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 June 30, 2018 (dollars in thousands):



June 30, 2018:	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Other-than- temporary impairments in AOCI
Available-for-sale:
Corporate	$	22,249,964	$	663,087	$	409,544	$	22,503,507	61.2	%	$	—
Canadian government	2,789,699		1,277,020		3,876		4,062,843		11.0		—
RMBS	1,837,316		18,500		34,602		1,821,214		5.0		—
ABS	1,711,099		11,596		13,871		1,708,824		4.6		275
CMBS	1,249,616		8,591		15,698		1,242,509		3.4		—
U.S. government	1,583,622		8,193		66,665		1,525,150		4.1		—
State and political subdivisions	703,047		43,318		9,321		737,044		2.0		—
Other foreign government	3,109,607		112,887		38,631		3,183,863		8.7		—
Total fixed maturity securities	$	35,233,970	$	2,143,192	$	592,208	$	36,784,954	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 Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Other-than- temporary impairments 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 June 30, 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 June 30, 2018 and December 31, 2017 (dollars in thousands):



	June 30, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	63,640	$	66,118	$	72,542	$	75,622
Fixed maturity securities received as collateral	n/a		626,081		n/a		590,417
Assets in trust held to satisfy collateral requirements	16,061,218		16,571,173		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 June 30, 2018 and December 31, 2017 (dollars in thousands).



	June 30, 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	$	1,101,825	$	1,850,642	$	1,119,337	$	1,917,996
Canadian province of Ontario	929,913		1,239,102		939,837		1,282,944

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at June 30, 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	$	978,683	$	986,160
Due after one year through five years	7,550,595		7,649,023
Due after five years through ten years	9,208,763		9,323,786
Due after ten years	12,697,898		14,053,438
Asset and mortgage-backed securities	4,798,031		4,772,547
Total	$	35,233,970	$	36,784,954

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2018 and December 31, 2017 (dollars in thousands):



June 30, 2018:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	8,097,947	$	8,129,125	36.2	%
Industrial	11,705,150		11,847,762		52.6
Utility	2,446,867		2,526,620		11.2
Total	$	22,249,964	$	22,503,507	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 June 30,				Six months ended June 30,
	2018		2017		2018		2017
Balance, beginning of period	$	3,677	$	3,677	$	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	$	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 2,580 fixed maturity securities as of June 30, 2018, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	June 30, 2018
	Gross Unrealized Losses		% of Total
Less than 20%	$	571,151	96.4	%
20% or more for less than six months	21,045		3.6
20% or more for six months or greater	12		—
Total	$	592,208	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 2,580 fixed maturity securities that have estimated fair values below amortized cost as of June 30, 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
June 30, 2018:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	9,135,620	$	299,909	$	818,555	$	51,938	$	9,954,175	$	351,847
Canadian government	46,392		668		110,326		3,058		156,718		3,726
RMBS	1,101,941		25,546		241,914		9,032		1,343,855		34,578
ABS	807,714		10,637		139,676		3,187		947,390		13,824
CMBS	612,214		11,097		104,426		4,601		716,640		15,698
U.S. government	584,758		20,707		747,679		45,958		1,332,437		66,665
State and political subdivisions	168,817		5,064		66,122		4,257		234,939		9,321
Other foreign government	919,229		25,758		199,578		5,407		1,118,807		31,165
Total investment grade securities	13,376,685		399,386		2,428,276		127,438		15,804,961		526,824
Below investment grade securities:
Corporate	735,338		47,846		56,042		9,851		791,380		57,697
Canadian government	1,864		150		—		—		1,864		150
RMBS	—		—		1,194		24		1,194		24
ABS	—		—		1,148		47		1,148		47
Other foreign government	146,374		7,111		7,643		355		154,017		7,466
Total below investment grade securities	883,576		55,107		66,027		10,277		949,603		65,384
Total fixed maturity securities	$	14,260,261	$	454,493	$	2,494,303	$	137,715	$	16,754,564	$	592,208

