QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
Page | |
March 31, 2020 | December 31, 2019 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities, available for sale, at fair value (amortized cost of $47,254,063 as of 2020 and $48,238,946 as of 2019; allowance for credit losses of $28,332 as of 2020) | $ | $ | |||||
Mortgage loans on real estate (net of allowance for credit losses of $19,776 as of 2020 and $9,179 as of 2019) | |||||||
Derivative instruments | |||||||
Other investments | |||||||
Total investments | |||||||
Cash and cash equivalents | |||||||
Coinsurance deposits (net of allowance for credit losses of $4,559 as of 2020 and $0 as of 2019) | |||||||
Accrued investment income | |||||||
Deferred policy acquisition costs | |||||||
Deferred sales inducements | |||||||
Deferred income taxes | |||||||
Income taxes recoverable | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Policy benefit reserves | $ | $ | |||||
Other policy funds and contract claims | |||||||
Notes payable | |||||||
Subordinated debentures | |||||||
Amounts due under repurchase agreements | |||||||
Deferred income taxes | |||||||
Income taxes payable | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Stockholders' equity: | |||||||
Preferred stock; par value $1 per share; $400,000 aggregate liquidation preference; 2,000,000 shares authorized; issued and outstanding: 2020 - 16,000 shares; 2019 - 16,000 shares | |||||||
Common stock; par value $1 per share; 200,000,000 shares authorized; issued and outstanding: 2020 - 91,497,841 shares (excluding 1,207,201 treasury shares); 2019 - 91,107,555 shares (excluding 1,344,193 treasury shares) | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income | |||||||
Retained earnings | |||||||
Total stockholders' equity | |||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Revenues: | |||||||
Premiums and other considerations | $ | $ | |||||
Annuity product charges | |||||||
Net investment income | |||||||
Change in fair value of derivatives | ( | ) | |||||
Net realized gains (losses) on investments, excluding credit losses on fixed maturity securities, available for sale | ( | ) | |||||
Credit losses on fixed maturity securities, available for sale | ( | ) | |||||
Loss on extinguishment of debt | ( | ) | |||||
Total revenues | ( | ) | |||||
Benefits and expenses: | |||||||
Insurance policy benefits and change in future policy benefits | |||||||
Interest sensitive and index product benefits | |||||||
Amortization of deferred sales inducements | |||||||
Change in fair value of embedded derivatives | ( | ) | |||||
Interest expense on notes payable | |||||||
Interest expense on subordinated debentures | |||||||
Amortization of deferred policy acquisition costs | |||||||
Other operating costs and expenses | |||||||
Total benefits and expenses | ( | ) | |||||
Income (loss) before income taxes | ( | ) | |||||
Income tax expense (benefit) | ( | ) | |||||
Net income (loss) | ( | ) | |||||
Less: Preferred stock dividends | |||||||
Net income (loss) available to common stockholders | $ | $ | ( | ) | |||
Earnings (loss) per common share | $ | $ | ( | ) | |||
Earnings (loss) per common share - assuming dilution | $ | $ | ( | ) | |||
Weighted average common shares outstanding (in thousands): | |||||||
Earnings (loss) per common share | |||||||
Earnings (loss) per common share - assuming dilution |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net income (loss) | $ | $ | ( | ) | |||
Other comprehensive income (loss): | |||||||
Change in net unrealized investment gains/losses (1) | ( | ) | |||||
Reclassification of unrealized investment gains/losses to net income (loss) (1) | ( | ) | |||||
Other comprehensive income (loss) before income tax | ( | ) | |||||
Income tax effect related to other comprehensive income (loss) | ( | ) | |||||
Other comprehensive income (loss) | ( | ) | |||||
Comprehensive income (loss) | $ | ( | ) | $ |
(1) | Net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs. |
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total Stockholders' Equity | ||||||||||||||||||
For the three months ended March 31, 2020 | |||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Net income for period | — | — | — | — | |||||||||||||||||||
Other comprehensive loss | — | — | — | ( | ) | — | ( | ) | |||||||||||||||
Share-based compensation | — | — | — | — | |||||||||||||||||||
Issuance of 390,286 shares of common stock under compensation plans | — | — | — | ||||||||||||||||||||
Cumulative effect of change in accounting principal | — | — | — | — | ( | ) | ( | ) | |||||||||||||||
Dividends on preferred stock | — | — | — | — | ( | ) | ( | ) | |||||||||||||||
Balance at March 31, 2020 | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | ||||||||||||||||||
For the three months ended March 31, 2019 | |||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Net loss for period | — | — | — | — | ( | ) | ( | ) | |||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||
Share-based compensation | — | — | — | — | |||||||||||||||||||
Issuance of 414,894 shares of common stock under compensation plans | — | ( | ) | — | — | ||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | $ | $ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Operating activities | |||||||
Net income (loss) | $ | $ | ( | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Interest sensitive and index product benefits | |||||||
Amortization of deferred sales inducements | |||||||
Annuity product charges | ( | ) | ( | ) | |||
Change in fair value of embedded derivatives | ( | ) | |||||
Change in traditional life and accident and health insurance reserves | ( | ) | ( | ) | |||
Policy acquisition costs deferred | ( | ) | ( | ) | |||
Amortization of deferred policy acquisition costs | |||||||
Provision for depreciation and other amortization | |||||||
Amortization of discounts and premiums on investments | |||||||
Realized gains (losses) on investments and net credit losses recognized in operations | |||||||
Change in fair value of derivatives | ( | ) | |||||
Deferred income taxes | ( | ) | |||||
Loss on extinguishment of debt | |||||||
Share-based compensation | |||||||
Change in accrued investment income | ( | ) | |||||
Change in income taxes recoverable/payable | ( | ) | |||||
Change in other assets | ( | ) | |||||
Change in other policy funds and contract claims | ( | ) | ( | ) | |||
Change in collateral held for derivatives | ( | ) | |||||
Change in collateral held for securities lending | ( | ) | |||||
Change in other liabilities | ( | ) | |||||
Other | ( | ) | ( | ) | |||
Net cash provided by (used in) operating activities | ( | ) | |||||
Investing activities | |||||||
Sales, maturities, or repayments of investments: | |||||||
Fixed maturity securities, available for sale | |||||||
Mortgage loans on real estate | |||||||
Derivative instruments | |||||||
