  |  | 10,928,393 |
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 from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies, as well as the securities disclosed below, as of December 31, 2016 and 2015 (dollars in thousands).
| 2016 |  | 2015
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Fixed maturity securities guaranteed or issued by: |  |  |  |  |  |  |
Canadian province of Quebec | $ | 1,004,261 |  |  | $ | 1,612,957 |  |  | $ | 943,484 |  |  | $ | 1,525,903 |
Canadian province of Ontario | 832,764 |  |  | 1,126,433 |  |  | 864,444 |  |  | 1,199,080 |
The amortized cost and estimated fair value of fixed maturity securities available-for-sale at December 31, 2016 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 |  | $ | 791,302 |  |  | $ | 800,010 |
Due after one year through five years |  | 6,665,056 |  |  | 6,897,024 |
Due after five years through ten years |  | 9,042,167 |  |  | 9,390,938 |
Due after ten years |  | 9,668,961 |  |  | 10,934,079 |
Asset and mortgage-backed securities |  | 4,044,301 |  |  | 4,071,574 |
Total |  | $ | 30,211,787 |  |  | $ | 32,093,625 |
Corporate Fixed Maturity Securities The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of December 31, 2016 and 2015 (dollars in thousands):
December 31, 2016: |  | Amortized Cost |  | Estimated Fair Value |  | % of Total
Finance |  | $ | 6,725,199 |  |  | $ | 6,888,968 |  |  | 35.2 | %
Industrial |  | 10,228,813 |  |  | 10,639,613 |  |  | 54.2 |
Utility |  | 1,970,699 |  |  | 2,090,503 |  |  | 10.6 |
Total |  | $ | 18,924,711 |  |  | $ | 19,619,084 |  |  | 100.0 | %
December 31, 2015: |  | Amortized Cost |  | Estimated Fair Value |  | % of Total
Finance |  | $ | 5,408,791 |  |  | $ | 5,555,044 |  |  | 31.4 | %
Industrial |  | 10,211,426 |  |  | 10,129,917 |  |  | 57.2 |
Utility |  | 1,955,290 |  |  | 2,023,195 |  |  | 11.4 |
Total |  | $ | 17,575,507 |  |  | $ | 17,708,156 |  |  | 100.0 | %
Other-Than-Temporary Impairments—Fixed Maturity and Equity Securities As discussed in Note 2 – “Summary of Significant Accounting Policies,” 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 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):
|  | 2016 |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 7,284 |  |  | $ | 7,284 |  |  | $ | 11,696 |
Additional impairments - credit loss OTTI recognized on securities previously impaired |  | 231 |  |  | — |  |  | — |
Credit loss previously recognized on securities which matured, paid down, prepaid or were sold during the period |  | (1,502 | ) |  | — |  |  | (4,412 | )
Balance, end of period |  | $ | 6,013 |  |  | $ | 7,284 |  |  | $ | 7,284 |
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 as of December 31, 2016 and 2015 (dollars in thousands):
| 2016 |  | 2015
Outstanding principal and interest balance(1) | $ | 85,078 |  |  | $ | 343,640 |
Carrying value, including accrued interest(2) | $ | 69,717 |  |  | $ | 287,663 |
(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 ended December 31, 2016 and 2015, as of the acquisition dates (dollars in thousands):
| 2016 |  | 2015
Contractually required payments (including interest) | $ | 7,310 |  |  | $ | 217,187 |
Cash flows expected to be collected(1) | $ | 5,748 |  |  | $ | 179,025 |
Fair value of investments acquired | $ | 4,139 |  |  | $ | 137,399 |
(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 years ended December 31, 2016 and 2015 (dollars in thousands):
| 2016 |  | 2015
Balance, beginning of period | $ | 88,016 |  |  | $ | 67,171 |
Investments purchased | 1,609 |  |  | 41,626 |
Accretion | (9,004 | ) |  | (11,402 | )
Disposals | (59,078 | ) |  | (1,109 | )
Reclassification from nonaccretable difference | (2,105 | ) |  | (8,270 | )
Balance, end of period | $ | 19,438 |  |  | $ | 88,016 |
Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale The following table presents the total gross unrealized losses for the 1,535 and 2,080 fixed maturity and equity securities at December 31, 2016 and 2015, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):
|  | 2016 |  | 2015
|  | Gross Unrealized Losses |  | % of Total |  | Gross Unrealized Losses |  | % of Total
Less than 20% |  | $ | 337,831 |  |  | 90.1 | % |  | $ | 463,109 |  |  | 73.8 | %
20% or more for less than six months |  | 19,438 |  |  | 5.2 |  |  | 142,495 |  |  | 22.7 |
20% or more for six months or greater |  | 17,588 |  |  | 4.7 |  |  | 21,847 |  |  | 3.5 |
Total |  | $ | 374,857 |  |  | 100.0 | % |  | $ | 627,451 |  |  | 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 1,535 and 2,080 fixed maturity and equity securities that have estimated fair values below amortized cost as of December 31, 2016 and 2015, 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
December 31, 2016: |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 4,661,706 |  |  | $ | 124,444 |  |  | $ | 549,273 |  |  | $ | 43,282 |  |  | $ | 5,210,979 |  |  | $ | 167,726 |
Canadian and Canadian provincial governments |  | 101,578 |  |  | 3,541 |  |  | — |  |  | — |  |  | 101,578 |  |  | 3,541 |
Residential mortgage-backed securities |  | 490,473 |  |  | 9,733 |  |  | 112,216 |  |  | 3,635 |  |  | 602,689 |  |  | 13,368 |
Asset-backed securities |  | 563,259 |  |  | 12,010 |  |  | 257,166 |  |  | 9,653 |  |  | 820,425 |  |  | 21,663 |
Commercial mortgage-backed securities |  | 368,465 |  |  | 6,858 |  |  | 10,853 |  |  | 166 |  |  | 379,318 |  |  | 7,024 |
U.S. government and agencies |  | 1,056,101 |  |  | 63,044 |  |  | — |  |  | — |  |  | 1,056,101 |  |  | 63,044 |
State and political subdivisions |  | 187,194 |  |  | 9,396 |  |  | 13,635 |  |  | 3,068 |  |  | 200,829 |  |  | 12,464 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 524,236 |  |  | 13,372 |  |  | 51,097 |  |  | 2,981 |  |  | 575,333 |  |  | 16,353 |
Total investment grade securities |  | 7,953,012 |  |  | 242,398 |  |  | 994,240 |  |  | 62,785 |  |  | 8,947,252 |  |  | 305,183 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | 330,757 |  |  | 7,914 |  |  | 163,152 |  |  | 41,605 |  |  | 493,909 |  |  | 49,519 |
Residential mortgage-backed securities |  | — |  |  | — |  |  | 412 |  |  | 12 |  |  | 412 |  |  | 12 |
Asset-backed securities |  | 5,904 |  |  | 700 |  |  | 12,581 |  |  | 1,465 |  |  | 18,485 |  |  | 2,165 |
Commercial mortgage-backed securities |  | 5,815 |  |  | 735 |  |  | — |  |  | — |  |  | 5,815 |  |  | 735 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 32,355 |  |  | 1,258 |  |  | 39,763 |  |  | 2,327 |  |  | 72,118 |  |  | 3,585 |
Total below investment grade securities |  | 374,831 |  |  | 10,607 |  |  | 215,908 |  |  | 45,409 |  |  | 590,739 |  |  | 56,016 |
Total fixed maturity securities |  | $ | 8,327,843 |  |  | $ | 253,005 |  |  | $ | 1,210,148 |  |  | $ | 108,194 |  |  | $ | 9,537,991 |  |  | $ | 361,199 |
Non-redeemable preferred stock |  | $ | 10,831 |  |  | $ | 831 |  |  | $ | 21,879 |  |  | $ | 5,506 |  |  | $ | 32,710 |  |  | $ | 6,337 |
Other equity securities |  | 202,068 |  |  | 7,020 |  |  | 6,751 |  |  | 301 |  |  | 208,819 |  |  | 7,321 |
Total equity securities |  | $ | 212,899 |  |  | $ | 7,851 |  |  | $ | 28,630 |  |  | $ | 5,807 |  |  | $ | 241,529 |  |  | $ | 13,658 |
|  | Less than 12 months |  | 12 months or greater |  | Total
December 31, 2015: |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
Investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 6,388,148 |  |  | $ | 323,961 |  |  | $ | 294,755 |  |  | $ | 40,861 |  |  | $ | 6,682,903 |  |  | $ | 364,822 |
