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Investments (Tables) | 12 Months Ended
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Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract] |
Components of net investment income | The components of net investment income for the following periods were:
($ in thousands) |  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Fixed maturity securities |  | $ | 283,228 |  |  | $ | 353,303 |  |  | $ | 354,290 |
Equity securities |  | 4,923 |  |  | 6,017 |  |  | 6,411 |
Limited partnership interests |  | 25,694 |  |  | 15,406 |  |  | 12,555 |
Short-term and other investments |  | 60,703 |  |  | 11,981 |  |  | 10,214 |
Total investment income |  | 374,548 |  |  | 386,707 |  |  | 383,470 |
Investment expenses |  | (9,484 | ) |  | (10,200 | ) |  | (9,840 | )
Net investment income |  | $ | 365,064 |  |  | $ | 376,507 |  |  | $ | 373,630 |
Summary of realized investment gains (losses) | Net investment gains (losses) for the following periods were:
($ in thousands) |  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Fixed maturity securities (1) |  | $ | 141,448 |  |  | $ | (5,713 | ) |  | $ | (8,867 | )
Equity securities |  | 15,975 |  |  | (10,649 | ) |  | 4,003 |
Short-term investments and other |  | (4,083 | ) |  | 3,819 |  |  | 1,458 |
Net investment gains (losses) |  | $ | 153,340 |  |  | $ | (12,543 | ) |  | $ | (3,406 | )
(1) | Net investment gains realized on fixed maturity securities include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid during the second quarter of 2019 in connection with the reinsurance of a $2.9 billion block of in force fixed and variable annuity business. See Notes 6 and 17 for further information.
The following table reconciles net investment gains (losses) by transaction type:
($ in thousands) |  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Impairment write-downs |  | $ | (1,105 | ) |  | $ | — |  |  | $ | (1,778 | )
Change in intent write-downs |  | (275 | ) |  | (1,530 | ) |  | (10,842 | )
Net OTTI losses recognized in earnings |  | (1,380 | ) |  | (1,530 | ) |  | (12,620 | )
Sales and other, net |  | 151,495 |  |  | 3,491 |  |  | 7,756 |
Change in fair value - equity securities (1) |  | 7,308 |  |  | (18,323 | ) |  | — |
Change in fair value and gains (losses) realized on settlements - derivatives |  | (4,083 | ) |  | 3,819 |  |  | 1,458 |
Net investment gains (losses) |  | $ | 153,340 |  |  | $ | (12,543 | ) |  | $ | (3,406 | )
(1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, equity securities are reported at fair value with changes in fair value recognized in Net investment gains (losses) and are no longer included in impairment write-downs or change in intent write-downs.
Unrealized gains and losses on fixed maturities and equity securities | Amortized cost, net unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in thousands) |  | Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
December 31, 2019 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: (1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 684,543 |  |  | $ | 41,263 |  |  | $ | 1,487 |  |  | $ | 724,319 |
Other, including U.S. Treasury securities |  | 436,665 |  |  | 22,824 |  |  | 621 |  |  | 458,868 |
Municipal bonds |  | 1,545,787 |  |  | 141,996 |  |  | 1,580 |  |  | 1,686,203 |
Foreign government bonds |  | 42,801 |  |  | 2,569 |  |  | — |  |  | 45,370 |
Corporate bonds |  | 1,464,444 |  |  | 118,775 |  |  | 1,795 |  |  | 1,581,424 |
Other mortgage-backed securities |  | 1,282,740 |  |  | 20,883 |  |  | 8,131 |  |  | 1,295,492 |
Totals |  | $ | 5,456,980 |  |  | $ | 348,310 |  |  | $ | 13,614 |  |  | $ | 5,791,676 |
December 31, 2018 |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: (1) |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 778,038 |  |  | $ | 22,724 |  |  | $ | 13,321 |  |  | $ | 787,441 |
Other, including U.S. Treasury securities |  | 835,096 |  |  | 16,127 |  |  | 17,681 |  |  | 833,542 |
Municipal bonds |  | 1,884,313 |  |  | 133,150 |  |  | 13,494 |  |  | 2,003,969 |
Foreign government bonds |  | 83,343 |  |  | 2,321 |  |  | 760 |  |  | 84,904 |
Corporate bonds |  | 2,054,105 |  |  | 64,296 |  |  | 38,891 |  |  | 2,079,510 |
Other mortgage-backed securities |  | 1,739,016 |  |  | 10,467 |  |  | 23,531 |  |  | 1,725,952 |
Totals |  | $ | 7,373,911 |  |  | $ | 249,085 |  |  | $ | 107,678 |  |  | $ | 7,515,318 |
(1) Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $405.1 million and $441.3 million; Federal Home Loan Mortgage Corporation (FHLMC) of $283.1 million and $417.3 million; and Government National Mortgage Association (GNMA) of $147.4 million and $96.5 million as of December 31, 2019 and 2018, respectively.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position | Therefore, it was determined that the unrealized losses on the securities presented in the table below were not other-than-temporarily impaired as of December 31, 2019.