Other investments | |||||||
Acquisitions of investments: | |||||||
Fixed maturity securities, available for sale | ( | ) | ( | ) | |||
Mortgage loans on real estate | ( | ) | ( | ) | |||
Derivative instruments | ( | ) | ( | ) | |||
Other investments | ( | ) | ( | ) | |||
Purchases of property, furniture and equipment | ( | ) | ( | ) | |||
Net cash provided by (used in) investing activities | ( | ) |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Financing activities | |||||||
Receipts credited to annuity policyholder account balances | $ | $ | |||||
Coinsurance deposits | |||||||
Return of annuity policyholder account balances | ( | ) | ( | ) | |||
Repayment of subordinated debentures | ( | ) | |||||
Net proceeds from amounts due under repurchase agreements | |||||||
Proceeds from issuance of common stock, net | |||||||
Change in checks in excess of cash balance | ( | ) | ( | ) | |||
Preferred stock dividends | ( | ) | |||||
Net cash provided by (used in) financing activities | ( | ) | |||||
Increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
Supplemental disclosures of cash flow information | |||||||
Cash paid during period for: | |||||||
Interest expense | $ | $ | |||||
Income taxes | |||||||
Non-cash operating activity: | |||||||
Deferral of sales inducements |
March 31, 2020 | December 31, 2019 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale | $ | $ | $ | $ | |||||||||||
Mortgage loans on real estate | |||||||||||||||
Derivative instruments | |||||||||||||||
Other investments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Coinsurance deposits | |||||||||||||||
Interest rate caps | |||||||||||||||
Liabilities | |||||||||||||||
Policy benefit reserves | |||||||||||||||
Single premium immediate annuity (SPIA) benefit reserves | |||||||||||||||
Notes payable | |||||||||||||||
Subordinated debentures | |||||||||||||||
Amounts due under repurchase agreements |
Level 1— | Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price. |
Level 2— | Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable. |
Level 3— | Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value. |
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, 2020 | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | |||||||||||
United States Government sponsored agencies | |||||||||||||||
United States municipalities, states and territories | |||||||||||||||
Foreign government obligations | |||||||||||||||
Corporate securities | |||||||||||||||
Residential mortgage backed securities | |||||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
Derivative instruments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities | |||||||||||||||
Fixed index annuities - embedded derivatives | $ | $ | $ | $ | |||||||||||
December 31, 2019 | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | |||||||||||
United States Government sponsored agencies | |||||||||||||||
United States municipalities, states and territories | |||||||||||||||
Foreign government obligations | |||||||||||||||
Corporate securities | |||||||||||||||
Residential mortgage backed securities | |||||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
Derivative instruments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Interest rate caps | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities | |||||||||||||||
Fixed index annuities - embedded derivatives | $ | $ | $ | $ |
• | reported trading prices, |
• | benchmark yields, |
• | broker-dealer quotes, |
• | benchmark securities, |
• | bids and offers, |
• | credit ratings, |
• | relative credit information, and |
• | other reference data. |
Average Lapse Rates | Average Partial Withdrawal Rates | |||||||
Contract Duration (Years) | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||
1 - 5 | ||||||||
6 - 10 | ||||||||
11 - 15 | ||||||||
16 - 20 | ||||||||
20+ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Fixed index annuities - embedded derivatives | |||||||
Beginning balance | $ | $ | |||||
Premiums less benefits | |||||||
Change in fair value, net | ( | ) | |||||
Ending balance | $ | $ |
Amortized Cost (1) | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
March 31, 2020 | |||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | $ | ||||||||||||||
United States Government sponsored agencies | |||||||||||||||||||
United States municipalities, states and territories | ( | ) | |||||||||||||||||
Foreign government obligations | ( | ) | |||||||||||||||||
Corporate securities | ( | ) | ( | ) | |||||||||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||||||
Commercial mortgage backed securities | ( | ) | |||||||||||||||||
Other asset backed securities | ( | ) | |||||||||||||||||
$ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
December 31, 2019 | |||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||
United States Government full faith and credit | $ | $ | $ | ( | ) | $ | — | $ | |||||||||||
United States Government sponsored agencies | ( | ) | — | ||||||||||||||||
United States municipalities, states and territories | ( | ) | — | ||||||||||||||||
Foreign government obligations | — | ||||||||||||||||||
Corporate securities | ( | ) | — | ||||||||||||||||
Residential mortgage backed securities | ( | ) | — | ||||||||||||||||
Commercial mortgage backed securities | ( | ) | — | ||||||||||||||||
Other asset backed securities | ( | ) | — | ||||||||||||||||
$ | $ | $ | ( | ) | $ | — | $ |
Available for sale | |||||||
Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | |||||||
Due in one year or less | $ | $ | |||||
Due after one year through five years | |||||||
Due after five years through ten years | |||||||
Due after ten years through twenty years | |||||||
Due after twenty years | |||||||
Residential mortgage backed securities | |||||||
Commercial mortgage backed securities | |||||||
Other asset backed securities | |||||||
$ | $ |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Net unrealized gains on available for sale fixed maturity securities | $ | $ | |||||
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements | ( | ) | ( | ) | |||
Deferred income tax valuation allowance reversal | |||||||
Deferred income tax expense | ( | ) | ( | ) | |||
Net unrealized gains reported as accumulated other comprehensive income | $ | $ |
March 31, 2020 | December 31, 2019 | |||||||||||||||
NAIC Designation | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
1 | $ | $ | $ | $ | ||||||||||||
2 | ||||||||||||||||
3 | ||||||||||||||||
4 | ||||||||||||||||
5 | ||||||||||||||||
6 | ||||||||||||||||
$ | $ | $ | $ |
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses (1) | Fair Value | Unrealized Losses (1) | Fair Value | Unrealized Losses (1) | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
March 31, 2020 | |||||||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||||||
