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Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

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, 2016								December 31, 2015
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	39,863,803			$	39,863,803			$	36,421,839			$	36,421,839
Held for investment	76,722				68,542				76,622				65,377
Equity securities, available for sale	7,813				7,813				7,828				7,828
Mortgage loans on real estate	2,451,375				2,478,023				2,435,257				2,471,864
Derivative instruments	576,262				576,262				337,256				337,256
Other investments	292,776				291,107				285,044				290,075
Cash and cash equivalents	1,547,041				1,547,041				397,749				397,749
Coinsurance deposits	4,120,911				3,700,449				3,187,470				2,860,882
Interest rate caps	427				427				1,410				1,410
Counterparty collateral	91,457				91,457				82,312				82,312
Liabilities
Policy benefit reserves	49,086,249				41,155,256				45,151,460				38,435,515
Single premium immediate annuity (SPIA) benefit reserves	304,365				315,420				324,264				336,066
Notes payable	393,739				424,804				393,227				417,752
Subordinated debentures	241,650				229,881				241,452				216,933
Interest rate swap	5,971				5,971				3,139				3,139

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, 2016 and December 31, 2015 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, 2016
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	449,439			$	442,226			$	7,213			$	—
United States Government sponsored agencies	1,380,266				—				1,380,266				—
United States municipalities, states and territories	3,975,544				—				3,975,544				—
Foreign government obligations	253,990				—				253,990				—
Corporate securities	26,383,116				7				26,383,109				—
Residential mortgage backed securities	1,392,441				—				1,392,441				—
Commercial mortgage backed securities	4,735,210				—				4,735,210				—
Other asset backed securities	1,293,797				—				1,293,797				—
Equity securities, available for sale: finance, insurance and real estate	7,813				—				7,813				—
Derivative instruments	576,262				—				576,262				—
Cash and cash equivalents	1,547,041				1,547,041				—				—
Interest rate caps	427				—				427				—
Counterparty collateral	91,457				—				91,457				—
	$	42,086,803			$	1,989,274			$	40,097,529			$	—
Liabilities
Interest rate swap	$	5,971			$	—			$	5,971			$	—
Fixed index annuities - embedded derivatives	6,499,015				—				—				6,499,015
	$	6,504,986			$	—			$	5,971			$	6,499,015
December 31, 2015
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	471,256			$	438,598			$	32,658			$	—
United States Government sponsored agencies	1,398,611				—				1,398,611				—
United States municipalities, states and territories	3,755,367				—				3,755,367				—
Foreign government obligations	212,565				—				212,565				—
Corporate securities	23,802,394				121				23,802,273				—
Residential mortgage backed securities	1,462,072				—				1,462,072				—
Commercial mortgage backed securities	4,174,396				—				4,174,396				—
Other asset backed securities	1,145,178				—				1,145,178				—
Equity securities, available for sale: finance, insurance and real estate	7,828				—				7,828				—
Derivative instruments	337,256				—				337,256				—
Cash and cash equivalents	397,749				397,749				—				—
Interest rate caps	1,410				—				1,410				—
Counterparty collateral	82,312				—				82,312				—
	$	37,248,394			$	836,468			$	36,411,926			$	—
Liabilities
Interest rate swap	$	3,139			$	—			$	3,139			$	—
Fixed index annuities - embedded derivatives	5,983,622				—				—				5,983,622
	$	5,986,761			$	—			$	3,139			$	5,983,622

Schedule of Assumptions Used in Estimating Fair Value

The following table presents average lapse rate and partial withdrawal rate assumptions, by contract duration, used in estimating the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each reporting date:

		Average Lapse Rates				Average Partial Withdrawal Rates
Contract Duration (Years)		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
1 - 5		1.77%		1.58%		3.30%		3.08%
6 - 10		6.59%		8.55%		3.30%		3.55%
11 - 15		11.25%		12.01%		3.31%		3.59%
16 - 20		12.04%		12.99%		3.17%		3.22%
20+		11.69%		12.54%		3.17%		3.22%

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

	Three Months Ended June 30,								Six Months Ended June 30,
	2016				2015				2016				2015
	(Dollars in thousands)
Available for sale securities
Beginning balance	$	—			$	342			$	—			$	375
Principal returned	—				(9		)		—				(21		)
Amortization of premium/accretion of discount	—				(409		)		—				(466		)
Total gains (losses) (realized/unrealized):
Included in other comprehensive income (loss)	—				240				—				276
Included in operations	—				(138		)		—				(138		)
Ending balance	$	—			$	26			$	—			$	26

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

	Three Months Ended June 30,								Six Months Ended June 30,
	2016				2015				2016				2015
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	6,254,466			$	5,865,171			$	5,983,622			$	5,574,653
Premiums less benefits	44,632				453,317				135,761				813,712
Change in fair value, net	199,917				(334,481		)		379,632				(404,358		)
Ending balance	$	6,499,015			$	5,984,007			$	6,499,015			$	5,984,007

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