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 December 31, 2018 (dollars in thousands):



December 31, 2018:	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Other-than- temporary impairments in AOCI
Available-for-sale:
Corporate	$	24,006,407	$	530,804	$	555,092	$	23,982,119	59.9	%	$	—
Canadian government	2,768,466		1,126,227		2,308		3,892,385		9.7		—
RMBS	1,872,236		22,267		25,282		1,869,221		4.7		—
ABS	2,171,254		10,779		32,829		2,149,204		5.4		275
CMBS	1,428,115		9,153		18,234		1,419,034		3.5		—
U.S. government	2,233,537		10,204		57,867		2,185,874		5.5		—
State and political subdivisions	721,290		39,914		9,010		752,194		1.9		—
Other foreign government	3,680,863		109,320		47,868		3,742,315		9.4		—
Total fixed maturity securities	$	38,882,168	$	1,858,668	$	748,490	$	39,992,346	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 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, 2018 and 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 December 31, 2018 and 2017 (dollars in thousands):



	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	80,891	$	83,950	$	72,542	$	75,622
Fixed maturity securities received as collateral	n/a		616,584		n/a		590,417
Assets in trust held to satisfy collateral requirements	20,072,735		20,366,170		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 that 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, 2018 and 2017 (dollars in thousands):



	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Quebec	$	1,091,018	$	1,757,087	$	1,119,337	$	1,917,996
Canadian province of Ontario	913,642		1,187,526		939,837		1,282,944

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of December 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	$	1,185,868	$	1,190,931
Due after one year through five years	8,760,200		8,851,307
Due after five years through ten years	9,060,972		9,149,497
Due after ten years	14,403,523		15,363,152
Asset and mortgage-backed securities	5,471,605		5,437,459
Total	$	38,882,168	$	39,992,346

Corporate Fixed Maturity Securities

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



December 31, 2018:	Amortized Cost		Estimated Fair Value		% of Total
Finance	$	8,793,742	$	8,730,568	36.3	%
Industrial	12,336,857		12,342,111		51.6
Utility	2,875,808		2,909,440		12.1
Total	$	24,006,407	$	23,982,119	100.0	%

December 31, 2017:	Amortized Cost		Estimated 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 – “Significant Accounting Policies and Pronouncements,” 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):



	2018		2017			2016
Balance, beginning of period	$	3,677	$	6,013		$	7,284
Additional impairments - credit loss OTTI recognized on securities previously impaired	—		—			231
Credit loss impairments previously recognized on securities impaired to fair value during the period	—		(2,336		)	—
Credit loss previously recognized on securities that matured, paid down, prepaid or were sold during the period	—		—			(1,502		)
Balance, end of period	$	3,677	$	3,677		$	6,013

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

The following table presents the total gross unrealized losses for the 3,109 fixed maturity securities as of December 31, 2018, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	2018
	Gross Unrealized Losses		% of Total
Less than 20%	$	721,015	96.3	%
20% or more for less than six months	21,336		2.9
20% or more for six months or greater	6,139		0.8
Total	$	748,490	100.0	%

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



	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 an 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 table presents the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 3,109 fixed maturity securities that have estimated fair values below amortized cost as of December 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
December 31, 2018:	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Investment grade securities:
Corporate	$	8,505,371	$	302,604	$	3,611,266	$	195,082	$	12,116,637	$	497,686
Canadian government	25,169		419		131,806		1,612		156,975		2,031
RMBS	269,558		2,488		836,741		22,760		1,106,299		25,248
ABS	1,102,677		24,271		381,609		8,523		1,484,286		32,794
CMBS	384,259		4,304		414,719		13,930		798,978		18,234
U.S. government	8,616		80		1,086,694		57,787		1,095,310		57,867
State and political subdivisions	103,504		1,538		157,330		7,472		260,834		9,010
Other foreign government	789,859		24,509		472,934		17,446		1,262,793		41,955
Total investment grade securities	11,189,013		360,213		7,093,099		324,612		18,282,112		684,825
Below investment grade securities:
Corporate	755,679		42,760		122,559		14,646		878,238		57,406
Canadian government	443		34		1,770		243		2,213		277
RMBS	—		—		1,026		34		1,026		34
ABS	—		—		1,063		35		1,063		35
Other foreign government	128,725		5,574		7,479		339		136,204		5,913
Total below investment grade securities	884,847		48,368		133,897		15,297		1,018,744		63,665
Total fixed maturity securities	$	12,073,860	$	408,581	$	7,226,996	$	339,909	$	19,300,856	$	748,490

