Investments (Tables)

12 Months Ended

Dec. 31, 2018

At December 31, 2018 and 2017, the amortized cost and fair value of fixed maturity securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
December 31, 2018
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,872	$	102	$	(322	)	$	11,652
United States Government sponsored agencies	1,208,468		13,095		(83,034		)	1,138,529
United States municipalities, states and territories	3,880,703		261,222		(15,658		)	4,126,267
Foreign government obligations	226,860		7,573		(4,159		)	230,274
Corporate securities	28,483,138		727,105		(838,729		)	28,371,514
Residential mortgage backed securities	1,134,623		71,661		(4,125		)	1,202,159
Commercial mortgage backed securities	5,492,271		21,558		(134,826		)	5,379,003
Other asset backed securities	5,693,255		41,308		(270,234		)	5,464,329
	$	46,131,190	$	1,143,624	$	(1,351,087	)	$	45,923,727

December 31, 2017
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	11,861	$	162	$	(147	)	$	11,876
United States Government sponsored agencies	1,308,290		28,457		(31,730		)	1,305,017
United States municipalities, states and territories	3,804,360		366,048		(3,596		)	4,166,812
Foreign government obligations	228,214		13,171		(2,025		)	239,360
Corporate securities	28,127,653		1,897,005		(145,687		)	29,878,971
Residential mortgage backed securities	1,028,484		79,554		(2,471		)	1,105,567
Commercial mortgage backed securities	5,531,922		82,768		(69,840		)	5,544,850
Other asset backed securities	3,075,975		57,966		(13,405		)	3,120,536
	$	43,116,759	$	2,525,131	$	(268,901	)	$	45,372,989
Held for investment:
Corporate security	$	77,041	$	—	$	(581	)	$	76,460

Other investments: equity securities, available for sale	$	292,429	$	—	$	—		$	292,429

Schedule of Fixed Maturity Securities by Contractual Maturity Date

The amortized cost and fair value of fixed maturity securities at December 31, 2018, 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
	Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	365,686	$	368,836
Due after one year through five years	5,426,450		5,416,871
Due after five years through ten years	9,918,504		9,768,751
Due after ten years through twenty years	9,565,686		9,895,985
Due after twenty years	8,534,715		8,427,793
	33,811,041		33,878,236
Residential mortgage backed securities	1,134,623		1,202,159
Commercial mortgage backed securities	5,492,271		5,379,003
Other asset backed securities	5,693,255		5,464,329
	$	46,131,190	$	45,923,727

Schedule of Components of Net Unrealized Gains (Losses) on Available For Sale Fixed Maturity Securities Reported as Separate Component of Stockholders' Equity

Net unrealized gains (losses) on available for sale fixed maturity securities reported as a separate component of stockholders' equity were comprised of the following:



	December 31,
	2018			2017
	(Dollars in thousands)
Net unrealized gains (losses) on available for sale fixed maturity securities	$	(207,463	)	$	2,256,230
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements	112,571			(1,206,078		)
Deferred income tax valuation allowance reversal	22,534			22,534
Deferred income tax benefit (expense) (a)	19,926			(348,087		)
Net unrealized gains (losses) reported as accumulated other comprehensive income (loss)	$	(52,432	)	$	724,599


(a)	December 31, 2017 includes $128 million related to the impact of Tax Reform that was reclassified between accumulated other comprehensive income (loss) and retained earnings within our consolidated balance sheet during the first quarter of 2018. For more information regarding the reclassification, see Note 1.

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:



	December 31,
	2018				2017
NAIC Designation	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
1	$	26,588,352	$	26,921,843	$	26,669,427	$	28,274,379
2	17,901,161		17,528,072		15,198,551		15,869,219
3	1,396,650		1,269,242		1,161,737		1,157,420
4	173,987		137,991		134,838		117,542
5	23,836		19,453		17,015		20,927
6	47,204		47,126		12,232		9,962
	$	46,131,190	$	45,923,727	$	43,193,800	$	45,449,449

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 2,715 and 955 securities, respectively) have been in a continuous unrealized loss position, at December 31, 2018 and 2017:



