Investments

Fixed Maturity and Equity Securities Available-for-Sale

The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate securities (“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), U.S. government and agencies (“U.S. government”), state and political subdivisions, and other foreign government, supranational and foreign government-sponsored enterprises (“Other foreign government”).

The following table provides information relating to investments in fixed maturity securities by sector as of March 31, 2018 (dollars in thousands):



March 31, 2018:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate	$	22,890,985	$	869,867	$	240,383	$	23,520,469	61.9	%	$	—
Canadian government	2,803,077		1,297,817		3,040		4,097,854		10.8		—
RMBS	1,791,007		23,640		27,499		1,787,148		4.7		—
ABS	1,727,810		16,383		9,471		1,734,722		4.6		275
CMBS	1,281,452		12,717		12,236		1,281,933		3.4		—
U.S. government	1,486,262		9,266		59,414		1,436,114		3.8		—
State and political subdivisions	672,064		49,465		8,016		713,513		1.9		—
Other foreign government	3,261,048		133,865		21,406		3,373,507		8.9		—
Total fixed maturity securities	$	35,913,705	$	2,413,020	$	381,465	$	37,945,260	100.0	%	$	275

The following table provides information relating to investments in fixed maturity and equity securities by sector as of December 31, 2017 (dollars in thousands):



December 31, 2017:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate	$	21,966,803	$	1,299,594	$	55,429	$	23,210,968	60.9	%	$	—
Canadian government	2,843,273		1,378,510		1,707		4,220,076		11.1		—
RMBS	1,695,126		36,632		11,878		1,719,880		4.5		—
ABS	1,634,758		18,798		5,194		1,648,362		4.3		275
CMBS	1,285,594		22,627		4,834		1,303,387		3.4		—
U.S. government	1,953,436		12,089		21,933		1,943,592		5.1		—
State and political subdivisions	647,727		59,997		4,296		703,428		1.8		—
Other foreign government	3,254,695		154,507		8,075		3,401,127		8.9		—
Total fixed maturity securities	$	35,281,412	$	2,982,754	$	113,346	$	38,150,820	100.0	%	$	275
Non-redeemable preferred stock	$	41,553	$	479	$	2,226	$	39,806	39.7	%
Other equity securities	61,288		479		1,421		60,346		60.3
Total equity securities	$	102,841	$	958	$	3,647	$	100,152	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 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 repledge collateral it receives; however, as of March 31, 2018 and December 31, 2017, none of the collateral received had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under derivative transactions and 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 March 31, 2018 and December 31, 2017 (dollars in thousands):



	March 31, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	72,850	$	75,384	$	72,542	$	75,622
Fixed maturity securities received as collateral	n/a		614,423		n/a		590,417
Assets in trust held to satisfy collateral requirements	16,316,662		17,076,547		15,584,296		16,715,281

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 March 31, 2018 and December 31, 2017 (dollars in thousands).



	March 31, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Quebec	$	1,106,753	$	1,863,568	$	1,119,337	$	1,917,996
Canadian province of Ontario	928,384		1,247,158		939,837		1,282,944

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at March 31, 2018 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	$	900,166	$	905,385
Due after one year through five years	7,939,821		8,084,053
Due after five years through ten years	9,533,025		9,779,934
Due after ten years	12,740,424		14,372,085
Asset and mortgage-backed securities	4,800,269		4,803,803
Total	$	35,913,705	$	37,945,260

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of March 31, 2018 and December 31, 2017 (dollars in thousands):



March 31, 2018:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	8,250,681	$	8,407,037	35.8	%
Industrial	12,093,034		12,437,180		52.8
Utility	2,547,270		2,676,252		11.4
Total	$	22,890,985	$	23,520,469	100.0	%

December 31, 2017:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	7,977,885	$	8,362,774	36.1	%
Industrial	11,535,166		12,199,333		52.5
Utility	2,453,752		2,648,861		11.4
Total	$	21,966,803	$	23,210,968	100.0	%

Other-Than-Temporary Impairments - Fixed Maturity Securities

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2017 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 March 31,
	2018		2017
Balance, beginning of period	$	3,677	$	6,013
Credit loss OTTI previously recognized on securities impaired to fair value during the period	—		(2,336		)
Balance, end of period	$	3,677	$	3,677

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

The following table presents the total gross unrealized losses for the 2,114 fixed maturity securities as of March 31, 2018, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	March 31, 2018
	Gross Unrealized Losses		% of Total
Less than 20%	$	358,873	94.1	%
20% or more for less than six months	20,232		5.3
20% or more for six months or greater	2,360		0.6
Total	$	381,465	100.0	%

The following table presents the total gross unrealized losses for the 1,116 fixed maturity and equity securities at December 31, 2017 where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	December 31, 2017
	Gross Unrealized Losses		% of Total
Less than 20%	$	113,466	97.0	%
20% or more for less than six months	689		0.6
20% or more for six months or greater	2,838		2.4
Total	$	116,993	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.

