Investments (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of Fixed Maturity and Equity Securities

At March 31, 2014 and December 31, 2013, the amortized cost and fair value of fixed maturity securities and equity securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
March 31, 2014
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	44,185	$	325	$	(1,210	)	$	43,300
United States Government sponsored agencies	1,358,426		8,276		(67,248		)	1,299,454
United States municipalities, states and territories	3,186,473		265,511		(14,671		)	3,437,313
Foreign government obligations	136,116		10,379		(2,472		)	144,023
Corporate securities	17,662,806		1,006,794		(228,413		)	18,441,187
Residential mortgage backed securities	1,831,161		120,106		(22,712		)	1,928,555
Commercial mortgage backed securities	2,003,425		17,671		(44,507		)	1,976,589
Other asset backed securities	1,033,033		30,254		(18,235		)	1,045,052
	$	27,255,625	$	1,459,316	$	(399,468	)	$	28,315,473
Held for investment:
Corporate security	$	76,298	$	—	$	(11,378	)	$	64,920

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,505	$	262	$	—		$	7,767

December 31, 2013
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	44,852	$	367	$	(2,294	)	$	42,925
United States Government sponsored agencies	1,313,776		1,875		(121,362		)	1,194,289
United States municipalities, states and territories	3,181,032		164,785		(39,074		)	3,306,743
Foreign government obligations	86,112		8,907		(3,462		)	91,557
Corporate securities	17,142,118		606,948		(516,029		)	17,233,037
Residential mortgage backed securities	1,895,913		119,230		(43,183		)	1,971,960
Commercial mortgage backed securities	1,821,988		3,287		(89,815		)	1,735,460
Other asset backed securities	1,041,939		23,300		(30,763		)	1,034,476
	$	26,527,730	$	928,699	$	(845,982	)	$	26,610,447
Held for investment:
Corporate security	$	76,255	$	—	$	(15,415	)	$	60,840

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,503	$	275	$	—		$	7,778

Schedule of Fixed Maturity Securities by Contractual Maturity Date

The amortized cost and fair value of fixed maturity securities at March 31, 2014, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage and other asset backed securities provide for periodic payments throughout their lives and are shown below as separate lines.



	Available for sale				Held for investment
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	38,837	$	39,547	$	—	$	—
Due after one year through five years	985,636		1,113,705		—		—
Due after five years through ten years	8,171,938		8,264,244		—		—
Due after ten years through twenty years	6,588,518		6,838,801		—		—
Due after twenty years	6,603,077		7,108,980		76,298		64,920
	22,388,006		23,365,277		76,298		64,920
Residential mortgage backed securities	1,831,161		1,928,555		—		—
Commercial mortgage backed securities	2,003,425		1,976,589		—		—
Other asset backed securities	1,033,033		1,045,052		—		—
	$	27,255,625	$	28,315,473	$	76,298	$	64,920

Schedule of Components of Net Unrealized Gains on Available for Sale Fixed Maturity and Equity Securities Reported as Separate Component of Stockholders' Equity

Net unrealized gains on available for sale fixed maturity securities and equity securities reported as a separate component of stockholders' equity were comprised of the following:



	March 31, 2014			December 31, 2013
	(Dollars in thousands)
Net unrealized gains on available for sale fixed maturity securities and equity securities	$	1,060,110		$	82,992
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements	(583,340		)	(46,588		)
Deferred income tax valuation allowance reversal	22,534			22,534
Deferred income tax benefit	(166,869		)	(12,742		)
Net unrealized gains reported as accumulated other comprehensive income	$	332,435		$	46,196

Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation

The following table summarizes the credit quality, as determined by NAIC designation, of our fixed maturity portfolio as of the dates indicated:



	March 31, 2014				December 31, 2013
NAIC Designation	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
1	$	16,990,834	$	17,755,174	$	16,394,654	$	16,531,250
2	9,755,720		10,059,679		9,630,251		9,598,399
3	519,452		505,434		502,822		474,165
4	64,256		58,988		74,493		66,078
5	—		—		—		—
6	1,661		1,118		1,765		1,395
	$	27,331,923	$	28,380,393	$	26,603,985	$	26,671,287

Schedule of Gross Unrealized Losses on Investments, By Category and Length of Time