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
December 31, 2017:	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized 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. Changes in unrealized losses are primarily 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):



	2018			2017			2016
Fixed maturity securities available-for-sale	$	1,528,086		$	1,401,585		$	1,285,406
Equity securities	4,343			4,445			12,513
Mortgage loans on real estate	214,387			197,755			168,582
Policy loans	59,332			60,617			63,837
Funds withheld at interest	309,977			457,774			368,728
Short-term investments and cash and cash equivalents	14,349			7,171			8,051
Other invested assets	98,557			106,015			76,858
Investment income	2,229,031			2,235,362			1,983,975
Investment expense	(90,506		)	(80,711		)	(72,089		)
Investment income, net of related expenses	$	2,138,525		$	2,154,651		$	1,911,886

Investment Related Gains (Losses), Net

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



	2018			2017			2016
Fixed maturity securities available-for-sale:
Other-than-temporary impairment losses	$	(28,494	)	$	(42,639	)	$	(38,805	)
Portion of loss recognized in accumulated other comprehensive income	—			—			74
Gain on investment activity	65,211			110,546			145,172
Loss on investment activity	(158,870		)	(37,328		)	(47,094		)
Equity securities:
Other-than-temporary impairment losses	—			(1,202		)	—
Gain on investment activity	4,429			23			9,198
Loss on investment activity	(1,937		)	(4,351		)	(2,871		)
Change in unrealized gains (losses) recognized in earnings	(23,184		)	—			—
Other impairment losses and change in mortgage loan provision	(11,919		)	(9,497		)	(11,006		)
Derivatives and other, net	(15,324		)	152,328			39,527
Total investment related gains (losses), net	$	(170,088	)	$	167,880		$	94,195

The other-than-temporary impairment losses on fixed maturity securities for 2018, 2017 and 2016 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 modco and funds withheld treaties, as a result of changes in interest rates, driven primarily by credit spreads. These fluctuations were partially offset by changes in the fair value of free-standing derivatives as a result of changes in value of underlying stock indices, movements in credit and inflation spreads, and changes in interest rates.

As of December 31, 2018 and 2017, the Company held non-income producing securities with amortized costs of $41.3 million and $38.8 million, and estimated fair values of $42.7 million and $39.3 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 2018, 2017 and 2016, the Company sold fixed maturity securities with fair values of $5,784.6 million, $2,550.1 million, and $1,055.5 million at losses of $158.9 million, $37.3 million and $47.1 million, respectively. During 2018, 2017 and 2016, the Company sold equity securities with fair values of $32.8 million, $177.7 million, and $126.1 million at losses of $1.9 million, $4.4 million and $2.9 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing, Lending and Repurchase Agreements

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, 2018 and 2017 (dollars in thousands):



	2018				2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	335,781	$	366,663	$	358,875	$	377,820
Securities lending:
Securities loaned	101,981		102,618		117,246		121,551
Securities received	n/a		112,000		n/a		128,000
Repurchase program/reverse repurchase program:
Securities pledged	554,806		554,589		413,819		428,344
Securities received	n/a		530,932		n/a		417,550

The Company also held cash collateral for securities lending and the repurchase program/reverse repurchase programs of $28.6 million and $31.2 million as of December 31, 2018 and 2017, respectively. No cash or securities have been pledged by the Company for its securities borrowing program as of December 31, 2018 and 2017.

The following tables present information on the Company’s securities lending and repurchase transactions as of December 31, 2018 and 2017, 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, 2018
	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	$	—	$	—	$	—	$	102,618	$	102,618
Total	—		—		—		102,618		102,618
Repurchase transactions:
Corporate	—		—		—		254,151		254,151
U.S. government	—		—		—		221,572		221,572
Foreign government	—		—		—		78,866		78,866
Total	—		—		—		554,589		554,589
Total transactions	$	—	$	—	$	—	$	657,207	$	657,207

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	671,492
Amounts related to agreements not included in offsetting disclosure									$	14,285



	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 transaction:
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 transactions	$	1,131	$	—	$	312	$	548,452	$	549,895

Gross amount of recognized liabilities for 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 consolidated balance sheets was a liability of $0.4 million and $1.1 million as of December 31, 2018 and 2017, respectively. As of December 31, 2018 and 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 9.1% and 8.5% of the Company’s total investments as of December 31, 2018 and 2017, respectively. As of December 31, 2018, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (18.7%), Texas (10.9%) and Washington (7.4%) and include loans secured by properties in Canada (2.7%) and United Kingdom (0.1%). 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 December 31, 2018 and 2017 (dollars in thousands):