Canadian and Canadian provincial governments |  | 122,746 |  |  | 2,532 |  |  | — |  |  | — |  |  | 122,746 |  |  | 2,532 |
Residential mortgage-backed securities |  | 452,297 |  |  | 7,036 |  |  | 82,314 |  |  | 4,057 |  |  | 534,611 |  |  | 11,093 |
Asset-backed securities |  | 581,701 |  |  | 9,825 |  |  | 199,298 |  |  | 7,100 |  |  | 780,999 |  |  | 16,925 |
Commercial mortgage-backed securities |  | 514,877 |  |  | 9,806 |  |  | 31,177 |  |  | 997 |  |  | 546,054 |  |  | 10,803 |
U.S. government and agencies |  | 1,010,387 |  |  | 57,718 |  |  | — |  |  | — |  |  | 1,010,387 |  |  | 57,718 |
State and political subdivisions |  | 157,837 |  |  | 5,349 |  |  | 13,016 |  |  | 3,718 |  |  | 170,853 |  |  | 9,067 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 702,962 |  |  | 18,279 |  |  | 38,379 |  |  | 4,206 |  |  | 741,341 |  |  | 22,485 |
Total investment grade securities |  | 9,930,955 |  |  | 434,506 |  |  | 658,939 |  |  | 60,939 |  |  | 10,589,894 |  |  | 495,445 |
Below investment grade securities: |  |  |  |  |  |  |  |  |  |  |  |
Corporate securities |  | 554,688 |  |  | 71,171 |  |  | 114,427 |  |  | 31,076 |  |  | 669,115 |  |  | 102,247 |
Residential mortgage-backed securities |  | 22,646 |  |  | 282 |  |  | 7,679 |  |  | 298 |  |  | 30,325 |  |  | 580 |
Asset-backed securities |  | 6,772 |  |  | 201 |  |  | 9,335 |  |  | 1,250 |  |  | 16,107 |  |  | 1,451 |
Commercial mortgage-backed securities |  | 3,253 |  |  | 248 |  |  | 767 |  |  | 117 |  |  | 4,020 |  |  | 365 |
Other foreign government, supranational and foreign government-sponsored enterprises |  | 60,668 |  |  | 7,356 |  |  | 31,693 |  |  | 11,803 |  |  | 92,361 |  |  | 19,159 |
Total below investment grade securities |  | 648,027 |  |  | 79,258 |  |  | 163,901 |  |  | 44,544 |  |  | 811,928 |  |  | 123,802 |
Total fixed maturity securities |  | $ | 10,578,982 |  |  | $ | 513,764 |  |  | $ | 822,840 |  |  | $ | 105,483 |  |  | $ | 11,401,822 |  |  | $ | 619,247 |
Non-redeemable preferred stock |  | $ | 12,331 |  |  | $ | 2,175 |  |  | $ | 12,191 |  |  | $ | 3,787 |  |  | $ | 24,522 |  |  | $ | 5,962 |
Other equity securities |  | 38,327 |  |  | 2,242 |  |  | — |  |  | — |  |  | 38,327 |  |  | 2,242 |
Total equity securities |  | $ | 50,658 |  |  | $ | 4,417 |  |  | $ | 12,191 |  |  | $ | 3,787 |  |  | $ | 62,849 |  |  | $ | 8,204 |
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 December 31, 2016 are primarily related to high-yield corporate and other foreign government, supranational and foreign government-sponsored enterprise securities. Changes in unrealized losses are primarily driven by changes in credit spreads and interest rates. Investment Income, Net of Related Expenses Major categories of investment income, net of related expenses consist of the following (dollars in thousands):
|  | 2016 |  | 2015 |  | 2014
Fixed maturity securities available-for-sale |  | $ | 1,285,406 |  |  | $ | 1,177,706 |  |  | $ | 1,052,715 |
Mortgage loans on real estate |  | 168,582 |  |  | 149,564 |  |  | 148,417 |
Policy loans |  | 63,837 |  |  | 62,955 |  |  | 55,248 |
Funds withheld at interest |  | 368,728 |  |  | 343,031 |  |  | 447,364 |
Short-term investments and cash and cash equivalents |  | 8,051 |  |  | 7,574 |  |  | 8,955 |
Other |  | 89,371 |  |  | 61,709 |  |  | 63,312 |
Investment income |  | 1,983,975 |  |  | 1,802,539 |  |  | 1,776,011 |
Investment expense |  | (72,089 | ) |  | (68,044 | ) |  | (62,320 | )
Investment income, net of related expenses |  | $ | 1,911,886 |  |  | $ | 1,734,495 |  |  | $ | 1,713,691 |
Investment Related Gains (Losses), Net Investment related gains (losses), net, consist of the following (dollars in thousands):
|  | 2016 |  | 2015 |  | 2014
Fixed maturity and equity securities available for sale: |  |  |  |  |  |
