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Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2018

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, 2018								December 31, 2017
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	44,799,370			$	44,799,370			$	45,372,989			$	45,372,989
Held for investment	77,155				68,108				77,041				76,460
Mortgage loans on real estate	2,794,382				2,769,163				2,665,531				2,670,037
Derivative instruments	847,243				847,243				1,568,380				1,568,380
Other investments	508,932				499,644				616,764				605,894
Cash and cash equivalents	1,259,722				1,259,722				1,434,045				1,434,045
Coinsurance deposits	4,936,037				4,478,159				4,858,289				4,347,990
Interest rate caps	1,063				1,063				415				415
Interest rate swap	850				850				—				—
Counterparty collateral	123,055				123,055				186,108				186,108
Liabilities
Policy benefit reserves	56,501,423				48,016,495				55,786,011				46,344,931
Single premium immediate annuity (SPIA) benefit reserves	276,214				285,302				282,563				292,153
Notes payable	494,339				489,495				494,093				521,800
Subordinated debentures	242,770				226,192				242,565				244,117
Interest rate swap	—				—				789				789

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, 2018 and December 31, 2017 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, 2018
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,355			$	5,502			$	5,853			$	—
United States Government sponsored agencies	1,249,440				—				1,249,440				—
United States municipalities, states and territories	4,174,182				—				4,174,182				—
Foreign government obligations	228,613				—				228,613				—
Corporate securities	28,272,532				10				28,272,522				—
Residential mortgage backed securities	1,207,606				—				1,207,606				—
Commercial mortgage backed securities	5,331,174				—				5,331,174				—
Other asset backed securities	4,324,468				—				4,324,468				—
Other investments: equity securities	182,433				175,000				7,433				—
Derivative instruments	847,243				—				847,243				—
Cash and cash equivalents	1,259,722				1,259,722				—				—
Interest rate caps	1,063				—				1,063				—
Interest rate swap	850				—				850				—
Counterparty collateral	123,055				—				123,055				—
	$	47,213,736			$	1,440,234			$	45,773,502			$	—
Liabilities
Fixed index annuities - embedded derivatives	$	8,351,151			$	—			$	—			$	8,351,151
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	8,790,427				—				—				8,790,427
	$	8,791,216			$	—			$	789			$	8,790,427

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, 2018		December 31, 2017		June 30, 2018		December 31, 2017
1 - 5		2.10%		1.83%		3.33%		3.32%
6 - 10		7.29%		7.01%		3.33%		3.32%
11 - 15		11.34%		11.31%		3.35%		3.34%
16 - 20		11.91%		11.96%		3.21%		3.20%
20+		11.58%		11.62%		3.21%		3.20%

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 and six months ended June 30, 2018 and 2017:

	Three Months Ended   June 30,								Six Months Ended   June 30,
	2018				2017				2018				2017
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	8,233,557			$	7,051,000			$	8,790,427			$	6,563,288
Premiums less benefits	406,494				497,689				955,647				909,191
Change in fair value, net	(288,900		)		3,676				(1,394,923		)		79,886
Ending balance	$	8,351,151			$	7,552,365			$	8,351,151			$	7,552,365

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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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