The following table presents the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 2,114 fixed maturity securities that have estimated fair values below amortized cost as of March 31, 2018 (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, 2018:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	7,282,079	$	155,541	$	883,699	$	46,908	$	8,165,778	$	202,449
Canadian government	39,192		390		109,552		2,536		148,744		2,926
RMBS	897,255		19,899		225,288		7,575		1,122,543		27,474
ABS	612,053		7,001		114,605		2,423		726,658		9,424
CMBS	538,464		8,026		103,447		4,210		641,911		12,236
U.S. government	488,095		16,856		744,844		42,558		1,232,939		59,414
State and political subdivisions	135,158		3,331		67,949		4,685		203,107		8,016
Other foreign government	746,485		15,575		191,446		5,000		937,931		20,575
Total investment grade securities	10,738,781		226,619		2,440,830		115,895		13,179,611		342,514
Below investment grade securities:
Corporate	452,086		29,597		46,976		8,337		499,062		37,934
Canadian government	1,900		114		—		—		1,900		114
RMBS	—		—		1,272		25		1,272		25
ABS	—		—		1,173		47		1,173		47
Other foreign government	57,385		662		12,045		169		69,430		831
Total below investment grade securities	511,371		30,373		61,466		8,578		572,837		38,951
Total fixed maturity securities	$	11,250,152	$	256,992	$	2,502,296	$	124,473	$	13,752,448	$	381,465

The following table presents the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 1,116 fixed maturity and equity securities that have estimated fair values below amortized cost as of December 31, 2017 (dollars in thousands):



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2017:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	1,886,212	$	17,099	$	1,009,750	$	28,080	$	2,895,962	$	45,179
Canadian government	18,688		91		111,560		1,596		130,248		1,687
RMBS	566,699		5,852		224,439		6,004		791,138		11,856
ABS	434,274		2,707		168,524		2,434		602,798		5,141
CMBS	220,401		1,914		103,269		2,920		323,670		4,834
U.S. government	800,298		6,177		767,197		15,756		1,567,495		21,933
State and political subdivisions	43,510		242		68,666		4,054		112,176		4,296
Other foreign government	369,717		2,707		191,265		4,704		560,982		7,411
Total investment grade securities	4,339,799		36,789		2,644,670		65,548		6,984,469		102,337
Below investment grade securities:
Corporate	194,879		3,317		75,731		6,933		270,610		10,250
Canadian government	1,995		20		—		—		1,995		20
RMBS	—		—		1,369		22		1,369		22
ABS	—		—		1,489		53		1,489		53
Other foreign government	28,600		113		15,134		551		43,734		664
Total below investment grade securities	225,474		3,450		93,723		7,559		319,197		11,009
Total fixed maturity securities	$	4,565,273	$	40,239	$	2,738,393	$	73,107	$	7,303,666	$	113,346
Non-redeemable preferred stock	$	82	$	1	$	26,471	$	2,225	$	26,553	$	2,226
Other equity securities	5,820		1,023		47,251		398		53,071		1,421
Total equity securities	$	5,902	$	1,024	$	73,722	$	2,623	$	79,624	$	3,647

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 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 March 31, 2018 are primarily related to high-yield corporate securities. Changes in unrealized losses are primarily being driven by changes in interest rates.

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,
	2018			2017
Fixed maturity securities available-for-sale	$	369,203		$	324,500
Equity securities	1,682			1,359
Mortgage loans on real estate	50,199			44,347
Policy loans	14,780			15,272
Funds withheld at interest	75,445			127,578
Short-term investments and cash and cash equivalents	3,245			1,510
Other	23,828			18,468
Investment income	538,382			533,034
Investment expense	(22,053		)	(18,670		)
Investment income, net of related expenses	$	516,329		$	514,364

Investment Related Gains (Losses), Net

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



	Three months ended March 31,
	2018			2017
Fixed maturity securities available for sale:
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings	$	—		$	(17,189	)
Gain on investment activity	10,966			17,893
Loss on investment activity	(20,380		)	(8,687		)
Equity securities:
Gain on investment activity	28			—
Loss on investment activity	(950		)	(3,876		)
Change in unrealized gains (losses) recognized in earnings	(4,137		)	—
Other impairment losses and change in mortgage loan provision	(312		)	(99		)
Derivatives and other, net	14,315			72,481
Total investment related gains (losses), net	$	(470	)	$	60,523

There were no fixed maturity impairments for the three months ended March 31, 2018. The fixed maturity impairments for the three months ended March 31, 2017 were largely related to high-yield corporate securities. The other impairment losses and change in mortgage loan provision for the three months ended March 31, 2018 were primarily due to impairments on real estate joint ventures offset by a release of the mortgage loan valuation allowance. The other impairment losses and change in mortgage loan provision for the three months ended March 31, 2017 were primarily due to an increase in the mortgage loan valuation allowance. The fluctuations in investment related gains (losses) for derivatives and other for the three months ended March 31, 2018, compared to the same period in 2017, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.