($ in thousands) |  | 12 months or less |  | More than 12 months |  | Total
|  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 72,422 |  |  | $ | 1,282 |  |  | $ | 2,620 |  |  | $ | 205 |  |  | $ | 75,042 |  |  | $ | 1,487 |
Other |  | 38,341 |  |  | 619 |  |  | 1,527 |  |  | 2 |  |  | 39,868 |  |  | 621 |
Municipal bonds |  | 91,195 |  |  | 977 |  |  | 9,160 |  |  | 603 |  |  | 100,355 |  |  | 1,580 |
Foreign government bonds |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Corporate bonds |  | 58,198 |  |  | 886 |  |  | 16,622 |  |  | 909 |  |  | 74,820 |  |  | 1,795 |
Other mortgage-backed securities |  | 218,710 |  |  | 1,970 |  |  | 442,791 |  |  | 6,161 |  |  | 661,501 |  |  | 8,131 |
Total |  | $ | 478,866 |  |  | $ | 5,734 |  |  | $ | 472,720 |  |  | $ | 7,880 |  |  | $ | 951,586 |  |  | $ | 13,614 |
Number of positions with a gross unrealized loss |  | 330 |  |  |  |  | 137 |  |  |  |  | 467 |  |  |
Fair value as a percentage of total fixed maturities securities fair value |  | 8.3 | % |  |  |  | 8.2 | % |  |  |  | 16.5 | % |  |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. Government and federally sponsored agency obligations: |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 193,447 |  |  | $ | 5,026 |  |  | $ | 157,295 |  |  | $ | 8,295 |  |  | $ | 350,742 |  |  | $ | 13,321 |
Other |  | 263,497 |  |  | 6,746 |  |  | 246,213 |  |  | 10,935 |  |  | 509,710 |  |  | 17,681 |
Municipal bonds |  | 291,869 |  |  | 7,603 |  |  | 95,297 |  |  | 5,891 |  |  | 387,166 |  |  | 13,494 |
Foreign government bonds |  | 16,250 |  |  | 760 |  |  | — |  |  | — |  |  | 16,250 |  |  | 760 |
Corporate bonds |  | 818,519 |  |  | 27,429 |  |  | 99,171 |  |  | 11,462 |  |  | 917,690 |  |  | 38,891 |
Other mortgage-backed securities |  | 913,858 |  |  | 16,076 |  |  | 291,442 |  |  | 7,455 |  |  | 1,205,300 |  |  | 23,531 |
Total |  | $ | 2,497,440 |  |  | $ | 63,640 |  |  | $ | 889,418 |  |  | $ | 44,038 |  |  | $ | 3,386,858 |  |  | $ | 107,678 |
Number of positions with a gross unrealized loss |  | 1,052 |  |  |  |  | 359 |  |  |  |  | 1,411 |  |  |
Fair value as a percentage of total fixed maturities and equity securities fair value |  | 32.7 | % |  |  |  | 11.7 | % |  |  |  | 44.4 | % |  |
Summary of cumulative credit losses | The following table summarizes the cumulative amounts related to the Company's credit loss component of OTTI losses on fixed maturity securities held as of December 31, 2019 and 2018 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost basis, for which the non-credit portions of OTTI losses were recognized in OCI:
($ in thousands) |  | Year Ended December 31,
|  | 2019 |  | 2018
Cumulative credit loss (1) |  |  |  |
Beginning of period |  | $ | 1,529 |  |  | $ | 3,825 |
New credit losses |  | — |  |  | — |
Increases to previously recognized credit losses |  | — |  |  | 246 |
Losses related to securities sold or paid down during the period |  | — |  |  | (2,542 | )
End of period |  | $ | 1,529 |  |  | $ | 1,529 |
(1) The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.