United States municipalities, states and territories | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||
Foreign government obligations | ( | ) | ( | ) | |||||||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Finance, insurance and real estate | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Manufacturing, construction and mining | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Utilities and related sectors | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Wholesale/retail trade | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Services, media and other | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Residential mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
December 31, 2019 | |||||||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||||||
United States Government full faith and credit | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||
United States Government sponsored agencies | ( | ) | ( | ) | ( | ) | |||||||||||||||||
United States municipalities, states and territories | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Finance, insurance and real estate | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Manufacturing, construction and mining | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Utilities and related sectors | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Wholesale/retail trade | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Services, media and other | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Residential mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Fixed maturity securities available for sale carried at fair value | $ | ( | ) | $ | |||
Adjustment for effect on other balance sheet accounts: | |||||||
Deferred policy acquisition costs and deferred sales inducements | ( | ) | |||||
Deferred income tax asset/liability | ( | ) | |||||
( | ) | ||||||
Change in net unrealized gains/losses on investments carried at fair value | $ | ( | ) | $ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Available for sale fixed maturity securities: | |||||||
Gross realized gains | $ | $ | |||||
Gross realized losses | ( | ) | ( | ) | |||
( | ) | ||||||
Mortgage loans on real estate: | |||||||
Increase (decrease) in allowance for credit losses | ( | ) | |||||
$ | $ | ( | ) |
• | the extent to which the fair value has been less than amortized cost or cost; |
• | whether the issuer is current on all payments and all contractual payments have been made as agreed; |
• | the remaining payment terms and the financial condition and near-term prospects of the issuer; |
• | the lack of ability to refinance due to liquidity problems in the credit market; |
• | the fair value of any underlying collateral; |
• | the existence of any credit protection available; |
• | our intent to sell and whether it is more likely than not we would be required to sell prior to recovery for debt securities; |
• | consideration of rating agency actions; and |
• | changes in estimated cash flows of mortgage and asset backed securities. |
Three Months Ended March 31, 2020 | |||||||||||||||
Corporate Securities | Commercial Mortgage Backed Securities | Other Asset Backed Securities | Total | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Beginning balance (1) | $ | $ | $ | $ | |||||||||||
Additions for credit losses not previously recorded | |||||||||||||||
Reduction for securities with credit losses due to intent to sell | ( | ) | ( | ) | ( | ) | |||||||||
Ending balance | $ | $ | $ | $ |
Three Months Ended March 31, | |||
2019 | |||
(Dollars in thousands) | |||
Cumulative credit loss at beginning of period | $ | ( | ) |
Additions for the amount related to credit losses for which OTTI has not previously been recognized | |||
Additional credit losses on securities for which OTTI has previously been recognized | |||
Accumulated losses on securities that were disposed of during the period | |||
Cumulative credit loss at end of period | $ | ( | ) |
Amortized Cost | OTTI Recognized in Other Comprehensive Income (Loss) | Change in Fair Value Since OTTI was Recognized | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
December 31, 2019 | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Corporate securities | $ | $ | ( | ) | $ | $ | |||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||
Commercial mortgage backed securities | ( | ) | |||||||||||||
Other asset backed securities | |||||||||||||||
$ | $ | ( | ) | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Principal outstanding | $ | $ | |||||
Deferred prepayment fees | ( | ) | ( | ) | |||
Amortized cost | |||||||
Valuation allowance | ( | ) | ( | ) | |||
Carrying value | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||||||||
Principal | Percent | Principal | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Geographic distribution | |||||||||||||
East | $ | % | $ | % | |||||||||
Middle Atlantic | % | % | |||||||||||
Mountain | % | % | |||||||||||
New England | % | % | |||||||||||
Pacific | % | % | |||||||||||
South Atlantic | % | % | |||||||||||
West North Central | % | % | |||||||||||
West South Central | % | % | |||||||||||
$ | % | $ | % | ||||||||||
Property type distribution | |||||||||||||
Office | $ | % | $ | % | |||||||||
Medical Office | % | % | |||||||||||
Retail | % | % | |||||||||||
Industrial/Warehouse | % | % | |||||||||||
Apartment | % | % | |||||||||||
Agricultural | % | % | |||||||||||
Mixed use/Other | % | % | |||||||||||
$ | % | $ | % |
2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total | |||||||||||||||||||||||||||||
As of March 31, 2020 | Amortized Cost | Average LTV | Amortized Cost | Average LTV | Amortized Cost | Average LTV | Amortized Cost | Average LTV | Amortized Cost | Average LTV | Amortized Cost | Average LTV | Amortized Cost | Average LTV | |||||||||||||||||||||
Debt Service Coverage Ratio: | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||
Greater than or equal to 1.5 | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||
Greater than or equal to 1.2 and less than 1.5 | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||
Greater than or equal to 1.0 and less than 1.2 | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||
Less than 1.0 | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||
Total | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % |
Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||
Specific Allowance | General Allowance | Specific Allowance | General Allowance | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Beginning allowance balance (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Charge-offs | |||||||||||||||
Recoveries | |||||||||||||||
Change in provision for credit losses | ( | ) | |||||||||||||
Ending allowance balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Credit Exposure - By Payment Activity | |||||||
Performing | $ | $ | |||||
