AFS Securities. The period-end cost or amortized cost, gross unrealized gains and losses, and fair value of AFS fixed-maturity and equity securities were as follows:

	December 31, 2018
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Securities available-for-sale, carried at fair value:
Fixed-maturity securities:
U.S. government and agencies	$	12,115	$	176	$	(58	)	$	12,233
Foreign government		155,723		3,347		(958	)		158,112
States and political subdivisions		59,075		1,202		(271	)		60,006
Corporates		1,447,075		11,916		(24,773	)		1,434,218
Residential mortgage-backed securities		191,245		2,439		(1,733	)		191,951
Commercial mortgage-backed securities		131,279		1,712		(1,636	)		131,355
Other asset-backed securities		82,310		205		(755	)		81,760
Total fixed-maturity securities⁽¹⁾		2,078,822		20,997		(30,184	)		2,069,635
Short-term investments		8,171		-		-			8,171
Total fixed-maturity and short-term investments	$	2,086,993	$	20,997	$	(30,184	)	$	2,077,806

	December 31, 2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Securities available-for-sale, carried at fair value:
Fixed-maturity securities:
U.S. government and agencies	$	11,577	$	283	$	(47	)	$	11,813
Foreign government		139,486		5,651		(648	)		144,489
States and political subdivisions		54,714		1,554		(141	)		56,127
Corporates		1,337,321		42,616		(3,655	)		1,376,282
Residential mortgage-backed securities		119,672		3,583		(297	)		122,958
Commercial mortgage-backed securities		134,003		2,299		(910	)		135,392
Other asset-backed securities		80,553		452		(224	)		80,781
Total fixed-maturity securities⁽¹⁾		1,877,326		56,438		(5,922	)		1,927,842
Equity securities		31,331		9,796		(20	)		41,107
Total fixed-maturity and equity securities	$	1,908,657	$	66,234	$	(5,942	)	$	1,968,949

All of our AFS mortgage- and asset-backed securities represent variable interests in variable interest entities (“VIEs”). We are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact the entities’ economic performance. The maximum exposure to loss as a result of our involvement in these VIEs equals the carrying value of the securities.

The scheduled maturity distribution of the AFS fixed-maturity securities portfolio at December 31, 2018 was as follows:

	Amortized cost		Fair value
	(In thousands)
Due in one year or less	$	221,508	$	222,803
Due after one year through five years		871,181		867,564
Due after five years through 10 years		529,167		519,647
Due after 10 years		52,132		54,555
		1,673,988		1,664,569
Mortgage- and asset-backed securities		404,834		405,066
Total AFS fixed-maturity securities	$	2,078,822	$	2,069,635

Expected maturities may differ from scheduled contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.

Unrealized Gains and Losses on Investments. The net effect on stockholders’ equity of unrealized gains and losses on AFS securities was as follows:

	December 31, 2018			December 31, 2017
	(In thousands)
Net unrealized investment gains on available-for-sale securities including OTTI:
Available-for-sale securities	$	(9,187	)	$	60,292		⁽¹⁾
OTTI		147			174
Net unrealized investment gains on available-for-sale securities excluding OTTI		(9,040	)		60,466
Deferred income taxes		1,787			(20,780	)
Net unrealized investment gains on available-for-sale securities excluding OTTI, net of tax	$	(7,253	)	$	39,686

Trading Securities. The costs and fair values of the fixed-maturity and equity securities classified as trading securities were as follows:

	December 31, 2018				December 31, 2017
	Cost		Fair value		Cost		Fair value
	(In thousands)
Fixed-maturity securities	$	13,597	$	13,610	$	4,801	$	4,800
Equity securities⁽¹⁾		-		-		1,371		1,428
Total trading securities	$	13,597	$	13,610	$	6,172	$	6,228

Held-to-maturity Security. Concurrent with the execution of the Vidalia Re Coinsurance Agreement, Vidalia Re entered into a Surplus Note Purchase Agreement (the “Surplus Note Purchase Agreement”) with Hannover Life Reassurance Company of America and certain of its affiliates (collectively, “Hannover Re”) and a newly formed limited liability company (the “LLC”) owned by a third- party service provider. Under the Surplus Note Purchase Agreement, Vidalia Re issued a surplus note (the “Surplus Note”) to the LLC in exchange for a credit enhanced note from the LLC with an equal principal amount (the “LLC Note”). The principal amount of both the LLC Note and the Surplus Note will fluctuate over time to coincide with the amount of reserves contractually supported under the Vidalia Re Coinsurance Agreement. Both the LLC Note and the Surplus Note mature on December 31, 2030 and bear interest at an annual interest rate of 4.50%. The LLC Note is guaranteed by Hannover Re through a credit enhancement feature in exchange for a fee, which is reflected in interest expense on our consolidated statements of income.

