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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 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:

	December 31,
	2017								2016
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	45,372,989			$	45,372,989			$	41,060,494			$	41,060,494
Held for investment	77,041				76,460				76,825				68,766
Mortgage loans on real estate	2,665,531				2,670,037				2,480,956				2,522,035
Derivative instruments	1,568,380				1,568,380				830,519				830,519
Other investments	616,764				605,894				308,774				300,918
Cash and cash equivalents	1,434,045				1,434,045				791,266				791,266
Coinsurance deposits	4,858,289				4,347,990				4,639,492				4,150,792
Interest rate caps	415				415				1,082				1,082
Counterparty collateral	186,108				186,108				145,693				145,693
Liabilities
Policy benefit reserves	55,786,011				46,344,931				51,280,331				43,104,183
Single premium immediate annuity (SPIA) benefit reserves	282,563				292,153				297,724				308,028
Notes and loan payable	494,093				521,800				493,755				519,440
Subordinated debentures	242,565				244,117				241,853				225,106
Interest rate swap	789				789				2,113				2,113

Assets and Liabilities Measured on a Recurring Basis by Fair Value Hierarchy

Our assets and liabilities which are measured at fair value on a recurring basis as of December 31, 2017 and 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)
December 31, 2017
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,876			$	5,640			$	6,236			$	—
United States Government sponsored agencies	1,305,017				—				1,305,017				—
United States municipalities, states and territories	4,166,812				—				4,166,812				—
Foreign government obligations	239,360				—				239,360				—
Corporate securities	29,878,971				5				29,878,966				—
Residential mortgage backed securities	1,105,567				—				1,105,567				—
Commercial mortgage backed securities	5,544,850				—				5,544,850				—
Other asset backed securities	3,120,536				—				3,120,536				—
Other investments: equity securities, available for sale	292,429				285,000				7,429				—
Derivative instruments	1,568,380				—				1,568,380				—
Cash and cash equivalents	1,434,045				1,434,045				—				—
Interest rate caps	415				—				415				—
Counterparty collateral	186,108				—				186,108				—
	$	48,854,366			$	1,724,690			$	47,129,676			$	—
Liabilities
Interest rate swap	$	789			$	—			$	789			$	—
Fixed index annuities - embedded derivatives, net	8,790,427				—				—				8,790,427
	$	8,791,216			$	—			$	789			$	8,790,427
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)		December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
1 - 5		1.83%		1.76%		3.32%		3.30%
6 - 10		7.01%		6.58%		3.32%		3.30%
11 - 15		11.31%		11.25%		3.34%		3.32%
16 - 20		11.96%		12.04%		3.20%		3.18%
20+		11.62%		11.68%		3.20%		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 years ended December 31, 2017 and 2016:

	Year Ended December 31,
	2017				2016
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	6,563,288			$	5,983,622
Premiums less benefits	2,052,985				434,621
Change in fair value, net	174,154				145,045
Ending balance	$	8,790,427			$	6,563,288

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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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