Distribution of the company's fixed maturity portfolio by estimated expected maturity | The following table presents the distribution of the Company's fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in thousands) |  | December 31, 2019
|  | Amortized Cost |  | Fair Value |  | Percent of Total Fair Value
Estimated expected maturity: |  |  |  |  |  |
Due in 1 year or less |  | $ | 205,798 |  |  | $ | 211,420 |  |  | 3.6 | %
Due after 1 year through 5 years |  | 1,541,749 |  |  | 1,587,300 |  |  | 27.4 | %
Due after 5 years through 10 years |  | 1,613,539 |  |  | 1,712,236 |  |  | 29.6 | %
Due after 10 years through 20 years |  | 1,393,503 |  |  | 1,512,769 |  |  | 26.1 | %
Due after 20 years |  | 702,391 |  |  | 767,951 |  |  | 13.3 | %
Total |  | $ | 5,456,980 |  |  | $ | 5,791,676 |  |  | 100.0 | %
Average option-adjusted duration, in years |  | 6.0 |  |  |  |  |
Proceeds received from sales of fixed maturities and equity securities | Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each year were:
($ in thousands) |  | Year Ended December 31,
|  | 2019 (1) |  | 2018 |  | 2017
Fixed maturity securities |  |  |  |  |  |
Proceeds received |  | $ | 805,887 |  |  | $ | 625,527 |  |  | $ | 500,760 |
Gross gains realized |  | 150,852 |  |  | 10,536 |  |  | 13,570 |
Gross losses realized |  | (7,807 | ) |  | (14,932 | ) |  | (11,842 | )
Equity securities |  |  |  |  |  |
Proceeds received |  | $ | 29,863 |  |  | $ | 25,498 |  |  | $ | 50,113 |
Gross gains realized |  | 9,193 |  |  | 8,592 |  |  | 7,753 |
Gross losses realized |  | (788 | ) |  | (917 | ) |  | (1,972 | )
(1) Gross gains realized presented above include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid during the second quarter of 2019 in connection with the reinsurance of a $2.9 billion block of in force fixed and variable annuity business. See Notes 6 and 17 for further information.
Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities | The following table reconciles the net unrealized investment gains (losses) on securities, net of tax, included in AOCI, before the impact on DAC:
($ in thousands) |  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |
Beginning of period |  | $ | 111,712 |  |  | $ | 286,176 |  |  | $ | 202,941 |
Change in unrealized investment gains (losses) on fixed maturity securities |  | 277,062 |  |  | (172,350 | ) |  | 80,073 |
Reclassification of net investment (gains) losses on securities to net income |  | (124,364 | ) |  | 12,927 |  |  | 3,162 |
Cumulative effect of change in accounting principle (1) |  | — |  |  | (15,041 | ) |  | — |
End of period |  | $ | 264,410 |  |  | $ | 111,712 |  |  | $ | 286,176 |
(1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and the related net unrealized gains were reclassified from AOCI to Retained earnings.
Offsetting assets and liability | The following table presents the instruments that were subject to a master netting arrangement for the Company.
($ in thousands) |  |  |  | Gross Amounts Offset in the |  | Net Amounts of Assets/ Liabilities Presented in the |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |
|  | Gross Amounts |  | Consolidated Balance Sheets |  | Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Received |  | Net Amount
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | $ | 13,239 |  |  | $ | — |  |  | $ | 13,239 |  |  | $ | 7,687 |  |  | $ | 6,640 |  |  | $ | (1,088 | )
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |
Asset derivatives |  |  |  |  |  |  |  |  |  |  |  |
Free-standing derivatives |  | 2,647 |  |  | — |  |  | 2,647 |  |  | — |  |  | 1,868 |  |  | 779 |

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