Investments (Tables)

9 Months Ended

Sep. 30, 2015

Schedule of Fixed Maturity and Equity Securities

At September 30, 2015 and December 31, 2014, 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)
September 30, 2015
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	36,355	$	1,437	$	(111	)	$	37,681
United States Government sponsored agencies	1,286,586		35,864		(7,702		)	1,314,748
United States municipalities, states and territories	3,405,519		363,590		(8,221		)	3,760,888
Foreign government obligations	210,941		16,199		(10,153		)	216,987
Corporate securities	22,738,792		1,135,974		(415,018		)	23,459,748
Residential mortgage backed securities	1,431,656		126,485		(1,833		)	1,556,308
Commercial mortgage backed securities	3,881,487		90,536		(30,160		)	3,941,863
Other asset backed securities	1,066,994		45,295		(10,670		)	1,101,619
	$	34,058,330	$	1,815,380	$	(483,868	)	$	35,389,842
Held for investment:
Corporate security	$	76,574	$	—	$	(14,574	)	$	62,000

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,514	$	319	$	—		$	7,833

December 31, 2014
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	137,710	$	765	$	(15	)	$	138,460
United States Government sponsored agencies	1,364,424		43,399		(13,933		)	1,393,890
United States municipalities, states and territories	3,293,551		430,469		(711		)	3,723,309
Foreign government obligations	181,128		16,628		(3,953		)	193,803
Corporate securities	19,984,747		1,628,941		(123,396		)	21,490,292
Residential mortgage backed securities	1,616,846		136,704		(2,205		)	1,751,345
Commercial mortgage backed securities	2,720,294		90,649		(3,323		)	2,807,620
Other asset backed securities	906,346		48,022		(7,885		)	946,483
	$	30,205,046	$	2,395,577	$	(155,421	)	$	32,445,202
Held for investment:
Corporate security	$	76,432	$	—	$	(594	)	$	75,838

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,509	$	296	$	—		$	7,805

Schedule of Fixed Maturity Securities by Contractual Maturity Date

The amortized cost and fair value of fixed maturity securities at September 30, 2015, 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	$	134,699	$	138,612	$	—	$	—
Due after one year through five years	1,818,945		1,969,759		—		—
Due after five years through ten years	9,951,489		10,005,018		—		—
Due after ten years through twenty years	8,419,743		8,976,207		—		—
Due after twenty years	7,353,317		7,700,456		76,574		62,000
	27,678,193		28,790,052		76,574		62,000
Residential mortgage backed securities	1,431,656		1,556,308		—		—
Commercial mortgage backed securities	3,881,487		3,941,863		—		—
Other asset backed securities	1,066,994		1,101,619		—		—
	$	34,058,330	$	35,389,842	$	76,574	$	62,000

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:



	September 30, 2015			December 31, 2014
	(Dollars in thousands)
Net unrealized gains on available for sale fixed maturity securities and equity securities	$	1,331,831		$	2,240,452
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements	(710,260		)	(1,165,271		)
Deferred income tax valuation allowance reversal	22,534			22,534
Deferred income tax expense	(217,550		)	(376,314		)
Net unrealized gains reported as accumulated other comprehensive income	$	426,555		$	721,401

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:



	September 30, 2015				December 31, 2014
NAIC Designation	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
1	$	21,918,272	$	23,171,086	$	19,223,151	$	20,941,634
2	11,432,147		11,581,162		10,432,593		10,981,618
3	745,289		679,289		602,191		583,313
4	31,042		17,256		22,888		14,089
5	—		—		—		—
6	8,154		3,049		655		386
	$	34,134,904	$	35,451,842	$	30,281,478	$	32,521,040

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 855 and 402 securities, respectively) have been in a continuous unrealized loss position, at September 30, 2015 and December 31, 2014:



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
September 30, 2015
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	7,431	$	(111	)	$	—	$	—		$	7,431	$	(111	)
United States Government sponsored agencies	589,545		(7,702		)	—		—			589,545		(7,702		)
United States municipalities, states and territories	217,954		(8,115		)	2,894		(106		)	220,848		(8,221		)
Foreign government obligations	43,821		(898		)	15,400		(9,255		)	59,221		(10,153		)
Corporate securities:
Finance, insurance and real estate	1,552,033		(38,683		)	51,196		(13,569		)	1,603,229		(52,252		)
Manufacturing, construction and mining	2,735,903		(155,795		)	319,447		(77,062		)	3,055,350		(232,857		)
Utilities and related sectors	1,681,159		(74,879		)	67,812		(9,995		)	1,748,971		(84,874		)
Wholesale/retail trade	335,950		(13,414		)	41,296		(6,234		)	377,246		(19,648		)
Services, media and other	692,146		(24,241		)	33,986		(1,146		)	726,132		(25,387		)
Residential mortgage backed securities	51,190		(1,180		)	7,110		(653		)	58,300		(1,833		)
Commercial mortgage backed securities	1,283,393		(30,043		)	4,768		(117		)	1,288,161		(30,160		)
Other asset backed securities	166,719		(3,140		)	48,641		(7,530		)	215,360		(10,670		)
	$	9,357,244	$	(358,201	)	$	592,550	$	(125,667	)	$	9,949,794	$	(483,868	)
Held for investment:
Corporate security:
Insurance	$	62,000	$	(14,574	)	$	—	$	—		$	62,000	$	(14,574	)

December 31, 2014
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	—	$	—		$	498	$	(15	)	$	498	$	(15	)
United States Government sponsored agencies	—		—			610,339		(13,933		)	610,339		(13,933		)
United States municipalities, states and territories	—		—			27,947		(711		)	27,947		(711		)
Foreign government obligations	14,194		(1,068		)	11,542		(2,885		)	25,736		(3,953		)
Corporate securities:
Finance, insurance and real estate	253,439		(2,586		)	399,874		(16,277		)	653,313		(18,863		)
Manufacturing, construction and mining	1,078,089		(35,151		)	694,088		(35,926		)	1,772,177		(71,077		)
Utilities and related sectors	373,952		(8,185		)	344,313		(10,153		)	718,265		(18,338		)
Wholesale/retail trade	88,766		(2,290		)	99,427		(3,122		)	188,193		(5,412		)
Services, media and other	131,940		(1,567		)	277,296		(8,139		)	409,236		(9,706		)
Residential mortgage backed securities	22,115		(1,219		)	20,427		(986		)	42,542		(2,205		)
Commercial mortgage backed securities	241,637		(1,344		)	187,241		(1,979		)	428,878		(3,323		)
Other asset backed securities	142,094		(3,519		)	58,958		(4,366		)	201,052		(7,885		)
	$	2,346,226	$	(56,929	)	$	2,731,950	$	(98,492	)	$	5,078,176	$	(155,421	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	75,838	$	(594	)	$	75,838	$	(594	)

Schedule of Changes in Net Unrealized Gains/Losses on Investments

Changes in net unrealized gains on investments for the three and nine months ended September 30, 2015 and 2014 are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Fixed maturity securities held for investment carried at amortized cost	$	(3,753	)	$	4,883		$	(13,980	)	$	10,527
Investments carried at fair value:
Fixed maturity securities, available for sale	$	118,345		$	(54,291	)	$	(908,644	)	$	1,639,619
Equity securities, available for sale	(30		)	(7		)	23			(26		)
	118,315			(54,298		)	(908,621		)	1,639,593
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs and deferred sales inducements	(60,198		)	38,699			455,011			(870,770		)
Deferred income tax asset/liability	(20,341		)	5,459			158,764			(269,088		)
	(80,539		)	44,158			613,775			(1,139,858		)
Change in net unrealized gains on investments carried at fair value	$	37,776		$	(10,140	)	$	(294,846	)	$	499,735

