Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Schedule of the Fair Values and Carrying Amounts of Financial Instruments

The following sets forth a comparison of the carrying amounts and fair values of our financial instruments:



	September 30, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	26,262,878	$	26,262,878	$	24,172,136	$	24,172,136
Held for investment	76,212		60,843		76,088		61,521
Equity securities, available for sale	9,708		9,708		53,422		53,422
Mortgage loans on real estate	2,593,851		2,711,170		2,623,940		2,848,235
Derivative instruments	625,236		625,236		415,258		415,258
Other investments	187,437		187,655		163,193		163,517
Cash and cash equivalents	934,931		934,931		1,268,545		1,268,545
Coinsurance deposits	2,970,601		2,642,309		2,910,701		2,678,232
Interest rate caps	5,356		5,356		3,247		3,247
2015 notes hedges	144,904		144,904		43,105		43,105
Counterparty collateral	240,713		240,713		—		—

Liabilities
Policy benefit reserves	34,319,660		28,802,302		31,452,496		26,264,831
Single premium immediate annuity (SPIA) benefit reserves	430,908		444,512		455,167		469,768
Notes payable	691,452		1,023,962		309,869		422,175
Subordinated debentures	246,003		233,125		245,869		218,283
2015 notes embedded derivatives	147,150		147,150		43,105		43,105
2015 warrants	51,077		51,077		—		—
Interest rate swap	222		222		4,261		4,261

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis, By Fair Value Hierarchy Level

Our assets and liabilities which are measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 are presented below based on the fair value hierarchy levels:



	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
September 30, 2013
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	4,907	$	4,907	$	—	$	—
United States Government sponsored agencies	1,239,603		—		1,239,603		—
United States municipalities, states and territories	3,461,131		—		3,461,131		—
Foreign government obligations	92,682		—		92,682		—
Corporate securities	16,741,581		8,794		16,732,787		—
Residential mortgage backed securities	2,118,827		—		2,117,513		1,314
Commercial mortgage backed securities	1,590,310		—		1,590,310		—
Other asset backed securities	1,013,837		362		1,013,475		—
Equity securities, available for sale: finance, insurance and real estate	9,708		1,908		7,800		—
Derivative instruments	625,236		—		625,236		—
Cash and cash equivalents	934,931		934,931		—		—
Interest rate caps	5,356		—		5,356		—
2015 notes hedges	144,904		—		144,904		—
Counterparty collateral	240,713		—		240,713		—
	$	28,223,726	$	950,902	$	27,271,510	$	1,314
Liabilities
2015 notes embedded derivatives	$	147,150	$	—	$	147,150	$	—
Interest rate swap	222		—		222		—
2015 warrants	51,077		—		51,077		—
Fixed index annuities - embedded derivatives	3,975,862		—		—		3,975,862
	$	4,174,311	$	—	$	198,449	$	3,975,862

December 31, 2012
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	5,154	$	5,154	$	—	$	—
United States Government sponsored agencies	1,772,025		—		1,772,025		—
United States municipalities, states and territories	3,578,323		—		3,578,323		—
Foreign government obligations	105,259		—		105,259		—
Corporate securities	14,466,772		33,131		14,433,641		—
Residential mortgage backed securities	2,888,113		—		2,886,301		1,812
Commercial mortgage backed securities	357,982		—		357,982		—
Other asset backed securities	998,508		378		998,130		—
Equity securities, available for sale: finance, insurance and real estate	53,422		36,928		16,494		—
Derivative instruments	415,258		—		415,258		—
Cash and cash equivalents	1,268,545		1,268,545		—		—
Interest rate caps	3,247		—		3,247		—
2015 notes hedges	43,105		—		43,105		—
	$	25,955,713	$	1,344,136	$	24,609,765	$	1,812
Liabilities
2015 notes embedded derivatives	$	43,105	$	—	$	43,105	$	—
Interest rate swap	4,261		—		4,261		—
Fixed index annuities - embedded derivatives	3,337,556		—		—		3,337,556
	$	3,384,922	$	—	$	47,366	$	3,337,556

Reconciliation of Beginning and Ending Balances of Level 3 Assets Measured at Fair Value on a Recurring Basis



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Dollars in thousands)
Available for sale securities
Beginning balance	$	1,541		$	2,005		$	1,812		$	2,098
Principal returned	(148		)	(101		)	(709		)	(194		)
Accretion of discount	(18		)	13			116			60
Total gains (losses) (realized/unrealized):
Included in other comprehensive income (loss)	(61		)	28			95			211
Included in operations	—			(73		)	—			(303		)
Ending balance	$	1,314		$	1,872		$	1,314		$	1,872

Reconciliation of Beginning and Ending Balances of Level 3 Liabilities Measured at Fair Value on a Recurring Basis



	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	3,747,052		$	2,914,948	$	3,337,556		$	2,530,496
Premiums less benefits	372,363			229,340		1,044,756			418,845
Change in unrealized gains, net	(143,553		)	122,494		(406,450		)	317,441
Ending balance	$	3,975,862		$	3,266,782	$	3,975,862		$	3,266,782

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References+ Details