In workout | |||||||
Collateral dependent | |||||||
$ | $ |
30 - 59 Days | 60 - 89 Days | 90 Days and Over | Total Past Due | Current | Collateral Dependent Receivables | Total Financing Receivables | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Commercial Mortgage Loans | |||||||||||||||||||||||||||
March 31, 2020 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
December 31, 2019 | $ | $ | $ | $ | $ | $ | $ |
• | borrower is in default, |
• | borrower has declared bankruptcy, |
• | there is growing concern about the borrower's ability to continue as a going concern, |
• | borrower has insufficient cash flows to service debt, |
• | borrower's inability to obtain funds from other sources, and |
• | there is a breach of financial covenants by the borrower. |
• | assets used to satisfy debt are less than our recorded investment, |
• | interest rate is modified, |
• | maturity date extension at an interest rate less than market rate, |
• | capitalization of interest, |
• | delaying principal and/or interest for a period of |
• | partial forgiveness of the balance or charge-off. |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Assets | |||||||
Derivative instruments | |||||||
Call options | $ | $ | |||||
Other assets | |||||||
Interest rate caps | |||||||
$ | $ | ||||||
Liabilities | |||||||
Policy benefit reserves - annuity products | |||||||
Fixed index annuities - embedded derivatives, net | $ | $ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Change in fair value of derivatives: | |||||||
Call options | $ | ( | ) | $ | |||
Interest rate swap | ( | ) | |||||
Interest rate caps | ( | ) | |||||
$ | ( | ) | $ | ||||
Change in fair value of embedded derivatives: | |||||||
Fixed index annuities - embedded derivatives | $ | ( | ) | $ | |||
Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting | |||||||
$ | ( | ) | $ |
March 31, 2020 | December 31, 2019 | |||||||||||||||||||
Counterparty | Credit Rating (S&P) | Credit Rating (Moody's) | Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Bank of America | A+ | Aa2 | $ | $ | $ | $ | ||||||||||||||
Barclays | A | A1 | ||||||||||||||||||
Canadian Imperial Bank of Commerce | A+ | Aa2 | ||||||||||||||||||
Citibank, N.A. | A+ | Aa3 | ||||||||||||||||||
Credit Suisse | A+ | A1 | ||||||||||||||||||
J.P. Morgan | A+ | Aa2 | ||||||||||||||||||
Morgan Stanley | A+ | A1 | ||||||||||||||||||
Royal Bank of Canada | AA- | A2 | ||||||||||||||||||
Societe Generale | A | A1 | ||||||||||||||||||
SunTrust | A | A2 | ||||||||||||||||||
Wells Fargo | A+ | Aa2 | ||||||||||||||||||
Exchange traded | ||||||||||||||||||||
$ | $ | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Senior notes due 2027 | |||||||
Principal | $ | $ | |||||
Unamortized debt issue costs | ( | ) | ( | ) | |||
Unamortized discount | ( | ) | ( | ) | |||
$ | $ |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands, except per share data) | |||||||
Numerator: | |||||||
Net income (loss) available to common stockholders - numerator for earnings (loss) per common share | $ | $ | ( | ) | |||
Denominator: | |||||||
Weighted average common shares outstanding | |||||||
Effect of dilutive securities: | |||||||
Stock options and deferred compensation agreements | |||||||
Restricted stock and restricted stock units | |||||||
Denominator for earnings (loss) per common share - assuming dilution | |||||||
Earnings (loss) per common share | $ | $ | ( | ) | |||
Earnings (loss) per common share - assuming dilution | $ | $ | ( | ) |
• | general economic conditions and other factors, including prevailing interest rate levels and stock and credit market performance which may affect (among other things) our ability to sell our products, our ability to access capital resources and the costs associated therewith, the fair value of our investments, which could result in credit losses, and certain liabilities, and the lapse rate and profitability of policies; |
• | major public health issues, and specifically the COVID-19 pandemic and the resulting impacts on economic conditions and financial markets; |
• | customer response to new products and marketing initiatives; |
• | changes in Federal income tax laws and regulations which may affect the relative income tax advantages of our products; |
• | increasing competition in the sale of fixed annuities; |
• | regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products and regulation of the sale, underwriting and pricing of products; and |
• | the risk factors or uncertainties listed from time to time in our filings with the SEC. |
• | the amount of assets under our management, |
• | investment spreads we earn on our policyholder account balances, |
• | our ability to manage our investment portfolio to maximize returns and minimize risks such as interest rate changes and defaults or credit losses, |
• | our ability to appropriately price for lifetime income benefit riders offered on certain of our fixed rate and fixed index annuity policies, |
• | our ability to manage interest rates credited to policyholders and costs of the options purchased to fund the annual index credits on our fixed index annuities, |
• | our ability to manage the costs of acquiring new business (principally commissions paid to agents and distribution partners and bonuses credited to policyholders), |
• | our ability to manage our operating expenses, and |
• | income taxes. |
Three Months Ended March 31, | |||
2020 | 2019 | ||
Average yield on invested assets | 4.36% | 4.48% | |
Aggregate cost of money | 1.72% | 1.90% | |
Aggregate investment spread | 2.64% | 2.58% | |
Impact of: | |||
Investment yield - additional prepayment income | 0.06% | 0.01% | |
Cost of money benefit from over hedging | 0.05% | 0.02% |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
American Equity Investment Life Insurance Company: | |||||||
Fixed index annuities | $ | 586,063 | $ | 1,027,658 | |||
Annual reset fixed rate annuities | 2,331 | 3,448 | |||||
Multi-year fixed rate annuities | 369 | 148 | |||||
Single premium immediate annuities | 5,398 | 2,068 | |||||
594,161 | 1,033,322 | ||||||
Eagle Life Insurance Company: | |||||||
Fixed index annuities | 106,502 | 177,480 | |||||
Annual reset fixed rate annuities | 41 | 127 | |||||
Multi-year fixed rate annuities | 4,149 | 25,568 | |||||
110,692 | 203,175 | ||||||
Consolidated: | |||||||
Fixed index annuities | 692,565 | 1,205,138 | |||||
Annual reset fixed rate annuities | 2,372 | 3,575 | |||||
Multi-year fixed rate annuities | 4,518 | 25,716 | |||||
Single premium immediate annuities | 5,398 | 2,068 | |||||
Total before coinsurance ceded | 704,853 | 1,236,497 | |||||
Coinsurance ceded | 17,703 | 54,064 | |||||
Net after coinsurance ceded | $ | 687,150 | $ | 1,182,433 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Reconciliation from net income (loss) available to common stockholders to non-GAAP operating income available to common stockholders: | |||||||