Other-than-temporary impairment losses on fixed maturities |  | $ | (38,805 | ) |  | $ | (57,380 | ) |  | $ | (7,766 | )
Portion of loss recognized in accumulated other comprehensive income |  | 74 |  |  | — |  |  | — |
Net other-than-temporary impairment losses on fixed maturity securities recognized in earnings |  | $ | (38,731 | ) |  | $ | (57,380 | ) |  | $ | (7,766 | )
Gain on investment activity |  | 154,370 |  |  | 73,079 |  |  | 65,435 |
Loss on investment activity |  | (49,965 | ) |  | (71,893 | ) |  | (31,295 | )
Other impairment losses and change in mortgage loan provision |  | (11,006 | ) |  | (6,953 | ) |  | (5,315 | )
Derivatives and other, net |  | 39,527 |  |  | (101,603 | ) |  | 165,134 |
Total investment related gains (losses), net |  | $ | 94,195 |  |  | $ | (164,750 | ) |  | $ | 186,193 |
The other-than-temporary impairment losses on fixed maturity securities for 2016, 2015 and 2014 are primarily due to emerging market and high-yield debt exposures. The fluctuations in investment related gains (losses) for derivatives and other are primarily due to changes in the fair value of embedded derivatives related to modified coinsurance and funds withheld treaties, as a result of changes in interest rates, driven primarily by credit spreads. At December 31, 2016 and 2015 the Company held non-income producing securities with amortized costs of $35.4 million and $116.0 million, and estimated fair values of $47.3 million and $123.0 million, respectively. Generally, securities are non-income producing when principal or interest is not paid primarily as a result of bankruptcies or credit defaults, but also include securities where amortization has been discontinued. During 2016, 2015 and 2014 the Company sold fixed maturity and equity securities with fair values of $1,181.6 million, $1,523.6 million, and $1,016.5 million, which were below amortized cost, at gross realized losses of $50.0 million, $71.9 million and $31.3 million, respectively. The Company generally does not engage in short-term buying and selling of securities. Securities Borrowing, Lending and Other The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s 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. The Company also participates in a securities lending program whereby securities, reflected as investments on the Company’s consolidated balance sheets, are loaned to a third party. The Company receives securities as collateral, in an amount equal to a minimum of 105% of the fair value of the securities lent. The securities received are not reflected on the Company’s consolidated balance sheets. The Company also participates in repurchase/reverse repurchase programs in which securities, reflected as investments on the Company’s consolidated balance sheets, are pledged to third parties. In return, the Company receives securities from the third parties 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 consolidated balance sheets. The Company also participates in a repurchase program in which securities, reflected as investments on the Company’s consolidated balance sheets, are pledged to a third party. In return, the Company receives cash from the third party, which is reflected as a payable to a third party, included in other liabilities on the consolidated balance sheets. The Company is required to maintain a minimum collateral balance with a fair value of 102% of the cash received. The following table includes the amount of borrowed securities, securities lent and securities collateral received as part of the securities lending program, repurchased/reverse repurchased securities pledged and received and cash received as of December 31, 2016 and 2015 (dollars in thousands).
