Investments (Tables)

3 Months Ended

Mar. 31, 2016

Schedule of Fixed Maturity and Equity Securities

At March 31, 2016 and December 31, 2015, 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, 2016
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	469,957	$	3,505	$	(60	)	$	473,402
United States Government sponsored agencies	1,519,674		46,980		(367		)	1,566,287
United States municipalities, states and territories	3,448,482		437,336		(2,081		)	3,883,737
Foreign government obligations	210,964		18,429		(7,532		)	221,861
Corporate securities	24,113,794		1,490,814		(436,140		)	25,168,468
Residential mortgage backed securities	1,313,775		120,977		(2,399		)	1,432,353
Commercial mortgage backed securities	4,472,852		102,466		(72,057		)	4,503,261
Other asset backed securities	1,147,288		34,010		(20,667		)	1,160,631
	$	36,696,786	$	2,254,517	$	(541,303	)	$	38,410,000
Held for investment:
Corporate security	$	76,672	$	—	$	(9,000	)	$	67,672

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,517	$	296	$	—		$	7,813

December 31, 2015
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	470,567	$	988	$	(299	)	$	471,256
United States Government sponsored agencies	1,386,219		26,801		(14,409		)	1,398,611
United States municipalities, states and territories	3,422,667		341,328		(8,628		)	3,755,367
Foreign government obligations	210,953		12,547		(10,935		)	212,565
Corporate securities	23,597,530		887,288		(682,424		)	23,802,394
Residential mortgage backed securities	1,366,985		98,576		(3,489		)	1,462,072
Commercial mortgage backed securities	4,238,265		41,412		(105,281		)	4,174,396
Other asset backed securities	1,130,524		34,534		(19,880		)	1,145,178
	$	35,823,710	$	1,443,474	$	(845,345	)	$	36,421,839
Held for investment:
Corporate security	$	76,622	$	—	$	(11,245	)	$	65,377

Equity securities, available for sale:
Finance, insurance, and real estate	$	7,515	$	313	$	—		$	7,828

Schedule of Fixed Maturity Securities by Contractual Maturity Date

The amortized cost and fair value of fixed maturity securities at March 31, 2016, 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	$	166,640	$	170,202	$	—	$	—
Due after one year through five years	2,643,302		2,774,423		—		—
Due after five years through ten years	10,835,215		11,043,464		—		—
Due after ten years through twenty years	8,715,797		9,407,493		—		—
Due after twenty years	7,401,917		7,918,173		76,672		67,672
	29,762,871		31,313,755		76,672		67,672
Residential mortgage backed securities	1,313,775		1,432,353		—		—
Commercial mortgage backed securities	4,472,852		4,503,261		—		—
Other asset backed securities	1,147,288		1,160,631		—		—
	$	36,696,786	$	38,410,000	$	76,672	$	67,672

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, 2016			December 31, 2015
	(Dollars in thousands)
Net unrealized gains on available for sale fixed maturity securities and equity securities	$	1,713,510		$	598,442
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements	(932,610		)	(322,859		)
Deferred income tax valuation allowance reversal	22,534			22,534
Deferred income tax expense	(273,315		)	(96,454		)
Net unrealized gains reported as accumulated other comprehensive income	$	530,119		$	201,663

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, 2016				December 31, 2015
NAIC Designation	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
1	$	23,648,794	$	25,264,168	$	23,363,259	$	24,207,801
2	11,955,752		12,223,107		11,709,730		11,589,325
3	1,023,746		894,557		758,531		643,293
4	128,238		86,816		60,480		44,312
5	2,100		1,537		—		—
6	14,828		7,487		8,332		2,485
	$	36,773,458	$	38,477,672	$	35,900,332	$	36,487,216

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 730 and 1,246 securities, respectively) have been in a continuous unrealized loss position, at March 31, 2016 and December 31, 2015:



	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, 2016
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	6,803	$	(60	)	$	—	$	—		$	6,803	$	(60	)
United States Government sponsored agencies	89,633		(367		)	—		—			89,633		(367		)
United States municipalities, states and territories	72,441		(946		)	21,519		(1,135		)	93,960		(2,081		)
Foreign government obligations	19,523		(116		)	17,200		(7,416		)	36,723		(7,532		)
Corporate securities:
Finance, insurance and real estate	763,808		(25,577		)	205,317		(18,958		)	969,125		(44,535		)
Manufacturing, construction and mining	1,597,989		(120,533		)	616,441		(140,715		)	2,214,430		(261,248		)
Utilities and related sectors	969,160		(57,648		)	294,026		(38,246		)	1,263,186		(95,894		)
Wholesale/retail trade	231,211		(6,500		)	54,985		(6,543		)	286,196		(13,043		)
Services, media and other	429,239		(12,617		)	120,737		(8,803		)	549,976		(21,420		)
Residential mortgage backed securities	61,677		(2,372		)	1,307		(27		)	62,984		(2,399		)
Commercial mortgage backed securities	1,613,984		(64,626		)	93,864		(7,431		)	1,707,848		(72,057		)
Other asset backed securities	424,447		(11,702		)	51,617		(8,965		)	476,064		(20,667		)
	$	6,279,915	$	(303,064	)	$	1,477,013	$	(238,239	)	$	7,756,928	$	(541,303	)
Held for investment:
Corporate security:
Insurance	$	67,672	$	(9,000	)	$	—	$	—		$	67,672	$	(9,000	)