The LLC is a VIE as its owner does not have an equity investment at risk that is sufficient to permit the LLC to finance its activities without Vidalia Re or Hannover Re. The Parent Company, Primerica Life, and Vidalia Re share the power to direct the activities of the LLC with Hannover Re, but do not have the obligation to absorb losses or the right to receive any residual returns related to the LLC’s primary risks or sources of variability. Through the credit enhancement feature, Hannover Re is the ultimate risk taker in this transaction and bears the obligation to absorb the LLC’s losses in the event of a Surplus Note default in exchange for the fee. Accordingly, the Company is not the primary beneficiary of the LLC and does not consolidate the LLC within its consolidated financial statements.

The LLC Note is classified as a held-to-maturity debt security in the Company’s invested asset portfolio as we have the positive intent and ability to hold the security until maturity. As of December 31, 2018, the LLC Note, which was rated A+ by Fitch Ratings, had an estimated unrealized holding loss of $25.1 million based on its amortized cost and estimated fair value. The estimated fair value of the LLC Note is expected to be at least equal to the estimated fair value of the offsetting Surplus Note. See Note 5 (Fair Value of Financial Instruments) for information on the fair value of our financial instruments and see Note 10 (Debt) for more information on the Surplus Note.

Investments on Deposit with Governmental Authorities. As required by law, we have investments on deposit with governmental authorities and banks for the protection of policyholders. The fair values of investments on deposit were $10.1 million and $11.1 million as of December 31, 2018 and 2017, respectively.

Securities Lending Transactions. We participate in securities lending transactions with broker-dealers and other financial institutions to increase investment income with minimal risk. We require minimum collateral on securities loaned equal to 102% of the fair value of the loaned securities. We accept collateral in the form of securities, which we are not able to sell or encumber, and to the extent the collateral declines in value below 100%, we require additional collateral from the borrower. Any securities collateral received is not reflected on our consolidated balance sheets. We also accept collateral in the form of cash, all of which we reinvest. For loans involving unrestricted cash collateral, the collateral is reported as an asset with a corresponding liability representing our obligation to return the collateral. We continue to carry the loaned securities as invested assets on our consolidated balance sheets during the terms of the loans, and we do not report them as sales. Cash collateral received and reinvested was $52.6 million and $89.8 million as of December 31, 2018 and 2017, respectively.

	Year ended December 31,
	2018			2017			2016
	(In thousands)
Fixed-maturity securities (available-for-sale)	$	79,356		$	76,877		$	74,673
Fixed-maturity security (held-to-maturity)		37,485			26,865			18,880
Equity securities		1,955			2,095			2,053
Policy loans and other invested assets		1,670			1,413			1,340
Cash and cash equivalents		2,922			1,123			632
Total return on deposit asset underlying 10% coinsurance agreement⁽¹⁾		3,643			2,970			5,212
Gross investment income		127,031			111,343			102,790
Investment expenses		(8,116	)		(5,461	)		(4,885	)
Investment income net of investment expenses		118,915			105,882			97,905
Interest expense on surplus note		(37,485	)		(26,865	)		(18,880	)
Net investment income	$	81,430		$	79,017		$	79,025

The components of net realized investment gains (losses), as well as details on gross realized investment gains and (losses) were as follows:

	Year ended December 31,
	2018			2017			2016
	(In thousands)
Net realized investment gains (losses):
Gross gains from sales of available-for-sale securities	$	1,162		$	3,249		$	8,126
Gross losses from sales of available-for-sale securities		(965	)		(107	)		(751	)
OTTI losses of available-for-sale securities		(152	)		(1,553	)		(3,420	)
Net gains (losses) recognized in net income during the period on equity securities		(2,456	)		-			-
Gains (losses) from bifurcated options		290			(250	)		133
Net realized investment gains (losses)	$	(2,121	)	$	1,339		$	4,088

The proceeds from sales or other redemptions of available-for-sale securities were as follows:

The components of net gains (losses) recognized in net income on equity securities still held as of period-end were as follows:

OTTI. We conduct a review each quarter to identify and evaluate impaired investments that have indications of possible OTTI. An investment in a debt security is impaired if its fair value falls below its cost. Factors considered in determining whether an impairment is temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects for the issue, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery, which may be maturity.

The amortized costs of AFS securities with a cost basis in excess of their fair values were $1,239.6 million and $529.2 million as of December 31, 2018 and 2017, respectively.