Net Realized Gains (Losses) on Investments

Net realized gains (losses) on investments, excluding net OTTI losses for the three and nine months ended September 30, 2015 and 2014, are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Available for sale fixed maturity securities:
Gross realized gains	$	283		$	179		$	4,783		$	1,536
Gross realized losses	(97		)	(148		)	(897		)	(910		)
	186			31			3,886			626
Other investments:
Gain on sale of real estate	2,245			455			3,278			1,493
Loss on sale of real estate	—			—			(575		)	(231		)
Impairment losses on real estate	(570		)	(1,436		)	(1,199		)	(2,235		)
	1,675			(981		)	1,504			(973		)
Mortgage loans on real estate:
Decrease (increase) in allowance for credit losses	(702		)	(2,240		)	597			(5,787		)
Recovery of specific allowance	—			—			4,375			—
	(702		)	(2,240		)	4,972			(5,787		)
	$	1,159		$	(3,190	)	$	10,362		$	(6,134	)

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 nine months ended September 30, 2015 and 2014, 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
Nine months ended September 30, 2015
Prime	2006	6.5	%	6.5	%	14	%	14	%	40	%	40	%
	2007	5.8	%	7.0	%	15	%	21	%	45	%	55	%
Alt-A	2005	5.6	%	5.6	%	99	%	99	%	2	%	2	%

Nine months ended September 30, 2014
Prime	2005	7.5	%	7.5	%	15	%	15	%	50	%	50	%
	2006	6.5	%	7.4	%	11	%	12	%	50	%	50	%
	2007	7.0	%	7.0	%	14	%	14	%	55	%	55	%
Alt-A	2005	5.6	%	6.4	%	87	%	89	%	2	%	2	%

Other Than Temporary Impairment by Asset Type

The following table summarizes other than temporary impairments for the three and nine months ended September 30, 2015 and 2014, by asset type:



	Number of Securities	Total OTTI Losses			Portion of OTTI Losses Recognized in (from) Other Comprehensive Income			Net OTTI Losses Recognized in Operations
		(Dollars in thousands)
Three months ended September 30, 2015
Fixed maturity securities, available for sale:
Residential mortgage backed securities	3	$	—		$	(354	)	$	(354	)
Other asset backed securities	1	(10,000		)	5,125			(4,875		)
	4	$	(10,000	)	$	4,771		$	(5,229	)

Three months ended September 30, 2014
Fixed maturity securities, available for sale:
Residential mortgage backed securities	3	$	—		$	(564	)	$	(564	)

Nine months ended September 30, 2015
Fixed maturity securities, available for sale:
Residential mortgage backed securities	7	$	(132	)	$	(1,182	)	$	(1,314	)
Other asset backed securities	1	(10,000		)	5,125			(4,875		)
	8	$	(10,132	)	$	3,943		$	(6,189	)

Nine months ended September 30, 2014
Fixed maturity securities, available for sale:
Residential mortgage backed securities	6	$	—		$	(2,063	)	$	(2,063	)

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Cumulative credit loss at beginning of period	$	(128,010	)	$	(127,459	)	$	(127,050	)	$	(125,960	)
Credit losses on securities for which OTTI has not previously been recognized	(4,876		)	—			(5,008		)	—
Additional credit losses on securities for which OTTI has previously been recognized	(353		)	(564		)	(1,181		)	(2,063		)
Accumulated losses on securities that were disposed of during the period	761			—			761			—
Cumulative credit loss at end of period	$	(132,478	)	$	(128,023	)	$	(132,478	)	$	(128,023	)

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 September 30, 2015 and December 31, 2014:



	Amortized Cost		OTTI Recognized in Other Comprehensive Income			Change in Fair Value Since OTTI was Recognized		Fair Value
	(Dollars in thousands)
September 30, 2015
Fixed maturity securities, available for sale:
Corporate securities	$	—	$	—		$	20	$	20
Residential mortgage backed securities	495,278		(171,632		)	205,140		528,786
Other asset backed securities	8,154		(5,125		)	—		3,029
	$	503,432	$	(176,757	)	$	205,160	$	531,835
December 31, 2014
Fixed maturity securities, available for sale:
Corporate securities	$	—	$	—		$	11	$	11
Residential mortgage backed securities	569,508		(173,494		)	215,625		611,639
	$	569,508	$	(173,494	)	$	215,636	$	611,650