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 June 30, 2018 are primarily related to publicly traded and privately placed 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 June 30,						Six months ended June 30,
	2018			2017			2018			2017
Fixed maturity securities available-for-sale	$	373,624		$	355,735		$	742,827		$	680,235
Equity securities	709			995			2,391			2,354
Mortgage loans on real estate	50,460			44,442			100,659			88,789
Policy loans	14,775			15,194			29,555			30,466
Funds withheld at interest	86,417			97,367			161,862			224,945
Short-term investments and cash and cash equivalents	2,964			1,779			6,209			3,289
Other invested assets	20,785			22,071			44,613			40,539
Investment income	549,734			537,583			1,088,116			1,070,617
Investment expense	(21,673		)	(19,045		)	(43,726		)	(37,715		)
Investment income, net of related expenses	$	528,061		$	518,538		$	1,044,390		$	1,032,902

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,
	2018			2017			2018			2017
Fixed maturity securities available for sale:
Other-than-temporary impairment losses	$	(3,350	)	$	(3,401	)	$	(3,350	)	$	(20,590	)
Gain on investment activity	21,140			54,197			32,106			72,090
Loss on investment activity	(35,934		)	(10,288		)	(56,314		)	(18,975		)
Equity securities:
Gain on investment activity	469			23			497			23
Loss on investment activity	—			(183		)	(950		)	(4,059		)
Change in unrealized gains (losses) recognized in earnings	(6,966		)	—			(11,103		)	—
Other impairment losses and change in mortgage loan provision	(1,357		)	(6,675		)	(1,669		)	(6,774		)
Derivatives and other, net	15,426			22,622			29,741			95,103
Total investment related gains (losses), net	$	(10,572	)	$	56,295		$	(11,042	)	$	116,818

The fixed maturity impairments for the three and six months ended June 30, 2018 and 2017 were largely related to high-yield corporate securities. The other impairment losses and change in mortgage loan provision for the three and six months ended June 30, 2018 includes impairments on real estate joint ventures. The other impairment losses and change in mortgage loan provision for the three and six months ended June 30, 2017 includes impairments on limited partnerships. The fluctuations in investment related gains (losses) for derivatives and other for the three and six months ended June 30, 2018, compared to the same periods in 2017, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.

During the three months ended June 30, 2018 and 2017, the Company sold fixed maturity securities with fair values of $1,174.4 million and $696.4 million at losses of $35.9 million and $10.3 million, respectively. During the six months ended June 30, 2018 and 2017, the Company sold fixed maturity securities with fair values of $2,438.0 million and $1,125.0 million at losses of $56.3 million and $19.0 million, respectively. The Company did not sell any equity securities at losses during the three months ended June 30, 2018. During the three months ended June 30, 2017, the Company sold equity securities with fair values of $14.1 million at losses of $0.2 million. During the six months ended June 30, 2018 and 2017, the Company sold equity securities with fair values of $28.4 million and $161.7 million at losses of $1.0 million and $4.1 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 June 30, 2018 and December 31, 2017 (dollars in thousands).



	June 30, 2018				December 31, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	350,350	$	365,730	$	358,875	$	377,820
Securities lending:
Securities loaned	101,995		102,208		117,246		121,551
Securities received	n/a		112,000		n/a		128,000
Repurchase program/reverse repurchase program:
Securities pledged	385,391		394,698		413,819		428,344
Securities received	n/a		397,712		n/a		417,550

The Company also held cash collateral for securities lending and the repurchase program/reverse repurchase programs of $29.6 million and $31.2 million at June 30, 2018 and December 31, 2017, respectively. No cash or securities have been pledged by the Company for its securities borrowing program as of June 30, 2018 and December 31, 2017.

The following tables present information on the Company’s securities lending and repurchase transactions as of June 30, 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.



	June 30, 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	$	—	$	—	$	—	$	102,208	$	102,208
Total	—		—		—		102,208		102,208
Repurchase transactions:
Corporate	—		—		—		151,519		151,519
U.S. government	—		—		—		219,154		219,154
Foreign government	—		—		—		22,894		22,894
Other	1,131		—		—		—		1,131
Total	1,131		—		—		393,567		394,698
Total transactions	$	1,131	$	—	$	—	$	495,775	$	496,906

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	539,332
Amounts related to agreements not included in offsetting disclosure									$	42,426



	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
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 of June 30, 2018 and December 31, 2017, respectively. As of June 30, 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 9.0% and 8.5% of the Company’s total investments as of June 30, 2018 and December 31, 2017. As of June 30, 2018, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (19.4%), Texas (9.6%) and Washington (7.8%) and include loans secured by properties in Canada (2.6%). 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 June 30, 2018 and December 31, 2017 (dollars in thousands):