The following table shows our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities (consisting of 665 and 1,047 securities, respectively) have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013:



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
March 31, 2014
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	33,386	$	(1,210	)	$	—	$	—		$	33,386	$	(1,210	)
United States Government sponsored agencies	618,888		(58,157		)	340,909		(9,091		)	959,797		(67,248		)
United States municipalities, states and territories	288,578		(14,671		)	—		—			288,578		(14,671		)
Foreign government obligations	77,271		(2,472		)	—		—			77,271		(2,472		)
Corporate securities:
Finance, insurance and real estate	1,126,695		(40,893		)	139,455		(9,454		)	1,266,150		(50,347		)
Manufacturing, construction and mining	2,267,589		(76,780		)	131,419		(14,578		)	2,399,008		(91,358		)
Utilities and related sectors	933,917		(40,959		)	101,402		(9,215		)	1,035,319		(50,174		)
Wholesale/retail trade	204,346		(11,286		)	13,850		(840		)	218,196		(12,126		)
Services, media and other	566,481		(17,716		)	97,230		(6,692		)	663,711		(24,408		)
Residential mortgage backed securities	385,500		(22,132		)	1,080		(580		)	386,580		(22,712		)
Commercial mortgage backed securities	1,169,178		(43,622		)	27,135		(885		)	1,196,313		(44,507		)
Other asset backed securities	318,187		(14,745		)	45,652		(3,490		)	363,839		(18,235		)
	$	7,990,016	$	(344,643	)	$	898,132	$	(54,825	)	$	8,888,148	$	(399,468	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	64,920	$	(11,378	)	$	64,920	$	(11,378	)

December 31, 2013
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	32,969	$	(2,294	)	$	—	$	—		$	32,969	$	(2,294	)
United States Government sponsored agencies	692,320		(88,671		)	467,309		(32,691		)	1,159,629		(121,362		)
United States municipalities, states and territories	614,056		(39,074		)	—		—			614,056		(39,074		)
Foreign government obligations	26,298		(3,462		)	—		—			26,298		(3,462		)
Corporate securities:
Finance, insurance and real estate	1,690,846		(92,426		)	153,037		(12,873		)	1,843,883		(105,299		)
Manufacturing, construction and mining	3,370,775		(191,245		)	93,608		(16,088		)	3,464,383		(207,333		)
Utilities and related sectors	1,829,868		(102,758		)	83,550		(11,547		)	1,913,418		(114,305		)
Wholesale/retail trade	428,407		(25,189		)	17,687		(1,992		)	446,094		(27,181		)
Services, media and other	834,699		(51,508		)	107,242		(10,403		)	941,941		(61,911		)
Residential mortgage backed securities	309,599		(41,080		)	31,739		(2,103		)	341,338		(43,183		)
Commercial mortgage backed securities	1,450,143		(83,814		)	51,099		(6,001		)	1,501,242		(89,815		)
Other asset backed securities	356,018		(20,426		)	92,372		(10,337		)	448,390		(30,763		)
	$	11,635,998	$	(741,947	)	$	1,097,643	$	(104,035	)	$	12,733,641	$	(845,982	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	60,840	$	(15,415	)	$	60,840	$	(15,415	)

Schedule of Changes in Net Unrealized Gains/Losses on Investments

Changes in net unrealized gains on investments for the three months ended March 31, 2014 and 2013 are as follows:



	Three Months Ended March 31,
	2014			2013
	(Dollars in thousands)
Fixed maturity securities held for investment carried at amortized cost	$	4,037		$	611
Investments carried at fair value:
Fixed maturity securities, available for sale	$	977,131		$	(119,070	)
Equity securities, available for sale	(13		)	2,219
	977,118			(116,851		)
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs and deferred sales inducements	(536,752		)	78,168
Deferred income tax asset/liability	(154,127		)	13,539
	(690,879		)	91,707
Change in net unrealized gains on investments carried at fair value	$	286,239		$	(25,144	)

Net Realized Gains (Losses) on Investments

Net realized gains (losses) on investments, excluding net OTTI losses for the three months ended March 31, 2014 and 2013, are as follows:



	Three Months Ended March 31,
	2014			2013
	(Dollars in thousands)
Available for sale fixed maturity securities:
Gross realized gains	$	184		$	13,015
Gross realized losses	(691		)	(2,187		)
	(507		)	10,828
Other investments:
Gain on sale of real estate	756			589
Loss on sale of real estate	—			(466		)
Impairment losses on real estate	(799		)	—
	(43		)	123
Mortgage loans on real estate:
Increase in allowance for credit losses	(164		)	(366		)
	$	(714	)	$	10,585

Significant Assumptions Used to Determine the Credit Loss Component of Other Than Temporary Impairment on Residential Mortgage Backed Securities

The following table presents the range of significant assumptions used to determine the credit loss component of other than temporary impairments we have recognized on residential mortgage backed securities for the three months ended March 31, 2014 and 2013, which are all senior level tranches within the structure of the securities:



		Discount Rate				Default Rate				Loss Severity
Sector	Vintage	Min		Max		Min		Max		Min		Max
Three months ended March 31, 2014
Prime	2006	6.5	%	7.4	%	11	%	12	%	50	%	50	%

Three months ended March 31, 2013
Prime	2003	5.1	%	5.1	%	2	%	2	%	30	%	30	%
	2005	6.5	%	7.7	%	8	%	17	%	50	%	50	%
	2006	6.0	%	6.9	%	9	%	16	%	50	%	50	%
	2007	6.5	%	6.7	%	14	%	25	%	40	%	60	%
	2008	6.6	%	6.6	%	16	%	16	%	45	%	45	%
Alt-A	2005	5.6	%	8.7	%	15	%	25	%	5	%	65	%
	2007	6.2	%	6.9	%	38	%	52	%	60	%	65	%

Other Than Temporary Impairment by Asset Type

The following table summarizes other than temporary impairments for the three months ended March 31, 2014 and 2013, by asset type:



	Number of Securities	Total OTTI Losses			Portion of OTTI Losses Recognized from Other Comprehensive Income			Net OTTI Losses Recognized in Operations
		(Dollars in thousands)
Three months ended March 31, 2014
Fixed maturity securities, available for sale:
Residential mortgage backed securities	2	$	—		$	(905	)	$	(905	)

Three months ended March 31, 2013
Fixed maturity securities, available for sale:
Corporate securities:
Industrial	1	$	(1,761	)	$	—		$	(1,761	)
Residential mortgage backed securities	5	—			(1,048		)	(1,048		)
Equity security, available for sale:
Industrial	1	(428		)	—			(428		)
	7	$	(2,189	)	$	(1,048	)	$	(3,237	)

Other Than Temporary Impairment, Credit Losses Recognized in Earnings

The cumulative portion of other than temporary impairments determined to be credit losses which have been recognized in operations for debt securities are summarized as follows:



	Three Months Ended March 31,
	2014			2013
	(Dollars in thousands)
Cumulative credit loss at beginning of period	$	(125,960	)	$	(134,027	)
Credit losses on securities for which OTTI has not previously been recognized	—			(1,761		)
Additional credit losses on securities for which OTTI has previously been recognized	(905		)	(1,048		)
Accumulated losses on securities that were disposed of during the period	—			7,023
Cumulative credit loss at end of period	$	(126,865	)	$	(129,813	)

Schedule of Other Than Temporary Impairment Losses, Investments

The following table summarizes the cumulative noncredit portion of OTTI and the change in fair value since recognition of OTTI, both of which were recognized in other comprehensive income (loss), by major type of security, for securities that are part of our investment portfolio at March 31, 2014 and December 31, 2013:



	Amortized Cost		OTTI Recognized in Other Comprehensive Income			Change in Fair Value Since OTTI was Recognized		Fair Value
	(Dollars in thousands)
March 31, 2014
Fixed maturity securities, available for sale:
Corporate securities	$	—	$	—		$	38	$	38
Residential mortgage backed securities	653,399		(175,429		)	210,802		688,772
	$	653,399	$	(175,429	)	$	210,840	$	688,810
December 31, 2013
Fixed maturity securities, available for sale:
Corporate securities	$	—	$	—		$	20	$	20
Residential mortgage backed securities	679,265		(176,334		)	216,061		718,992
	$	679,265	$	(176,334	)	$	216,081	$	719,012