Net income (loss) available to common stockholders | $ | 236,336 | $ | (30,010 | ) | ||
Adjustments to arrive at non-GAAP operating income available to common stockholders: | |||||||
Net realized gains/losses on financial assets, including credit losses | 16,349 | 305 | |||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | (120,454 | ) | 150,944 | ||||
Change in fair value of derivatives - interest rate caps and swap | (848 | ) | 636 | ||||
Income taxes | 22,702 | (32,473 | ) | ||||
Non-GAAP operating income available to common stockholders | $ | 154,085 | $ | 89,402 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Surrender charges | $ | 19,705 | $ | 16,456 | |||
Lifetime income benefit riders (LIBR) fees | 39,844 | 36,510 | |||||
$ | 59,549 | $ | 52,966 | ||||
Withdrawals from annuity policies subject to surrender charges | $ | 194,790 | $ | 142,100 | |||
Average surrender charge collected on withdrawals subject to surrender charges | 10.1 | % | 11.6 | % | |||
Fund values on policies subject to LIBR fees | $ | 5,195,486 | $ | 4,969,957 | |||
Weighted average per policy LIBR fee | 0.77 | % | 0.73 | % |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Call options: | |||||||
Gain (loss) on option expiration | $ | 110,103 | $ | (123,680 | ) | ||
Change in unrealized gains/losses | (1,052,039 | ) | 508,846 | ||||
Interest rate swap | — | (368 | ) | ||||
Interest rate caps | 62 | (329 | ) | ||||
$ | (941,874 | ) | $ | 384,469 |
Three Months Ended March 31, | |||
2020 | 2019 | ||
S&P 500 Index | |||
Point-to-point strategy | 0.0% - 17.4% | 0.0% - 7.0% | |
Monthly average strategy | 0.7% - 11.9% | 0.0% - 6.2% | |
Monthly point-to-point strategy | 0.0% - 14.0% | 0.0% - 0.0% | |
Fixed income (bond index) strategies | 0.0% - 10.2% | 0.0% - 6.4% |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Index credits on index policies | $ | 278,940 | $ | 55,925 | |||
Interest credited (including changes in minimum guaranteed interest for fixed index annuities) | 52,011 | 49,218 | |||||
Lifetime income benefit riders | 69,268 | 31,531 | |||||
$ | 400,219 | $ | 136,674 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Amortization of deferred sales inducements before gross profit adjustments | $ | 43,908 | $ | 68,803 | |||
Gross profit adjustments: | |||||||
Fair value accounting for derivatives and embedded derivatives | 31,799 | (35,387 | ) | ||||
Net realized gains (losses) on investments and credit losses on fixed maturity securities | (2,116 | ) | (107 | ) | |||
Amortization of deferred sales inducements after gross profit adjustments | $ | 73,591 | $ | 33,309 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Fixed index annuities - embedded derivatives | $ | (1,285,071 | ) | $ | 652,642 | ||
Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting | 35,010 | 113,681 | |||||
$ | (1,250,061 | ) | $ | 766,323 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Amortization of deferred policy acquisition costs before gross profit adjustments | $ | 66,256 | $ | 100,071 | |||
Gross profit adjustments: | |||||||
Fair value accounting for derivatives and embedded derivatives | 57,639 | (54,789 | ) | ||||
Net realized gains (losses) on investments and credit losses on fixed maturity securities | (3,193 | ) | (150 | ) | |||
Amortization of deferred policy acquisition costs after gross profit adjustments | $ | 120,702 | $ | 45,132 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Salary and benefits | $ | 22,155 | $ | 20,219 | |||
Risk charges | 10,840 | 8,709 | |||||
Other | 10,631 | 10,051 | |||||
Total other operating costs and expenses | $ | 43,626 | $ | 38,979 |
March 31, 2020 | December 31, 2019 | ||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Fixed maturity securities: | |||||||||||||
United States Government full faith and credit | $ | 39,248 | 0.1 | % | $ | 161,765 | 0.3 | % | |||||
United States Government sponsored agencies | 338,561 | 0.6 | % | 625,020 | 1.1 | % | |||||||
United States municipalities, states and territories | 3,765,163 | 7.2 | % | 4,527,671 | 7.9 | % | |||||||
Foreign government obligations | 198,396 | 0.4 | % | 205,096 | 0.3 | % | |||||||
Corporate securities | 31,135,319 | 59.8 | % | 32,536,839 | 57.2 | % | |||||||
Residential mortgage backed securities | 1,765,033 | 3.4 | % | 1,575,664 | 2.8 | % | |||||||
Commercial mortgage backed securities | 5,296,112 | 10.2 | % | 5,786,279 | 10.2 | % | |||||||
Other asset backed securities | 5,167,035 | 9.9 | % | 6,162,156 | 10.8 | % | |||||||
Total fixed maturity securities | 47,704,867 | 91.6 | % | 51,580,490 | 90.6 | % | |||||||
Mortgage loans on real estate | 3,668,625 | 7.0 | % | 3,448,793 | 6.1 | % | |||||||
Derivative instruments | 207,265 | 0.4 | % | 1,355,989 | 2.4 | % | |||||||
Other investments | 497,598 | 1.0 | % | 492,301 | 0.9 | % | |||||||
$ | 52,078,355 | 100.0 | % | $ | 56,877,573 | 100.0 | % |
March 31, 2020 | December 31, 2019 | |||||||||||||
Rating Agency Rating | Carrying Amount | Percent of Fixed Maturity Securities | Carrying Amount | Percent of Fixed Maturity Securities | ||||||||||
(Dollars in thousands) | ||||||||||||||
Aaa/Aa/A | $ | 28,334,402 | 59.4 | % | $ | 30,662,644 | 59.4 | % | ||||||
Baa | 18,386,135 | 38.5 | % | 19,833,309 | 38.4 | % | ||||||||
Total investment grade | 46,720,537 | 97.9 | % | 50,495,953 | 97.8 | % | ||||||||
Ba | 770,834 | 1.6 | % | 821,902 | 1.6 | % | ||||||||
B | 73,263 | 0.2 | % | 81,407 | 0.2 | % | ||||||||
Caa | 63,808 | 0.1 | % | 95,676 | 0.2 | % | ||||||||
Ca and lower | 76,425 | 0.2 | % | 85,552 | 0.2 | % | ||||||||
Total below investment grade | 984,330 | 2.1 | % | 1,084,537 | 2.2 | % | ||||||||
$ | 47,704,867 | 100.0 | % | $ | 51,580,490 | 100.0 | % |
NAIC Designation | NRSRO Equivalent Rating | |
1 | Aaa/Aa/A | |
2 | Baa | |
3 | Ba | |
4 | B | |
5 | Caa | |
6 | Ca and lower |
March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||
NAIC Designation | Amortized Cost | Fair Value | Carrying Amount | Percent of Total Carrying Amount | Amortized Cost | Fair Value | Carrying Amount | Percent of Total Carrying Amount | ||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||
1 | $ | 26,309,850 | $ | 27,739,779 | $ | 27,739,779 | 58.2 | % | $ | 27,781,525 | $ | 30,122,657 | $ | 30,122,657 | 58.4 | % | ||||||||||||||
2 | 19,582,082 | 18,999,760 | 18,999,760 | 39.8 | % | 19,278,355 | 20,316,911 | 20,316,911 | 39.4 | % | ||||||||||||||||||||
3 | 1,167,772 | 838,628 | 838,628 | 1.8 | % | 1,001,087 | 977,191 | 977,191 | 1.9 | % | ||||||||||||||||||||
4 | 128,826 | 104,090 | 104,090 | 0.2 | % | 114,497 | 112,534 | 112,534 | 0.2 | % | ||||||||||||||||||||
5 | 60,550 | 18,433 | 18,433 | — | % | 57,952 | 45,205 | 45,205 | 0.1 | % | ||||||||||||||||||||
6 | 4,983 | 4,177 | 4,177 | — | % | 5,530 | 5,992 | 5,992 | — | % | ||||||||||||||||||||