	June 30, 2018					December 31, 2017
Property type:	Carrying Value			% of Total		Carrying Value			% of Total
Office building	$	1,546,148		33.9	%	$	1,487,392		33.6	%
Retail	1,296,157			28.3		1,270,676			28.8
Industrial	962,049			21.0		938,612			21.3
Apartment	530,599			11.6		510,052			11.6
Other commercial	237,610			5.2		206,439			4.7
Recorded investment	4,572,563			100.0	%	4,413,171			100.0	%
Unamortized balance of loan origination fees and expenses	(4,188		)			(3,254		)
Valuation allowances	(9,706		)			(9,384		)
Total mortgage loans on real estate	$	4,558,669				$	4,400,533

The maturities of the mortgage loans as of June 30, 2018 and December 31, 2017 are as follows (dollars in thousands):



	June 30, 2018				December 31, 2017
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,153,623	25.2	%	$	1,091,066	24.8	%
Due after five years through ten years	2,623,105		57.4		2,516,872		57.0
Due after ten years	795,835		17.4		805,233		18.2
Total	$	4,572,563	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 June 30, 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
June 30, 2018:
Loan-to-Value Ratio
0% - 59.99%	$	2,125,328	$	102,254	$	19,439	$	17,602	$	2,264,623	49.5	%
60% - 69.99%	1,552,568		117,751		49,221		—		1,719,540		37.6
70% - 79.99%	315,274		25,121		101,213		—		441,608		9.7
Greater than 80%	101,870		12,933		31,989		—		146,792		3.2
Total	$	4,095,040	$	258,059	$	201,862	$	17,602	$	4,572,563	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 June 30, 2018 and December 31, 2017 (dollars in thousands):



	June 30, 2018		December 31, 2017
31-60 days past due	$	12,027	$	17,100
61-90 days past due	—		2,056
Total past due	12,027		19,156
Current	4,560,536		4,394,015
Total	$	4,572,563	$	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 June 30, 2018 and December 31, 2017 (dollars in thousands):



	June 30, 2018		December 31, 2017
Mortgage loans:
Individually measured for impairment	$	30,653	$	5,858
Collectively measured for impairment	4,541,910		4,407,313
Recorded investment	$	4,572,563	$	4,413,171
Valuation allowances:
Individually measured for impairment	$	—	$	—
Collectively measured for impairment	9,706		9,384
Total valuation allowances	$	9,706	$	9,384

Information regarding the Company’s loan valuation allowances for mortgage loans for the three and six months ended June 30, 2018 and 2017 is as follows (dollars in thousands):



	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Balance, beginning of period	$	8,864		$	7,786	$	9,384		$	7,685
Provision (release)	845			366		329			467
Translation adjustment	(3		)	4		(7		)	4
Balance, end of period	$	9,706		$	8,156	$	9,706		$	8,156

Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2018 and December 31, 2017 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2018:
Impaired mortgage loans with no valuation allowance recorded	$	30,690	$	30,653	$	—	$	30,653
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	30,690	$	30,653	$	—	$	30,653
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 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,
	2018				2017
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	27,038	$	247	$	2,088	$	33
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	27,038	$	247	$	2,088	$	33

	Six months ended June 30,
	2018				2017
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	19,978	$	304	$	2,131	$	67
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	19,978	$	304	$	2,131	$	67

(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, 2018 and 2017. The Company had no mortgage loans that were on a nonaccrual status at June 30, 2018 and December 31, 2017.

Policy Loans

Policy loans comprised approximately 2.7% and 2.6% of the Company’s total investments as of June 30, 2018 and December 31, 2017, 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 11.8% of the Company’s total investments as of both June 30, 2018 and December 31, 2017. Of the $6.0 billion funds withheld at interest balance, net of embedded derivatives, as of June 30, 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 Federal Home Loan Bank of Des Moines (“FHLB”) common stock which is included in other in the table below. Other invested assets represented approximately 3.2% and 2.9% of the Company’s total investments as of June 30, 2018 and December 31, 2017, respectively. Carrying values of these assets as of June 30, 2018 and December 31, 2017 are as follows (dollars in thousands):



	June 30, 2018		December 31, 2017
Limited partnership interests and real estate joint ventures	$	857,599	$	781,124
Equity release mortgages	311,723		219,940
Derivatives	137,315		137,613
FVO contractholder-directed unit-linked investments	212,202		218,541
Other	86,723		148,114
Total other invested assets	$	1,605,562	$	1,505,332