	2018					2017
	Carrying Value			Percentage of Total		Carrying Value			Percentage of Total
Property type:
Office building	$	1,725,748		34.6	%	$	1,487,392		33.6	%
Retail	1,432,394			28.7		1,270,676			28.8
Industrial	961,924			19.3		938,612			21.3
Apartment	571,291			11.5		510,052			11.6
Other commercial	291,997			5.9		206,439			4.7
Recorded investment	$	4,983,354		100.0	%	$	4,413,171		100.0	%
Unamortized balance of loan origination fees and expenses	(5,770		)			(3,254		)
Valuation allowances	(11,286		)			(9,384		)
Total mortgage loans on real estate	$	4,966,298				$	4,400,533

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



	2018				2017
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,425,598	28.6	%	$	1,091,066	24.8	%
Due after five years through ten years	2,686,264		53.9		2,516,872		57.0
Due after ten years	871,492		17.5		805,233		18.2
Total	$	4,983,354	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 December 31, 2018 and 2017 (dollars in thousands):



	Recorded Investment
	Debt Service Ratios						Construction loans
	>1.20x		1.00x - 1.20x		<1.00x		Construction loans		Total		% of Total
December 31, 2018:
Loan-to-Value Ratio
0% - 59.99%	$	2,410,556	$	61,246	$	38,177	$	13,691	$	2,523,670	50.6	%
60% - 69.99%	1,618,374		73,908		38,120		18,929		1,749,331		35.1
70% - 79.99%	414,269		48,438		54,440		—		517,147		10.4
Greater than 80%	117,978		49,668		25,560		—		193,206		3.9
Total	$	4,561,177	$	233,260	$	156,297	$	32,620	$	4,983,354	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 December 31, 2018 and 2017 (dollars in thousands):



	2018		2017
31-60 days past due	$	—	$	17,100
61-90 days past due	—		2,056
Total past due	—		19,156
Current	4,983,354		4,394,015
Total	$	4,983,354	$	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 December 31, 2018 and 2017 (dollars in thousands):



	2018		2017
Mortgage loans:
Individually measured for impairment	$	30,635	$	5,858
Collectively measured for impairment	4,952,719		4,407,313
Recorded investment	$	4,983,354	$	4,413,171
Valuation allowances:
Individually measured for impairment	$	—	$	—
Collectively measured for impairment	11,286		9,384
Total valuation allowances	$	11,286	$	9,384

Information regarding the Company’s loan valuation allowances for mortgage loans as of December 31, 2018, 2017 and 2016 are as follows (dollars in thousands):



	2018			2017		2016
Balance, beginning of period	$	9,384		$	7,685	$	6,813
Provision	1,918			1,691		872
Translation adjustment	(16		)	8		—
Balance, end of period	$	11,286		$	9,384	$	7,685

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



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
December 31, 2018:
Impaired mortgage loans with no valuation allowance recorded	$	30,660	$	30,635	$	—	$	30,635
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	30,660	$	30,635	$	—	$	30,635
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 years ended December 31, 2018, 2017 and 2016 (dollars in thousands):



	2018				2017				2016
	Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	24,240	$	1,129	$	3,621	$	186	$	2,249	$	142
Impaired mortgage loans with valuation allowance recorded	—		—		—		—		—		—
Total	$	24,240	$	1,129	$	3,621	$	186	$	2,249	$	142


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

Policy Loans

Policy loans comprised approximately 2.5% and 2.6% of the Company’s total investments as of December 31, 2018 and 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 10.6% and 11.8% of the Company’s total investments as of December 31, 2018 and 2017, respectively. Of the $5.8 billion funds withheld at interest balance, net of embedded derivatives, as of December 31, 2018, $3.8 billion of the balance is associated with one client. For reinsurance agreements written on a modco 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 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 3.5% and 2.9% of the Company’s total investments as of December 31, 2018 and 2017, respectively. Carrying values of these assets as of December 31, 2018 and 2017 are as follows (dollars in thousands):



	2018		2017
Limited partnership interests and real estate joint ventures	$	965,094	$	781,124
Equity release mortgages	475,905		219,940
Derivatives	180,699		137,613
FVO contractholder-directed unit-linked investments	197,770		218,541
Other	95,829		148,114
Total other invested assets	$	1,915,297	$	1,505,332