December 31, 2015
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	37,730	$	(299	)	$	—	$	—		$	37,730	$	(299	)
United States Government sponsored agencies	957,053		(14,409		)	—		—			957,053		(14,409		)
United States municipalities, states and territories	261,823		(8,474		)	2,846		(154		)	264,669		(8,628		)
Foreign government obligations	42,966		(1,762		)	15,463		(9,173		)	58,429		(10,935		)
Corporate securities:
Finance, insurance and real estate	2,077,223		(59,607		)	49,912		(14,855		)	2,127,135		(74,462		)
Manufacturing, construction and mining	3,517,967		(246,456		)	376,229		(131,003		)	3,894,196		(377,459		)
Utilities and related sectors	2,240,652		(138,940		)	97,184		(22,565		)	2,337,836		(161,505		)
Wholesale/retail trade	473,050		(17,863		)	38,682		(8,125		)	511,732		(25,988		)
Services, media and other	1,037,011		(39,937		)	32,050		(3,073		)	1,069,061		(43,010		)
Residential mortgage backed securities	162,770		(2,958		)	6,438		(531		)	169,208		(3,489		)
Commercial mortgage backed securities	2,679,510		(105,002		)	11,495		(279		)	2,691,005		(105,281		)
Other asset backed securities	457,055		(10,581		)	46,657		(9,299		)	503,712		(19,880		)
	$	13,944,810	$	(646,288	)	$	676,956	$	(199,057	)	$	14,621,766	$	(845,345	)
Held for investment:
Corporate security:
Insurance	$	65,377	$	(11,245	)	$	—	$	—		$	65,377	$	(11,245	)

Schedule of Changes in Net Unrealized Gains/Losses on Investments

Changes in net unrealized gains on investments for the three months ended March 31, 2016 and 2015 are as follows:



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Fixed maturity securities held for investment carried at amortized cost	$	2,245		$	7,099
Investments carried at fair value:
Fixed maturity securities, available for sale	$	1,115,085		$	520,166
Equity securities, available for sale	(17		)	42
	1,115,068			520,208
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs and deferred sales inducements	(609,751		)	(255,076		)
Deferred income tax asset/liability	(176,861		)	(92,795		)
	(786,612		)	(347,871		)
Change in net unrealized gains on investments carried at fair value	$	328,456		$	172,337

Net Realized Gains (Losses) on Investments

Net realized gains (losses) on investments, excluding net OTTI losses for the three months ended March 31, 2016 and 2015, are as follows:



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Available for sale fixed maturity securities:
Gross realized gains	$	1,487		$	2,288
Gross realized losses	(1,231		)	(289		)
	256			1,999
Other investments:
Gain on sale of real estate	131			838
Loss on sale of real estate	(92		)	(382		)
Impairment losses on real estate	—			(629		)
	39			(173		)
Mortgage loans on real estate:
Decrease (increase) in allowance for credit losses	(948		)	1,798
Recovery of specific allowance	3,340			1,255
	2,392			3,053
	$	2,687		$	4,879

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, 2016 and 2015, 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, 2016
Prime	2006	7.3	%	7.3	%	13	%	13	%	50	%	50	%
	2007	6.2	%	6.4	%	18	%	31	%	50	%	55	%

Three months ended March 31, 2015
Prime	2006	6.5	%	6.5	%	14	%	14	%	40	%	40	%

Other Than Temporary Impairment by Asset Type

The following table summarizes other than temporary impairments for the three months ended March 31, 2016 and 2015, 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 March 31, 2016
Fixed maturity securities, available for sale:
Corporate securities:
Energy	2	$	(642	)	$	—		$	(642	)
Telecommunications	1	(4,462		)	562			(3,900		)
Utilities	1	(136		)	—			(136		)
Residential mortgage backed securities	4	—			(238		)	(238		)
Commercial mortgage backed securities	3	(778		)	—			(778		)
	11	$	(6,018	)	$	324		$	(5,694	)

Three months ended March 31, 2015
Fixed maturity securities, available for sale:
Residential mortgage backed securities	1	$	(132	)	$	—		$	(132	)

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,
	2016			2015
	(Dollars in thousands)
Cumulative credit loss at beginning of period	$	(145,824	)	$	(127,050	)
Credit losses on securities for which OTTI has not previously been recognized	(5,456		)	(132		)
Additional credit losses on securities for which OTTI has previously been recognized	(238		)	—
Accumulated losses on securities that were disposed of during the period	—			—
Cumulative credit loss at end of period	$	(151,518	)	$	(127,182	)

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, 2016 and December 31, 2015:



	Amortized Cost		OTTI Recognized in Other Comprehensive Income			Change in Fair Value Since OTTI was Recognized			Fair Value
	(Dollars in thousands)
March 31, 2016
Fixed maturity securities, available for sale:
Corporate securities	$	8,592	$	(3,537	)	$	2,080		$	7,135
Residential mortgage backed securities	443,158		(170,486		)	196,000			468,672
Other asset backed securities	8,335		(5,125		)	(1,321		)	1,889
	$	460,085	$	(179,148	)	$	196,759		$	477,696
December 31, 2015
Fixed maturity securities, available for sale:
Corporate securities	$	6,396	$	(2,975	)	$	9		$	3,430
Residential mortgage backed securities	466,871		(170,724		)	199,149			495,296
Other asset backed securities	8,154		(5,125		)	(553		)	2,476
	$	481,421	$	(178,824	)	$	198,605		$	501,202