During the three months ended March 31, 2018 and 2017, the Company sold fixed maturity securities with fair values of $1,263.6 million and $428.6 million at losses of $20.4 million and $8.7 million, respectively. During the three months ended March 31, 2018 and 2017, the Company sold equity securities with fair values of $28.4 million and $147.6 million at losses of $1.0 million and $3.9 million, respectively. The Company generally does not buy and sell securities on a short-term basis.

Securities Borrowing, Lending and Other

The following table includes the amount of borrowed securities, securities lent and securities collateral received as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of March 31, 2018 and December 31, 2017 (dollars in thousands).



	March 31, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	353,875	$	370,760	$	358,875	$	377,820
Securities lending:
Securities loaned	117,449		118,617		117,246		121,551
Securities received	n/a		128,000		n/a		128,000
Repurchase program/reverse repurchase program:
Securities pledged	403,135		411,988		413,819		428,344
Securities received	n/a		404,871		n/a		417,550

The Company also held cash collateral for repurchase program/reverse repurchase programs of $30.7 million and $31.2 million at March 31, 2018 and December 31, 2017, respectively. No cash or securities have been pledged by the Company for its securities borrowing program as of March 31, 2018 and December 31, 2017.

The following table presents information on the Company’s securities lending and repurchase transactions as of March 31, 2018 and December 31, 2017 (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.



	March 31, 2018
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate	$	—	$	—	$	—	$	118,617	$	118,617
Total	$	—	$	—	$	—	$	118,617	$	118,617
Repurchase transactions:
Corporate	$	—	$	—	$	—	$	171,678	$	171,678
RMBS	—		—		—		—		—
U.S. government	—		—		—		219,509		219,509
Foreign government	—		—		—		19,670		19,670
Other	1,131		—		—		—		1,131
Total	1,131		—		—		410,857		411,988
Total borrowings	$	1,131	$	—	$	—	$	529,474	$	530,605

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	563,587
Amounts related to agreements not included in offsetting disclosure									$	32,982



	December 31, 2017
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate	$	—	$	—	$	—	$	121,551	$	121,551
Total	$	—	$	—	$	—	$	121,551	$	121,551
Repurchase transactions:
Corporate	$	—	$	—	$	312	$	184,334	$	184,646
RMBS	—		—		—		—		—
U.S. government	—		—		—		220,765		220,765
Foreign government	—		—		—		21,802		21,802
Other	1,131		—		—		—		1,131
Total	1,131		—		312		426,901		428,344
Total borrowings	$	1,131	$	—	$	312	$	548,452	$	549,895

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	576,786
Amounts related to agreements not included in offsetting disclosure									$	26,891

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 condensed consolidated balance sheets was a liability of $0.4 million and $1.1 million as of March 31, 2018 and December 31, 2017, respectively. As of March 31, 2018 and December 31, 2017, the Company recognized payables resulting from cash received as collateral associated with a repurchase agreement, as discussed above. 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 8.6% and 8.5% of the Company’s total investments as of March 31, 2018 and December 31, 2017. As of March 31, 2018, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (19.6%), Texas (8.6%) and Georgia (7.5%) and include loans secured by properties in Canada (2.4%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses, and valuation allowances.

The distribution of mortgage loans by property type is as follows as of March 31, 2018 and December 31, 2017 (dollars in thousands):



	March 31, 2018					December 31, 2017
Property type:	Carrying Value			% of Total		Carrying Value			% of Total
Office building	$	1,518,170		34.1	%	$	1,487,392		33.6	%
Retail	1,236,933			27.8		1,270,676			28.8
Industrial	964,685			21.7		938,612			21.3
Apartment	497,699			11.2		510,052			11.6
Other commercial	232,804			5.2		206,439			4.7
Recorded investment	4,450,291			100.0	%	$	4,413,171		100.0	%
Unamortized balance of loan origination fees and expenses	(3,433		)			(3,254		)
Valuation allowances	(8,864		)			(9,384		)
Total mortgage loans on real estate	$	4,437,994				$	4,400,533

The maturities of the mortgage loans as of March 31, 2018 and December 31, 2017 are as follows (dollars in thousands):



	March 31, 2018				December 31, 2017
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,130,108	25.4	%	$	1,091,066	24.8	%
Due after five years through ten years	2,492,588		56.0		2,516,872		57.0
Due after ten years	827,595		18.6		805,233		18.2
Total	$	4,450,291	100.0	%	$	4,413,171	100.0	%

