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Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

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:

	September 30, 2015								December 31, 2014
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	35,389,842			$	35,389,842			$	32,445,202			$	32,445,202
Held for investment	76,574				62,000				76,432				75,838
Equity securities, available for sale	7,833				7,833				7,805				7,805
Mortgage loans on real estate	2,452,402				2,492,283				2,434,580				2,493,901
Derivative instruments	180,649				180,649				731,113				731,113
Other investments	275,300				282,277				266,488				273,004
Cash and cash equivalents	523,614				523,614				701,514				701,514
Coinsurance deposits	3,062,924				2,750,361				3,044,342				2,698,552
Interest rate caps	1,492				1,492				2,778				2,778
2015 notes hedges	—				—				30,291				30,291
Counterparty collateral	30,880				30,880				206,096				206,096
Liabilities
Policy benefit reserves	43,240,623				36,871,234				39,463,987				33,078,978
Single premium immediate annuity (SPIA) benefit reserves	334,921				346,930				365,440				377,654
Notes payable	400,000				421,500				421,679				503,349
Subordinated debentures	246,397				204,817				246,243				244,437
2015 notes embedded conversion derivative	—				—				30,291				30,291
Interest rate swap	4,528				4,528				2,644				2,644

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, 2015 and December 31, 2014 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, 2015
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	37,681			$	5,549			$	32,132			$	—
United States Government sponsored agencies	1,314,748				—				1,314,748				—
United States municipalities, states and territories	3,760,888				—				3,760,888				—
Foreign government obligations	216,987				—				216,987				—
Corporate securities	23,459,748				20				23,459,728				—
Residential mortgage backed securities	1,556,308				—				1,556,308				—
Commercial mortgage backed securities	3,941,863				—				3,941,863				—
Other asset backed securities	1,101,619				—				1,101,619				—
Equity securities, available for sale: finance, insurance and real estate	7,833				—				7,833				—
Derivative instruments	180,649				—				180,649				—
Cash and cash equivalents	523,614				523,614				—				—
Interest rate caps	1,492				—				1,492				—
Counterparty collateral	30,880				—				30,880				—
	$	36,134,310			$	529,183			$	35,605,127			$	—
Liabilities
Interest rate swap	$	4,528			$	—			$	4,528			$	—
Fixed index annuities - embedded derivatives	5,731,117				—				—				5,731,117
	$	5,735,645			$	—			$	4,528			$	5,731,117
December 31, 2014
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	138,460			$	4,255			$	134,205			$	—
United States Government sponsored agencies	1,393,890				—				1,393,890				—
United States municipalities, states and territories	3,723,309				—				3,723,309				—
Foreign government obligations	193,803				—				193,803				—
Corporate securities	21,490,292				11				21,490,281				—
Residential mortgage backed securities	1,751,345				—				1,750,970				375
Commercial mortgage backed securities	2,807,620				—				2,807,620				—
Other asset backed securities	946,483				—				946,483				—
Equity securities, available for sale: finance, insurance and real estate	7,805				—				7,805				—
Derivative instruments	731,113				—				731,113				—
Cash and cash equivalents	701,514				701,514				—				—
Interest rate caps	2,778				—				2,778				—
2015 notes hedges	30,291				—				30,291				—
Counterparty collateral	206,096				—				206,096				—
	$	34,124,799			$	705,780			$	33,418,644			$	375
Liabilities
2015 notes embedded conversion derivative	$	30,291			$	—			$	30,291			$	—
Interest rate swap	2,644				—				2,644				—
Fixed index annuities - embedded derivatives	5,574,653				—				—				5,574,653
	$	5,607,588			$	—			$	32,935			$	5,574,653

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

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	(Dollars in thousands)
Available for sale securities
Beginning balance	$	26			$	668			$	375			$	1,376
Principal returned	(2		)		(68		)		(23		)		(260		)
Amortization of premium/accretion of discount	(28		)		1				(494		)		(164		)
Total gains (losses) (realized/unrealized):
Included in other comprehensive income (loss)	4				127				280				(19		)
Included in operations	—				(202		)		(138		)		(407		)
Ending balance	$	—			$	526			$	—			$	526

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

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	5,984,007			$	5,119,823			$	5,574,653			$	4,406,163
Premiums less benefits	207,141				496,295				1,020,853				1,294,024
Change in fair value, net	(460,031		)		(354,564		)		(864,389		)		(438,633		)
Ending balance	$	5,731,117			$	5,261,554			$	5,731,117			$	5,261,554

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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