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Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Carrying Amounts and Fair Values of Financial Instruments

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

	June 30, 2014								December 31, 2013
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	29,317,572			$	29,317,572			$	26,610,447			$	26,610,447
Held for investment	76,342				66,571				76,255				60,840
Equity securities, available for sale	7,762				7,762				7,778				7,778
Mortgage loans on real estate	2,543,810				2,596,588				2,581,082				2,615,410
Derivative instruments	905,688				905,688				856,050				856,050
Other investments	196,853				198,293				192,198				193,343
Cash and cash equivalents	1,464,533				1,464,533				897,529				897,529
Coinsurance deposits	3,085,340				2,722,024				2,999,618				2,669,432
Interest rate caps	3,788				3,788				6,103				6,103
Interest rate swap	—				—				712				712
2015 notes hedges	45,884				45,884				107,041				107,041
Counterparty collateral	261,266				261,266				315,824				315,824
Liabilities
Policy benefit reserves	37,538,232				31,279,983				35,453,166				29,670,827
Single premium immediate annuity (SPIA) benefit reserves	391,651				404,561				417,625				430,835
Notes payable	474,361				564,118				549,958				699,435
Subordinated debentures	246,145				240,767				246,050				234,959
2015 notes embedded conversion derivative	45,884				45,884				107,041				107,041
Interest rate swap	1,983				1,983				—				—

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 June 30, 2014 and December 31, 2013 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)
June 30, 2014
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	38,483			$	4,074			$	34,409			$	—
United States Government sponsored agencies	1,185,341				—				1,185,341				—
United States municipalities, states and territories	3,506,198				—				3,506,198				—
Foreign government obligations	192,963				—				192,963				—
Corporate securities	19,187,375				27				19,187,348				—
Residential mortgage backed securities	1,870,565				—				1,869,897				668
Commercial mortgage backed securities	2,296,096				—				2,296,096				—
Other asset backed securities	1,040,551				—				1,040,551				—
Equity securities, available for sale: finance, insurance and real estate	7,762				—				7,762				—
Derivative instruments	905,688				—				905,688				—
Cash and cash equivalents	1,464,533				1,464,533				—				—
Interest rate caps	3,788				—				3,788				—
2015 notes hedges	45,884				—				45,884				—
Counterparty collateral	261,266				—				261,266				—
	$	32,006,493			$	1,468,634			$	30,537,191			$	668
Liabilities
2015 notes embedded conversion derivative	$	45,884			$	—			$	45,884			$	—
Interest rate swap	1,983				—				1,983				—
Fixed index annuities - embedded derivatives	5,119,823				—				—				5,119,823
	$	5,167,690			$	—			$	47,867			$	5,119,823
December 31, 2013
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	42,925			$	4,805			$	38,120			$	—
United States Government sponsored agencies	1,194,289				—				1,194,289				—
United States municipalities, states and territories	3,306,743				—				3,306,743				—
Foreign government obligations	91,557				—				91,557				—
Corporate securities	17,233,037				20				17,233,017				—
Residential mortgage backed securities	1,971,960				—				1,970,584				1,376
Commercial mortgage backed securities	1,735,460				—				1,735,460				—
Other asset backed securities	1,034,476				359				1,034,117				—
Equity securities, available for sale: finance, insurance and real estate	7,778				—				7,778				—
Derivative instruments	856,050				—				856,050				—
Cash and cash equivalents	897,529				897,529				—				—
Interest rate caps	6,103				—				6,103				—
Interest rate swap	712				—				712				—
2015 notes hedges	107,041				—				107,041				—
Counterparty collateral	315,824				—				315,824				—
	$	28,801,484			$	902,713			$	27,897,395			$	1,376
Liabilities
2015 notes embedded conversion derivative	$	107,041			$	—			$	107,041			$	—
Fixed index annuities - embedded derivatives	4,406,163				—				—				4,406,163
	$	4,513,204			$	—			$	107,041			$	4,406,163

Assets Measured at Fair Value on Recurring Basis, Level 3 Reconciliation

	Three Months Ended June 30,								Six Months Ended June 30,
	2014				2013				2014				2013
	(Dollars in thousands)
Available for sale securities
Beginning balance	$	1,080			$	1,724			$	1,376			$	1,812
Principal returned	(114		)		(193		)		(192		)		(561		)
Amortization of premium/accretion of discount	(138		)		5				(165		)		134
Total gains (losses) (realized/unrealized):
Included in other comprehensive income (loss)	45				5				(146		)		156
Included in operations	(205		)		—				(205		)		—
Ending balance	$	668			$	1,541			$	668			$	1,541

Liabilities Measured at Fair Value on Recurring Basis, Level 3 Reconciliation

	Three Months Ended June 30,								Six Months Ended June 30,
	2014				2013				2014				2013
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	4,755,913			$	3,848,902			$	4,406,163			$	3,337,556
Premiums less benefits	425,776				425,671				797,729				672,393
Change in fair value, net	(61,866		)		(527,521		)		(84,069		)		(262,897		)
Ending balance	$	5,119,823			$	3,747,052			$	5,119,823			$	3,747,052

X

- 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.

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Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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