The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of March 31, 2018 and December 31, 2017 (dollars in thousands):



	Recorded Investment
	Debt Service Ratios						Construction loans
	>1.20x		1.00x - 1.20x		<1.00x		Construction loans		Total		% of Total
March 31, 2018:
Loan-to-Value Ratio
0% - 59.99%	$	2,154,344	$	79,738	$	6,855	$	12,279	$	2,253,216	50.6	%
60% - 69.99%	1,520,008		29,795		68,070		—		1,617,873		36.4
70% - 79.99%	360,183		27,682		30,904		—		418,769		9.4
Greater than 80%	125,660		30,497		4,276		—		160,433		3.6
Total	$	4,160,195	$	167,712	$	110,105	$	12,279	$	4,450,291	100.0	%



	Recorded Investment
	Debt Service Ratios						Construction loans
	>1.20x		1.00x - 1.20x		<1.00x		Construction loans		Total		% of Total
December 31, 2017:
Loan-to-Value Ratio
0% - 59.99%	$	2,148,428	$	53,979	$	3,801	$	—	$	2,206,208	50.0	%
60% - 69.99%	1,517,029		47,128		43,921		—		1,608,078		36.4
70% - 79.99%	396,446		19,461		15,367		—		431,274		9.8
Greater than 80%	120,850		30,713		6,362		9,686		167,611		3.8
Total	$	4,182,753	$	151,281	$	69,451	$	9,686	$	4,413,171	100.0	%

The age analysis of the Company’s past due recorded investments in mortgage loans as of March 31, 2018 and December 31, 2017 (dollars in thousands):



	March 31, 2018		December 31, 2017
31-60 days past due	$	17,102	$	17,100
61-90 days past due	—		2,056
Greater than 90 days	2,056		—
Total past due	19,158		19,156
Current	4,431,133		4,394,015
Total	$	4,450,291	$	4,413,171

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of March 31, 2018 and December 31, 2017 (dollars in thousands):



	March 31, 2018		December 31, 2017
Mortgage loans:
Individually measured for impairment	$	23,423	$	5,858
Collectively measured for impairment	4,426,868		4,407,313
Recorded investment	$	4,450,291	$	4,413,171
Valuation allowances:
Individually measured for impairment	$	—	$	—
Collectively measured for impairment	8,864		9,384
Total valuation allowances	$	8,864	$	9,384

Information regarding the Company’s loan valuation allowances for mortgage loans for the three months ended March 31, 2018 and 2017 is as follows (dollars in thousands):



	Three months ended March 31,
	2018			2017
Balance, beginning of period	$	9,384		$	7,685
Provision (release)	(516		)	101
Translation adjustment	(4		)	—
Balance, end of period	$	8,864		$	7,786

Information regarding the portion of the Company’s mortgage loans that were impaired as of March 31, 2018 and December 31, 2017 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
March 31, 2018:
Impaired mortgage loans with no valuation allowance recorded	$	—	$	23,423	$	—	$	23,423
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	—	$	23,423	$	—	$	23,423
December 31, 2017:
Impaired mortgage loans with no valuation allowance recorded	$	6,427	$	5,858	$	—	$	5,858
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	6,427	$	5,858	$	—	$	5,858

The Company’s average investment balance of 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,
	2018				2017
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	14,640	$	56	$	2,157	$	33
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	14,640	$	56	$	2,157	$	33

(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, 2018 and 2017. The Company had no mortgage loans that were on a nonaccrual status as of March 31, 2018 and December 31, 2017.

Policy Loans

Policy loans comprised approximately 2.6% of the Company’s total investments as of March 31, 2018 and December 31, 2017, 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 11.7% and 11.8% of the Company’s total investments as of March 31, 2018 and December 31, 2017, respectively. Of the $6.0 billion funds withheld at interest balance, net of embedded derivatives, as of March 31, 2018, $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 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 limited partnership interests, joint ventures (other than operating joint ventures), equity release mortgages, derivative contracts and fair value option (“FVO”) contractholder-directed unit-linked investments. Other invested assets also include FHLB common stock, which is included in other in the table below. Other invested assets represented approximately 2.9% of the Company’s total investments as of March 31, 2018 and December 31, 2017. Carrying values of these assets as of March 31, 2018 and December 31, 2017 are as follows (dollars in thousands):



	March 31, 2018		December 31, 2017
Limited partnership interests and real estate joint ventures	805,613		781,124
Equity release mortgages	261,837		219,940
Derivatives	132,195		137,613
FVO contractholder-directed unit-linked investments	221,512		218,541
Other	90,990		148,114
Total other invested assets	$	1,512,147	$	1,505,332