The following tables summarize, for all AFS securities in an unrealized loss position, the aggregate fair value and the gross unrealized loss by length of time such securities have continuously been in an unrealized loss position:

	December 31, 2018
	Less than 12 months							12 months or longer
	Fair value		Unrealized losses			Number of securities		Fair value		Unrealized losses			Number of securities
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	1,668	$	(10	)		1	$	4,541	$	(48	)		6
Foreign government		7,326		(170	)		7		52,086		(788	)		54
States and political subdivisions		2,644		(9	)		3		23,324		(262	)		20
Corporates		489,880		(10,649	)		396		360,516		(14,124	)		321
Residential mortgage-backed securities		32,725		(86	)		14		71,308		(1,647	)		41
Commercial mortgage-backed securities		31,129		(173	)		20		78,911		(1,463	)		77
Other asset-backed securities		19,363		(184	)		35		33,989		(571	)		41
Total fixed-maturity securities	$	584,735	$	(11,281	)			$	624,675	$	(18,903	)

	December 31, 2017
	Less than 12 months							12 months or longer
	Fair value		Unrealized losses			Number of securities		Fair value		Unrealized losses			Number of securities
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	4,754	$	(34	)		5	$	2,975	$	(13	)		3
Foreign government		40,287		(465	)		45		7,102		(183	)		7
States and political subdivisions		7,369		(43	)		7		6,267		(98	)		7
Corporates		247,613		(2,323	)		216		39,767		(1,332	)		43
Residential mortgage-backed securities		33,610		(263	)		16		2,592		(34	)		8
Commercial mortgage-backed securities		60,116		(394	)		52		22,149		(516	)		25
Other asset-backed securities		32,605		(121	)		33		14,819		(103	)		19
Total fixed-maturity securities		426,354		(3,643	)				95,671		(2,279	)
Equity securities		1,076		(16	)		4		170		(4	)		2
Total fixed-maturity and equity securities	$	427,430	$	(3,659	)			$	95,841	$	(2,283	)

As of December 31, 2018, the unrealized losses on our AFS invested asset portfolio were largely caused by interest rate sensitivity and, to a lesser extent, changes in credit spreads. We believe that fluctuations caused by movement in interest rates and credit spreads have little bearing on the recoverability of our investments. We do not consider these investments to be other-than-temporarily impaired because we have the ability to hold these investments until maturity or a market price recovery, and we have no present intention to dispose of them.

The amortized cost and fair value of AFS fixed-maturity securities in default were as follows:

	Year ended December 31,
	2018		2017		2016
	(In thousands)
OTTI on fixed-maturity securities not in default	$	152	$	1,001	$	3,257
OTTI on fixed-maturity securities in default		-		267		121
OTTI on equity securities⁽¹⁾		-		285		42
Total OTTI recognized in earnings	$	152	$	1,553	$	3,420

The securities noted above were considered to be other-than-temporarily impaired due to our intent to sell them; adverse credit events, such as news of an impending filing for bankruptcy; analyses of the issuer’s most recent financial statements or other information in which liquidity deficiencies, significant losses and large declines in capitalization were evident; or analyses of rating agency information for issuances with severe ratings downgrades that indicated a significant increase in the possibility of default. We also recognize OTTI related to invested assets held at the Parent Company that we intend to sell to fund share repurchases where we do not expect to recover its cost basis.

	Year ended December 31,
	2018		2017		2016
	(In thousands)
Total OTTI related to securities which the Company does not intend to sell or more-likely-than-not will not be required to sell:
Total OTTI losses recognized	$	152	$	1,476	$	1,486
Less portion of OTTI recognized in accumulated other comprehensive income (loss)		-		147		-
OTTI recognized in earnings for securities which the Company does not intend to sell or more-likely than-not will not be required to sell before recovery		152		1,329		1,486
OTTI recognized in earnings for securities which the Company intends to sell or more-likely-than-not will be required to sell before recovery		-		224		1,934
OTTI recognized in earnings	$	152	$	1,553	$	3,420

The rollforward of the OTTI recognized in net income for all AFS fixed-maturity securities still held was as follows:

	Year ended December 31,
	2018			2017
	(In thousands)
Cumulative OTTI recognized in net income for securities still held, beginning of period	$	4,346		$	5,774
Additions for securities where no OTTI were recognized prior to the beginning of the period		-			351
Additions for securities where OTTI have been recognized prior to the beginning of the period		152			917
Reductions due to sales, maturities, calls, amortization or increases in cash flows expected to be collected over the remaining life of credit-impaired securities		(1,987	)		(1,513	)
Reductions for exchanges of securities previously impaired		-			(1,183	)
Cumulative OTTI recognized in net income for securities still held, end of period	$	2,511		$	4,346

As of December 31, 2018, no OTTI have been recognized on the LLC Note held-to-maturity security.

Derivatives. Embedded conversion options associated with fixed-maturity securities are bifurcated from the fixed-maturity security host contracts and separately recognized as equity securities. The change in fair value of these bifurcated conversion options is reflected in realized investment gains (losses), including OTTI losses. As of December 31, 2018 we did not hold any fixed-maturity securities with embedded conversion options. As of December 31, 2017, the fair value for fixed-maturity securities with embedded conversion options was $0.9 million.

We have a deferred loss related to closed forward contracts, which were settled several years ago, that were used to mitigate our exposure to foreign currency exchange rates that resulted from the net investment in our Canadian operations. The amount of deferred loss included in accumulated other comprehensive income was $26.4 million as of December 31, 2018 and 2017. These deferred losses will not be recognized until such time as we sell or substantially liquidate our Canadian operations, although we have no such intention.