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
December 31, 2018
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	543	$	(3	)	$	7,785	$	(319	)	$	8,328	$	(322	)
United States Government sponsored agencies	30,089		(949		)	953,421		(82,085		)	983,510		(83,034		)
United States municipalities, states and territories	340,103		(6,816		)	162,997		(8,842		)	503,100		(15,658		)
Foreign government obligations	98,511		(1,748		)	11,859		(2,411		)	110,370		(4,159		)
Corporate securities:
Finance, insurance and real estate	2,501,640		(87,220		)	884,870		(77,507		)	3,386,510		(164,727		)
Manufacturing, construction and mining	2,045,859		(84,972		)	349,738		(34,635		)	2,395,597		(119,607		)
Utilities and related sectors	2,313,271		(82,119		)	591,482		(45,838		)	2,904,753		(127,957		)
Wholesale/retail trade	1,032,603		(51,228		)	198,805		(26,326		)	1,231,408		(77,554		)
Services, media and other	4,618,477		(196,520		)	1,072,722		(152,364		)	5,691,199		(348,884		)
Residential mortgage backed securities	145,613		(2,638		)	22,689		(1,487		)	168,302		(4,125		)
Commercial mortgage backed securities	2,141,560		(37,150		)	2,090,835		(97,676		)	4,232,395		(134,826		)
Other asset backed securities	4,073,249		(252,265		)	271,994		(17,969		)	4,345,243		(270,234		)
	$	19,341,518	$	(803,628	)	$	6,619,197	$	(547,459	)	$	25,960,715	$	(1,351,087	)

December 31, 2017
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	1,565	$	(10	)	$	6,731	$	(137	)	$	8,296	$	(147	)
United States Government sponsored agencies	44,794		(180		)	958,965		(31,550		)	1,003,759		(31,730		)
United States municipalities, states and territories	44,736		(128		)	128,499		(3,468		)	173,235		(3,596		)
Foreign government obligations	49,663		(337		)	12,625		(1,688		)	62,288		(2,025		)
Corporate securities:
Finance, insurance and real estate	456,244		(5,135		)	600,655		(28,043		)	1,056,899		(33,178		)
Manufacturing, construction and mining	222,985		(3,475		)	231,196		(10,849		)	454,181		(14,324		)
Utilities and related sectors	395,183		(4,099		)	249,416		(8,901		)	644,599		(13,000		)
Wholesale/retail trade	152,941		(1,249		)	178,635		(11,371		)	331,576		(12,620		)
Services, media and other	729,124		(19,000		)	891,654		(53,565		)	1,620,778		(72,565		)
Residential mortgage backed securities	39,771		(387		)	32,917		(2,084		)	72,688		(2,471		)
Commercial mortgage backed securities	1,096,757		(10,385		)	1,306,437		(59,455		)	2,403,194		(69,840		)
Other asset backed securities	765,531		(3,499		)	217,595		(9,906		)	983,126		(13,405		)
	$	3,999,294	$	(47,884	)	$	4,815,325	$	(221,017	)	$	8,814,619	$	(268,901	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	76,460	$	(581	)	$	76,460	$	(581	)

Schedule of Changes in Net Unrealized Gains/Losses on Investments

Changes in net unrealized gains/losses on investments for the years ended December 31, 2018, 2017 and 2016 are as follows:



	Year Ended December 31,
	2018			2017			2016
	(Dollars in thousands)
Fixed maturity securities held for investment carried at amortized cost	$	581		$	7,478		$	3,186
Investments carried at fair value:
Fixed maturity securities, available for sale	$	(2,463,693	)	$	1,149,691		$	508,410
Equity securities, available for sale	—			(479		)	166
	(2,463,693		)	1,149,212			508,576
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs and deferred sales inducements	1,318,649			(587,417		)	(295,802		)
Deferred income tax asset/liability	240,459			(177,162		)	(74,471		)
	1,559,108			(764,579		)	(370,273		)
Change in net unrealized gains/losses on investments carried at fair value	$	(904,585	)	$	384,633		$	138,303

Components of Net Investment Income

Components of net investment income are as follows:



	Year Ended December 31,
	2018			2017			2016
	(Dollars in thousands)
Fixed maturity securities	$	2,027,599		$	1,876,542		$	1,729,176
Equity securities	4,735			764			531
Mortgage loans on real estate	131,259			122,680			122,985
Cash and cash equivalents	2,320			2,562			3,201
Other	1,548			4,073			5,499
	2,167,461			2,006,621			1,861,392
Less investment expenses	(19,649		)	(14,624		)	(11,520		)
Net investment income	$	2,147,812		$	1,991,997		$	1,849,872

Net Realized Gains (Losses) on Investments, Excluding Net OTTI Losses

Net realized gains (losses) on investments, excluding net OTTI losses are as follows:



	Year Ended December 31,
	2018			2017			2016
	(Dollars in thousands)
Available for sale fixed maturity securities:
Gross realized gains	$	12,245		$	18,254		$	14,132
Gross realized losses	(47,974		)	(9,058		)	(4,036		)
	(35,729		)	9,196			10,096
Available for sale equity securities:
Gross realized gains	—			348			—

Other investments:
Gain on sale of real estate	—			56			884
Loss on sale of real estate	—			—			(93		)
	—			56			791
Mortgage loans on real estate:
Decrease (increase) in allowance for credit losses	(3,165		)	278			(4,846		)
Recovery of specific allowance	1,592			631			5,483
Gain on sale of mortgage loans	124			—			—
	(1,449		)	909			637
	$	(37,178	)	$	10,509		$	11,524

Non-Income Producing Investments

The following table summarizes the carrying value of our investments that have been non-income producing for 12 consecutive months:



	December 31,
	2018		2017
	(Dollars in thousands)
Fixed maturity securities, available for sale	$	6,717	$	8,680

Other Than Temporary Impairment by Asset Type

The following table summarizes other than temporary impairments 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)
Year ended December 31, 2018
Fixed maturity securities, available for sale:
Corporate securities:
Capital goods	1	$	(719	)	$	—		$	(719	)
Consumer discretionary	8	(9,533		)	—			(9,533		)
Energy	4	(4,793		)	—			(4,793		)
Financials	5	(3,495		)	—			(3,495		)
Information technology	1	(550		)	—			(550		)
Industrials	1	(2,299		)	—			(2,299		)
Telecommunications	2	(249		)	—			(249		)
Transportation	1	(178		)	—			(178		)
Utilities	2	(5,518		)	—			(5,518		)
Residential mortgage backed securities	3	(63		)	(295		)	(358		)
Commercial mortgage backed securities	5	(4,859		)	—			(4,859		)
Other asset backed securities	2	(2,749		)	(1,356		)	(4,105		)
	35	$	(35,005	)	$	(1,651	)	$	(36,656	)

Year ended December 31, 2017
Fixed maturity securities, available for sale:
Corporate securities:
Industrials	1	$	(2,485	)	$	—		$	(2,485	)
Residential mortgage backed securities	8	(273		)	(1,585		)	(1,858		)
Other asset backed securities	1	—			(287		)	(287		)
	10	$	(2,758	)	$	(1,872	)	$	(4,630	)

Year ended December 31, 2016
Fixed maturity securities, available for sale:
Corporate securities:
Energy	2	$	(642	)	$	—		$	(642	)
Materials	1	(4,554		)	1,575			(2,979		)
Telecommunications	1	(4,462		)	562			(3,900		)
Utilities	2	(6,961		)	798			(6,163		)
Residential mortgage backed securities	9	—			(783		)	(783		)
Commercial mortgage backed securities	5	(1,540		)	—			(1,540		)
Other asset backed securities	2	(3,190		)	(3,482		)	(6,672		)
	22	$	(21,349	)	$	(1,330	)	$	(22,679	)

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:



	Year Ended December 31,
	2018			2017
	(Dollars in thousands)
Cumulative credit loss at beginning of year	$	(157,066	)	$	(166,375	)
Additions for the amount related to credit losses for which OTTI has not previously been recognized	(35,005		)	(2,758		)
Additional credit losses on securities for which OTTI has previously been recognized	(1,651		)	(1,872		)
Accumulated losses on securities that were disposed of during the period	18,324			13,939
Cumulative credit loss at end of year	$	(175,398	)	$	(157,066	)

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, by major type of security, for securities that are part of our investment portfolio at December 31, 2018 and 2017:



	Amortized Cost		OTTI Recognized in Other Comprehensive Income (Loss)			Change in Fair Value Since OTTI was Recognized			Fair Value
	(Dollars in thousands)
December 31, 2018
Fixed maturity securities, available for sale:
Corporate securities	$	69,580	$	(3,700	)	$	6,195		$	72,075
Residential mortgage backed securities	245,691		(167,846		)	199,191			277,036
Commercial mortgage backed securities	35,244		—			—			35,244
Other asset backed securities	1,692		—			326			2,018
	$	352,207	$	(171,546	)	$	205,712		$	386,373
December 31, 2017
Fixed maturity securities, available for sale:
Corporate securities	$	13,015	$	(4,263	)	$	10,739		$	19,491
Residential mortgage backed securities	297,582		(168,355		)	201,620			330,847
Other asset backed securities	4,567		(1,356		)	(1,875		)	1,336
	$	315,164	$	(173,974	)	$	210,484		$	351,674