$ | 47,254,063 | $ | 47,704,867 | $ | 47,704,867 | 100.0 | % | $ | 48,238,946 | $ | 51,580,490 | $ | 51,580,490 | 100.0 | % |
Number of Securities | Amortized Cost | Unrealized Losses, Net of Allowance | Allowance for Credit Losses | Fair Value | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
March 31, 2020 | ||||||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||||||
United States municipalities, states and territories | 27 | $ | 213,421 | $ | (4,130 | ) | $ | — | $ | 209,291 | ||||||||
Foreign government obligations | 5 | 64,544 | (4,465 | ) | — | 60,079 | ||||||||||||
Corporate securities: | ||||||||||||||||||
Finance, insurance and real estate | 188 | 2,083,928 | (110,076 | ) | — | 1,973,852 | ||||||||||||
Manufacturing, construction and mining | 131 | 1,246,514 | (67,328 | ) | — | 1,179,186 | ||||||||||||
Utilities and related sectors | 144 | 1,516,371 | (98,041 | ) | — | 1,418,330 | ||||||||||||
Wholesale/retail trade | 90 | 840,207 | (108,207 | ) | — | 732,000 | ||||||||||||
Services, media and other | 357 | 3,338,716 | (444,186 | ) | (28,332 | ) | 2,866,198 | |||||||||||
Residential mortgage backed securities | 102 | 775,541 | (24,605 | ) | — | 750,936 | ||||||||||||
Commercial mortgage backed securities | 587 | 4,384,310 | (310,897 | ) | — | 4,073,413 | ||||||||||||
Other asset backed securities | 844 | 5,378,855 | (1,193,015 | ) | — | 4,185,840 | ||||||||||||
2,475 | $ | 19,842,407 | $ | (2,364,950 | ) | $ | (28,332 | ) | $ | 17,449,125 | ||||||||
December 31, 2019 | ||||||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||||||
United States Government full faith and credit | 5 | $ | 144,678 | $ | (96 | ) | $ | — | $ | 144,582 | ||||||||
United States Government sponsored agencies | 6 | 374,961 | (4,785 | ) | — | 370,176 | ||||||||||||
United States municipalities, states and territories | 42 | 296,812 | (8,250 | ) | — | 288,562 | ||||||||||||
Corporate securities: | ||||||||||||||||||
Finance, insurance and real estate | 38 | 399,043 | (9,529 | ) | — | 389,514 | ||||||||||||
Manufacturing, construction and mining | 20 | 216,229 | (9,990 | ) | — | 206,239 | ||||||||||||
Utilities and related sectors | 32 | 397,116 | (11,212 | ) | — | 385,904 | ||||||||||||
Wholesale/retail trade | 12 | 194,815 | (11,162 | ) | — | 183,653 | ||||||||||||
Services, media and other | 65 | 631,587 | (40,366 | ) | — | 591,221 | ||||||||||||
Residential mortgage backed securities | 34 | 227,427 | (3,691 | ) | — | 223,736 | ||||||||||||
Commercial mortgage backed securities | 127 | 810,505 | (13,783 | ) | — | 796,722 | ||||||||||||
Other asset backed securities | 652 | 4,306,620 | (179,191 | ) | — | 4,127,429 | ||||||||||||
1,033 | $ | 7,999,793 | $ | (292,055 | ) | $ | — | $ | 7,707,738 |
NAIC Designation | Carrying Value of Securities with Gross Unrealized Losses | Percent of Total | Gross Unrealized Losses (1) | Percent of Total | ||||||||||
(Dollars in thousands) | ||||||||||||||
March 31, 2020 | ||||||||||||||
1 | $ | 8,361,980 | 47.9 | % | $ | (710,624 | ) | 30.0 | % | |||||
2 | 8,191,448 | 47.0 | % | (1,281,317 | ) | 54.2 | % | |||||||
3 | 790,563 | 4.5 | % | (330,711 | ) | 14.0 | % | |||||||
4 | 87,938 | 0.5 | % | (23,145 | ) | 1.0 | % | |||||||
5 | 14,216 | 0.1 | % | (17,580 | ) | 0.7 | % | |||||||
6 | 2,980 | — | % | (1,573 | ) | 0.1 | % | |||||||
$ | 17,449,125 | 100.0 | % | $ | (2,364,950 | ) | 100.0 | % | ||||||
December 31, 2019 | ||||||||||||||
1 | $ | 3,580,578 | 46.4 | % | $ | (79,638 | ) | 27.3 | % | |||||
2 | 3,412,695 | 44.3 | % | (151,826 | ) | 52.0 | % | |||||||
3 | 613,240 | 8.0 | % | (38,216 | ) | 13.1 | % | |||||||
4 | 74,027 | 1.0 | % | (8,575 | ) | 2.9 | % | |||||||
5 | 26,998 | 0.3 | % | (13,437 | ) | 4.6 | % | |||||||
6 | 200 | — | % | (363 | ) | 0.1 | % | |||||||
$ | 7,707,738 | 100.0 | % | $ | (292,055 | ) | 100.0 | % |
Number of Securities | Amortized Cost, Net of Allowance (1) | Fair Value | Gross Unrealized Losses, Net of Allowance (1) | |||||||||||
(Dollars in thousands) | ||||||||||||||
March 31, 2020 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 1,858 | $ | 15,516,793 | $ | 14,275,065 | $ | (1,241,728 | ) | ||||||
Six months or more and less than twelve months | 18 | 152,147 | 126,703 | (25,444 | ) | |||||||||
Twelve months or greater | 401 | 2,976,402 | 2,234,014 | (742,388 | ) | |||||||||
Total investment grade | 2,277 | 18,645,342 | 16,635,782 | (2,009,560 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 83 | 476,779 | 377,044 | (99,735 | ) | |||||||||
Six months or more and less than twelve months | 15 | 46,421 | 28,698 | (17,723 | ) | |||||||||
Twelve months or greater | 100 | 645,533 | 407,601 | (237,932 | ) | |||||||||
Total below investment grade | 198 | 1,168,733 | 813,343 | (355,390 | ) | |||||||||
2,475 | $ | 19,814,075 | $ | 17,449,125 | $ | (2,364,950 | ) | |||||||
December 31, 2019 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 352 | $ | 2,960,557 | $ | 2,911,909 | $ | (48,648 | ) | ||||||
Six months or more and less than twelve months | 46 | 290,674 | 282,347 | (8,327 | ) | |||||||||
Twelve months or greater | 513 | 4,003,478 | 3,829,474 | (174,004 | ) | |||||||||
Total investment grade | 911 | 7,254,709 | 7,023,730 | (230,979 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 11 | 32,607 | 31,695 | (912 | ) | |||||||||
Six months or more and less than twelve months | 8 | 35,080 | 33,268 | (1,812 | ) | |||||||||
Twelve months or greater | 103 | 677,397 | 619,045 | (58,352 | ) | |||||||||
Total below investment grade | 122 | 745,084 | 684,008 | (61,076 | ) | |||||||||
1,033 | $ | 7,999,793 | $ | 7,707,738 | $ | (292,055 | ) |
Number of Securities | Amortized Cost, Net of Allowance (1) | Fair Value | Gross Unrealized Losses, Net of Allowance (1) | |||||||||||
(Dollars in thousands) | ||||||||||||||
March 31, 2020 | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 522 | $ | 3,777,984 | $ | 2,739,639 | $ | (1,038,345 | ) | ||||||
Six months or more and less than twelve months | — | — | — | — | ||||||||||
Twelve months or greater | — | — | — | — | ||||||||||
Total investment grade | 522 | 3,777,984 | 2,739,639 | (1,038,345 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 109 | 709,611 | 411,757 | (297,854 | ) | |||||||||
Six months or more and less than twelve months | 1 | — | — | — | ||||||||||
Twelve months or greater | 4 | 27,073 | 12,053 | (15,020 | ) | |||||||||
Total below investment grade | 114 | 736,684 | 423,810 | (312,874 | ) | |||||||||
636 | $ | 4,514,668 | $ | 3,163,449 | $ | (1,351,219 | ) | |||||||
December 31, 2019 | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | — | $ | — | $ | — | $ | — | |||||||
Six months or more and less than twelve months | — | — | — | — | ||||||||||
Twelve months or greater | — | — | — | — | ||||||||||
Total investment grade | — | — | — | — | ||||||||||
Below investment grade: | ||||||||||||||