| 2016 |  | 2015
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Borrowed securities | $ | 263,820 |  |  | $ | 279,186 |  |  | $ | 259,540 |  |  | $ | 266,297 |
Securities lending: |  |  |  |  |  |  |  |  |  |
Securities loaned | 74,389 |  |  | 73,625 |  |  | — |  |  | — |
Securities received | n/a |  |  | 80,000 |  |  | n/a |  |  | — |
Repurchase program/reverse repurchase program: |  |  |  |  |  |  |
Securities pledged | 476,531 |  |  | 499,891 |  |  | 443,435 |  |  | 465,889 |
Securities received | n/a |  |  | 515,200 |  |  | n/a |  |  | 481,197 |
Cash received | — |  |  | 28,832 |  |  | — |  |  | — |
The following tables present information on the Company’s securities lending and repurchase transactions as of December 31, 2016 and 2015, respectively (dollars in thousands). Collateral associated with certain borrowed securities is not included within the tables as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.
| December 31, 2016
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Securities lending transaction: |  |  |  |  |  |  |  |  |
Corporate securities | $ | — |  |  | $ | — |  |  | $ | 4,017 |  |  | $ | 69,608 |  |  | $ | 73,625 |
Total | — |  |  | — |  |  | 4,017 |  |  | 69,608 |  |  | 73,625 |
Repurchase transactions: |  |  |  |  |  |  |  |  |
Corporate securities | — |  |  | — |  |  | 3,220 |  |  | 166,979 |  |  | 170,199 |
Residential mortgage-backed securities | — |  |  | — |  |  | — |  |  | 92,546 |  |  | 92,546 |
U.S. government and agencies | — |  |  | — |  |  | — |  |  | 216,000 |  |  | 216,000 |
Foreign government | — |  |  | — |  |  | — |  |  | 19,900 |  |  | 19,900 |
Other | 1,246 |  |  | — |  |  | — |  |  | — |  |  | 1,246 |
Total | 1,246 |  |  | — |  |  | 3,220 |  |  | 495,425 |  |  | 499,891 |
Total transactions | $ | 1,246 |  |  | $ | — |  |  | $ | 7,237 |  |  | $ | 565,033 |  |  | $ | 573,516 |
Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table |  | $ | 624,032 |
Amounts related to agreements not included in offsetting disclosure |  | $ | 50,516 |
| December 31, 2015
| Remaining Contractual Maturity of the Agreements
| Overnight and Continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Repurchase transactions: |  |  |  |  |  |  |  |  |
Corporate securities | $ | — |  |  | $ | 2,951 |  |  | $ | — |  |  | $ | 147,324 |  |  | $ | 150,275 |
Residential mortgage-backed securities | — |  |  | — |  |  | — |  |  | 97,639 |  |  | 97,639 |
U.S. government and agencies | — |  |  | — |  |  | — |  |  | 199,431 |  |  | 199,431 |
Foreign government | — |  |  | — |  |  | — |  |  | 3,358 |  |  | 3,358 |
Other | 15,186 |  |  | — |  |  | — |  |  | — |  |  | 15,186 |
Total transactions | $ | 15,186 |  |  | $ | 2,951 |  |  | $ | — |  |  | $ | 447,752 |  |  | $ | 465,889 |
Gross amount of recognized liabilities for repurchase transactions in preceding table |  | $ | 481,197 |
Amounts related to agreements not included in offsetting disclosure |  | $ | 15,308 |
The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the consolidated balance sheets was a liability of $5.5 million and $8.8 million as of December 31, 2016 and 2015, respectively. The Company also has a payable resulting from cash received associated with a repurchase agreement of $28.8 million as of December 31, 2016. There were no repurchase agreement payables as of December 31, 2015. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements. Mortgage Loans on Real Estate Mortgage loans represented approximately 8.4% and 7.5% of the Company’s total investments as of December 31, 2016 and 2015, respectively. The Company makes mortgage loans on income producing properties that are geographically diversified, with the largest concentration being in the state of California, which represented 22.1% and 22.3% of mortgage loans on real estate as of December 31, 2016 and 2015, respectively. The distribution of mortgage loans by property type, gross of valuation allowances is as follows as of December 31, 2016 and 2015 (dollars in thousands):
