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Fair Values of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

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:

	March 31, 2017								December 31, 2016
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	42,105,366			$	42,105,366			$	41,060,494			$	41,060,494
Held for investment	76,878				70,795				76,825				68,766
Mortgage loans on real estate	2,506,991				2,510,066				2,480,956				2,522,035
Derivative instruments	1,033,552				1,033,552				830,519				830,519
Other investments	309,429				303,003				308,774				300,918
Cash and cash equivalents	1,172,748				1,172,748				791,266				791,266
Coinsurance deposits	4,630,422				4,137,329				4,639,492				4,150,792
Interest rate caps	804				804				1,082				1,082
Counterparty collateral	143,229				143,229				145,693				145,693
Liabilities
Policy benefit reserves	52,343,991				43,847,625				51,280,331				43,104,183
Single premium immediate annuity (SPIA) benefit reserves	292,482				302,808				297,724				308,028
Notes and loan payable	494,071				518,500				493,755				519,440
Subordinated debentures	241,949				230,855				241,853				225,106
Interest rate swap	1,729				1,729				2,113				2,113

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 March 31, 2017 and December 31, 2016 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)
March 31, 2017
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,672			$	5,381			$	6,291			$	—
United States Government sponsored agencies	1,340,788				—				1,340,788				—
United States municipalities, states and territories	3,989,302				—				3,989,302				—
Foreign government obligations	238,398				—				238,398				—
Corporate securities	28,160,620				12				28,160,608				—
Residential mortgage backed securities	1,200,040				—				1,200,040				—
Commercial mortgage backed securities	5,383,942				—				5,383,942				—
Other asset backed securities	1,780,604				—				1,780,604				—
Other investments: equity securities, available for sale	7,990				—				7,990				—
Derivative instruments	1,033,552				—				1,033,552				—
Cash and cash equivalents	1,172,748				1,172,748				—				—
Interest rate caps	804				—				804				—
Counterparty collateral	143,229				—				143,229				—
	$	44,463,689			$	1,178,141			$	43,285,548			$	—
Liabilities
Interest rate swap	$	1,729			$	—			$	1,729			$	—
Fixed index annuities - embedded derivatives	7,051,000				—				—				7,051,000
	$	7,052,729			$	—			$	1,729			$	7,051,000
December 31, 2016
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,805			$	5,381			$	6,424			$	—
United States Government sponsored agencies	1,344,787				—				1,344,787				—
United States municipalities, states and territories	3,926,950				—				3,926,950				—
Foreign government obligations	236,341				—				236,341				—
Corporate securities	27,114,418				6				27,114,412				—
Residential mortgage backed securities	1,254,835				—				1,254,835				—
Commercial mortgage backed securities	5,365,235				—				5,365,235				—
Other asset backed securities	1,806,123				—				1,806,123				—
Other investments: equity securities, available for sale	8,000				—				8,000				—
Derivative instruments	830,519				—				830,519				—
Cash and cash equivalents	791,266				791,266				—				—
Interest rate caps	1,082				—				1,082				—
Counterparty collateral	145,693				—				145,693				—
	$	42,837,054			$	796,653			$	42,040,401			$	—
Liabilities
Interest rate swap	$	2,113			$	—			$	2,113			$	—
Fixed index annuities - embedded derivatives	6,563,288				—				—				6,563,288
	$	6,565,401			$	—			$	2,113			$	6,563,288

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)		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
1 - 5		1.95%		1.76%		3.31%		3.30%
6 - 10		6.89%		6.58%		3.31%		3.30%
11 - 15		11.26%		11.25%		3.33%		3.32%
16 - 20		12.00%		12.04%		3.19%		3.18%
20+		11.65%		11.68%		3.19%		3.18%

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

The following table provides a reconciliation of the beginning and ending balances for our Level 3 liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three months ended March 31, 2017 and 2016:

	Three Months Ended   March 31,
	2017				2016
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	6,563,288			$	5,983,622
Premiums less benefits	411,502				91,129
Change in fair value, net	76,210				179,715
Ending balance	$	7,051,000			$	6,254,466

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- Definition

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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Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes 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 liability.

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