Less than six months | — | — | — | — | ||||||||||
Six months or more and less than twelve months | 1 | 2,640 | 1,755 | (885 | ) | |||||||||
Twelve months or greater | 4 | 53,800 | 35,541 | (18,259 | ) | |||||||||
Total below investment grade | 5 | 56,440 | 37,296 | (19,144 | ) | |||||||||
5 | $ | 56,440 | $ | 37,296 | $ | (19,144 | ) |
Available for sale | |||||||
Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | |||||||
March 31, 2020 | |||||||
Due in one year or less | $ | 53,323 | $ | 52,088 | |||
Due after one year through five years | 1,918,695 | 1,775,757 | |||||
Due after five years through ten years | 3,592,174 | 3,324,521 | |||||
Due after ten years through twenty years | 1,852,529 | 1,641,882 | |||||
Due after twenty years | 1,886,980 | 1,644,688 | |||||
9,303,701 | 8,438,936 | ||||||
Residential mortgage backed securities | 775,541 | 750,936 | |||||
Commercial mortgage backed securities | 4,384,310 | 4,073,413 | |||||
Other asset backed securities | 5,378,855 | 4,185,840 | |||||
$ | 19,842,407 | $ | 17,449,125 | ||||
December 31, 2019 | |||||||
Due in one year or less | $ | 5,073 | $ | 5,071 | |||
Due after one year through five years | 278,165 | 273,869 | |||||
Due after five years through ten years | 555,200 | 544,687 | |||||
Due after ten years through twenty years | 1,041,474 | 1,008,487 | |||||
Due after twenty years | 775,329 | 727,737 | |||||
2,655,241 | 2,559,851 | ||||||
Residential mortgage backed securities | 227,427 | 223,736 | |||||
Commercial mortgage backed securities | 810,505 | 796,722 | |||||
Other asset backed securities | 4,306,620 | 4,127,429 | |||||
$ | 7,999,793 | $ | 7,707,738 |
March 31, 2020 | ||||||||||
Amortized Cost | Carrying Amount/ Fair Value | Percent of Total Carrying Amount | ||||||||
(Dollars in thousands) | ||||||||||
GIIPS (1) | $ | 251,393 | $ | 260,759 | 0.5 | % | ||||
Asia/Pacific | 436,562 | 473,628 | 1.0 | % | ||||||
Non-GIIPS Europe | 3,069,045 | 3,183,740 | 6.7 | % | ||||||
Latin America | 276,707 | 273,839 | 0.6 | % | ||||||
Non-U.S. North America | 1,419,297 | 1,414,620 | 3.0 | % | ||||||
Australia & New Zealand | 1,140,439 | 1,144,352 | 2.4 | % | ||||||
Other | 5,596,935 | 4,512,832 | 9.4 | % | ||||||
$ | 12,190,378 | $ | 11,263,770 | 23.6 | % |
(1) | Greece, Ireland, Italy, Portugal and Spain ("GIIPS"). All of our exposure in GIIPS are corporate securities with issuers domiciled in these countries. None of our foreign government obligations were held in any of these countries. |
March 31, 2020 | |||||||
Amortized Cost | Carrying Amount/ Fair Value | ||||||
(Dollars in thousands) | |||||||
GIIPS | $ | 14,540 | $ | 14,746 | |||
Asia/Pacific | 11,000 | 10,342 | |||||
Non-GIIPS Europe | 97,731 | 71,520 | |||||
Latin America | 57,542 | 52,137 | |||||
Non-U.S. North America | 54,305 | 37,018 | |||||
Other | 434,398 | 269,263 | |||||
$ | 669,516 | $ | 455,026 |
General Description | Number of Securities | Amortized Cost | Allowance for Credit Losses | Amortized Cost, Net of Allowance | Unrealized Gains (Losses), Net of Allowance | Fair Value | Months in Continuous Unrealized Loss Position | Months Unrealized Losses Greater Than 20% | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Below investment grade | ||||||||||||||||||||||||||
Corporate securities: | ||||||||||||||||||||||||||
Energy | 6 | $ | 59,078 | $ | (28,332 | ) | $ | 30,746 | $ | (20,009 | ) | $ | 10,737 | 1 - 67 | 1 - 58 | |||||||||||
Other asset backed securities: | ||||||||||||||||||||||||||
Financials | 1 | 430 | — | 430 | 759 | 1,189 | — | — | ||||||||||||||||||
7 | $ | 59,508 | $ | (28,332 | ) | $ | 31,176 | $ | (19,250 | ) | $ | 11,926 |
March 31, 2020 | December 31, 2019 | ||||||
(Dollars in thousands) | |||||||
Impaired mortgage loans with an allowance | $ | 5,475 | $ | 1,229 | |||
Impaired mortgage loans with no related allowance | — | — | |||||
Allowance for probable loan losses | (2,426 | ) | (229 | ) | |||
Net carrying value of impaired mortgage loans | $ | 3,049 | $ | 1,000 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
(Dollars in thousands) | |||||||
Proceeds received at expiration of options related to such credits | $ | 285,263 | $ | 58,460 | |||
Annual index credits to policyholders on their anniversaries | 278,940 | 55,925 |
Period | Total Number of Shares Purchased (a) | Average Price Paid Per Share | |||||
January 1, 2020 - January 31, 2020 | 357 | $ | 29.89 | ||||
February 1, 2020 - February 29, 2020 | — | $ | — | ||||
March 1, 2020 - March 31, 2020 | 10,169 | $ | 18.70 | ||||
Total | 10,526 |
(a) | Includes the number of shares of common stock utilized to execute certain stock incentive awards. |
Exhibit Number | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following materials from American Equity Investment Life Holding Company's Quarterly Report on Form 10-Q for the period ended March 31, 2020 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Consolidated Financial Statements. | |
104 | The cover page from American Equity Investment Life Holding Company's Quarterly Report on Form 10-Q for the period ended March 31, 2020 formatted in iXBRL and contained in Exhibit 101. |
Date: | May 11, 2020 | AMERICAN EQUITY INVESTMENT LIFE | |||
HOLDING COMPANY | |||||
By: | /s/ Ted M. Johnson | ||||
Ted M. Johnson, Chief Financial Officer and Treasurer | |||||
(Principal Financial Officer and Duly Authorized Officer) | |||||
By: | /s/ Scott A. Samuelson | ||||
Scott A. Samuelson, Vice President and Chief Accounting Officer | |||||
(Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of American Equity Investment Life Holding Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 11, 2020 | By: | /s/ ANANT BHALLA | |
Anant Bhalla, Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of American Equity Investment Life Holding Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 11, 2020 | By: | /s/ TED M. JOHNSON | |
Ted M. Johnson, Chief Financial Officer and Treasurer (Principal Financial Officer) |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 11, 2020 | By: | /s/ ANANT BHALLA | |
Anant Bhalla, Chief Executive Officer and President (Principal Executive Officer) |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 11, 2020 | By: | /s/ TED M. JOHNSON | |
Ted M. Johnson, Chief Financial Officer and Treasurer (Principal Financial Officer) |
Derivative Instruments (Fair Value of Derivative Instruments as Presented in the Consolidated Balance Sheets) (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 207,265 | $ 1,355,989 |
Not Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 207,265 | 1,355,995 |
Not Designated as Hedging Instrument | Call Options | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 207,265 | 1,355,989 |
Not Designated as Hedging Instrument | Interest Rate Caps | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 0 | 6 |