|  | 2016 |  | 2015
|  | Recorded Investment |  | Percentage of Total |  | Recorded Investment |  | Percentage of Total
Property type: |  |  |  |  |  |  |  |
Office building |  | $ | 1,270,113 |  |  | 33.6 | % |  | $ | 980,858 |  |  | 31.3 | %
Retail |  | 1,179,936 |  |  | 31.2 |  |  | 1,026,018 |  |  | 32.7 |
Industrial |  | 713,461 |  |  | 18.8 |  |  | 527,485 |  |  | 16.8 |
Apartment |  | 447,088 |  |  | 11.8 |  |  | 420,014 |  |  | 13.4 |
Other commercial |  | 172,609 |  |  | 4.6 |  |  | 182,389 |  |  | 5.8 |
Total |  | $ | 3,783,207 |  |  | 100.0 | % |  | $ | 3,136,764 |  |  | 100.0 | %
The maturities of the mortgage loans, gross of valuation allowances, as of December 31, 2016 and 2015 are as follows (dollars in thousands):
|  | 2016 |  | 2015
|  | Recorded Investment |  | % of Total |  | Recorded Investment |  | % of Total
Due within five years |  | $ | 822,073 |  |  | 21.7 | % |  | $ | 873,280 |  |  | 27.8 | %
Due after five years through ten years |  | 2,099,559 |  |  | 55.5 |  |  | 1,561,535 |  |  | 49.8 |
Due after ten years |  | 861,575 |  |  | 22.8 |  |  | 701,949 |  |  | 22.4 |
Total |  | $ | 3,783,207 |  |  | 100.0 | % |  | $ | 3,136,764 |  |  | 100.0 | %
The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans, gross of valuation allowances, as of December 31, 2016 and 2015 (dollars in thousands):
| Recorded Investment
| Debt Service Ratios |  |  |  |
| >1.20x |  | 1.00x - 1.20x |  | <1.00x |  | Total |  | % of Total
December 31, 2016: |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |
0% - 59.99% | $ | 1,859,640 |  |  | $ | 64,749 |  |  | $ | 1,366 |  |  | $ | 1,925,755 |  |  | 50.8 | %
60% - 69.99% | 1,257,788 |  |  | 34,678 |  |  | — |  |  | 1,292,466 |  |  | 34.2 |
70% - 79.99% | 370,092 |  |  | 20,869 |  |  | 24,369 |  |  | 415,330 |  |  | 11.0 |
Greater than 80% | 114,297 |  |  | — |  |  | 35,359 |  |  | 149,656 |  |  | 4.0 |
Total | $ | 3,601,817 |  |  | $ | 120,296 |  |  | $ | 61,094 |  |  | $ | 3,783,207 |  |  | 100.0 | %
| Recorded Investment
| Debt Service Ratios |  |  |  |
| >1.20x |  | 1.00x - 1.20x |  | <1.00x |  | Total |  | % of Total
December 31, 2015: |  |  |  |  |  |  |  |  |
Loan-to-Value Ratio |  |  |  |  |  |  |  |  |
0% - 59.99% | $ | 1,621,056 |  |  | $ | 77,118 |  |  | $ | 2,367 |  |  | $ | 1,700,541 |  |  | 54.2 | %
60% - 69.99% | 881,611 |  |  | 14,332 |  |  | 19,805 |  |  | 915,748 |  |  | 29.2 | %
70% - 79.99% | 446,565 |  |  | 7,947 |  |  | 34,539 |  |  | 489,051 |  |  | 15.6 | %
Greater than 80% | 3,948 |  |  | 13,550 |  |  | 13,926 |  |  | 31,424 |  |  | 1.0 | %
Total | $ | 2,953,180 |  |  | $ | 112,947 |  |  | $ | 70,637 |  |  | $ | 3,136,764 |  |  | 100.0 | %
None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of December 31, 2016 and 2015. The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances, as of December 31, 2016 and 2015 (dollars in thousands):
|  | 2016 |  | 2015
Mortgage loans: |  |  |  |
Individually measured for impairment |  | $ | 2,216 |  |  | $ | 16,421 |
Collectively measured for impairment |  | 3,780,991 |  |  | 3,120,343 |
Mortgage loans, gross of valuation allowances |  | 3,783,207 |  |  | 3,136,764 |
Valuation allowances: |  |  |  |
Individually measured for impairment |  | — |  |  | 588 |
Collectively measured for impairment |  | 7,685 |  |  | 6,225 |
Total valuation allowances |  | 7,685 |  |  | 6,813 |
Mortgage loans, net of valuation allowances |  | $ | 3,775,522 |  |  | $ | 3,129,951 |
Information regarding the Company’s loan valuation allowances for mortgage loans as of December 31, 2016, 2015 and 2014 are as follows (dollars in thousands):
|  | 2016 |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 6,813 |  |  | $ | 6,471 |  |  | $ | 10,106 |
Charge-offs, net of recoveries |  | — |  |  | — |  |  | (2,731 | )
Provision (release) |  | 872 |  |  | 342 |  |  | (904 | )
Balance, end of period |  | $ | 7,685 |  |  | $ | 6,813 |  |  | $ | 6,471 |
Information regarding the portion of the Company’s mortgage loans that were impaired as of December 31, 2016 and 2015 is as follows (dollars in thousands):
|  | Unpaid Principal Balance |  | Recorded Investment |  | Related Allowance |  | Carrying Value
December 31, 2016: |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 2,758 |  |  | $ | 2,216 |  |  | $ | — |  |  | $ | 2,216 |
Impaired mortgage loans with valuation allowance recorded |  | — |  |  | — |  |  | — |  |  | — |
Total impaired mortgage loans |  | $ | 2,758 |  |  | $ | 2,216 |  |  | $ | — |  |  | $ | 2,216 |
December 31, 2015: |  |  |  |  |  |  |  |
Impaired mortgage loans with no valuation allowance recorded |  | $ | 4,033 |  |  | $ | 4,033 |  |  | $ | — |  |  | $ | 4,033 |
Impaired mortgage loans with valuation allowance recorded |  | 12,898 |  |  | 12,388 |  |  | 588 |  |  | 11,800 |
Total impaired mortgage loans |  | $ | 16,931 |  |  | $ | 16,421 |  |  | $ | 588 |  |  | $ | 15,833 |
The Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the years ended December 31, 2016, 2015 and 2014 (dollars in thousands):
|  | 2016 |  | 2015 |  | 2014
|  | Average Investment(1) |  | Interest Income |  | Average Investment(1) |  | Interest Income |  | Average Investment(1) |  | Interest Income
Impaired mortgage loans with no valuation allowance recorded |  | $ | 2,249 |  |  | $ | 142 |  |  | $ | 6,033 |  |  | $ | 330 |  |  | $ | 13,227 |  |  | $ | 647 |
Impaired mortgage loans with valuation allowance recorded |  | — |  |  | — |  |  | 11,592 |  |  | 770 |  |  | 13,827 |  |  | 637 |
Total |  | $ | 2,249 |  |  | $ | 142 |  |  | $ | 17,625 |  |  | $ | 1,100 |  |  | $ | 27,054 |  |  | $ | 1,284 |
(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 years ended December 31, 2016 and 2015. The Company had no mortgage loans that were on a nonaccrual status at December 31, 2016 and 2015. Policy Loans Policy loans comprised approximately 3.2% and 3.5% of the Company’s total investments as of December 31, 2016 and 2015, 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. 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 13.1% and 14.0% of the Company’s total investments as of December 31, 2016 and 2015, respectively. Of the $5.9 billion funds withheld at interest balance, net of embedded derivatives, as of December 31, 2016, $4.0 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 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), derivative contracts, and FVO contractholder-directed unit-linked investments. Other invested assets also include Federal Home Loan Bank of Des Moines (“FHLB”) common stock, equity release mortgages and structured loans, all of which are included in other in the table below. Other invested assets represented approximately 3.6% and 3.1% of the Company’s total investments as of December 31, 2016 and 2015, respectively. Carrying values of these assets as of December 31, 2016 and 2015 are as follows (dollars in thousands):
|  | 2016 |  | 2015
Equity securities |  | $ | 275,361 |  |  | $ | 125,862 |
Limited partnerships and real estate joint ventures |  | 687,522 |  |  | 567,697 |
Derivatives |  | 229,108 |  |  | 256,178 |
FVO contractholder-directed unit-linked investments |  | 190,120 |  |  | 197,547 |
Other |  | 209,829 |  |  | 150,836 |
Total other invested assets |  | $ | 1,591,940 |  |  | $ | 1,298,120 |

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