Not Designated as Hedging Instrument | Fixed Index Annuities - Embedded Derivatives | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liabilities | $ 8,451,482 | $ 9,624,395 |
Fair Values of Financial Instruments (Assumptions Used in Estimating Fair Value) (Details) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Expected cost of annual call options | 2.90% | 2.90% |
Fixed Index Annuities | Minimum | Contract Duration (Years), 1-5 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 1 year | 1 year |
Fixed Index Annuities | Minimum | Contract Duration (Years), 6-10 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 6 years | 6 years |
Fixed Index Annuities | Minimum | Contract Duration (Years), 11-15 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 11 years | 11 years |
Fixed Index Annuities | Minimum | Contract Duration (Years), 16-20 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 16 years | 16 years |
Fixed Index Annuities | Minimum | Contract Duration (Years), 20 or More | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 20 years | 20 years |
Fixed Index Annuities | Maximum | Contract Duration (Years), 1-5 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 5 years | 5 years |
Fixed Index Annuities | Maximum | Contract Duration (Years), 6-10 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 10 years | 10 years |
Fixed Index Annuities | Maximum | Contract Duration (Years), 11-15 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 15 years | 15 years |
Fixed Index Annuities | Maximum | Contract Duration (Years), 16-20 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Contract duration (years) | 20 years | 20 years |
Fixed Index Annuities | Average | Contract Duration (Years), 1-5 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Average lapse rates | 0.93% | 0.90% |
Average partial withdrawal rates | 3.37% | 3.33% |
Fixed Index Annuities | Average | Contract Duration (Years), 6-10 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Average lapse rates | 1.29% | 1.29% |
Average partial withdrawal rates | 3.87% | 3.84% |
Fixed Index Annuities | Average | Contract Duration (Years), 11-15 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Average lapse rates | 3.27% | 3.31% |
Average partial withdrawal rates | 4.13% | 4.12% |
Fixed Index Annuities | Average | Contract Duration (Years), 16-20 | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Average lapse rates | 7.83% | 8.52% |
Average partial withdrawal rates | 4.19% | 4.18% |
Fixed Index Annuities | Average | Contract Duration (Years), 20 or More | ||
Long-Duration Contracts, Assumptions by Product and Guarantee [Line Items] | ||
Average lapse rates | 7.21% | 7.10% |
Average partial withdrawal rates | 4.14% | 4.12% |
Significant Accounting Policies (Narrative) (Details) - Accounting Standards Update 2016-13 $ in Millions |
Jan. 01, 2020
USD ($)
|
---|---|
Financing Receivable, Allowance for Credit Loss | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New accounting pronouncement, effect of adoption, quantification | $ 8.6 |
Reinsurance Recoverable, Allowance for Credit Loss | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New accounting pronouncement, effect of adoption, quantification | 3.2 |
Retained Earnings | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New accounting pronouncement, effect of adoption, quantification | $ (9.3) |
Mortgage Loans on Real Estate (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Mortgage Loan Portfolio | Our commercial mortgage loan portfolio is summarized in the following table. There were commitments outstanding of $247.5 million at March 31, 2020.
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Mortgage Loan Portfolio Summarized By Geographic Region and Property Type | The mortgage loan portfolio is summarized by geographic region and property type as follows:
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Mortgage Loans By Credit Quality Indicator | We analyze credit risk of our mortgage loans by analyzing all available evidence on loans that are delinquent and loans that are in a workout period.
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Rollforward of Allowance for Credit Losses | The following table presents a rollforward of our specific and general valuation allowances for our commercial mortgage loan portfolio:
(1) Upon adoption of authoritative guidance effective January 1, 2020, we updated our accounting policies and methodology for calculating the general loan loss allowance, resulting in an adjustment to our commercial mortgage loan valuation allowance. See Note 1 for further details.
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Aging of Financing Receivables | Aging of financing receivables is summarized in the following table, with loans in a "workout" period as of the reporting date considered current if payments are current in accordance with agreed upon terms:
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Investments (Schedule of Fixed Maturity Securities) (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Jan. 01, 2020 |
[2] | Dec. 31, 2019 |
|||||
---|---|---|---|---|---|---|---|---|---|
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | $ 47,254,063 | [1] | $ 48,238,946 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 2,844,086 | 3,633,599 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (2,364,950) | (292,055) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | (28,332) | $ 0 | |||||||
Fixed maturity securities, available for sale, fair value | 47,704,867 | 51,580,490 | |||||||
United States Government Full Faith and Credit | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 36,501 | [1] | 161,492 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 2,747 | 369 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | 0 | (96) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Fixed maturity securities, available for sale, fair value | 39,248 | 161,765 | |||||||
United States Government Sponsored Agencies | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 293,722 | [1] | 601,672 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 44,839 | 28,133 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | 0 | (4,785) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Fixed maturity securities, available for sale, fair value | 338,561 | 625,020 | |||||||
United States Municipalities, States and Territories | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 3,357,142 | [1] | 4,147,343 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 412,151 | 388,578 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (4,130) | (8,250) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Fixed maturity securities, available for sale, fair value | 3,765,163 | 4,527,671 | |||||||
Foreign Government Obligations | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 187,007 | [1] | 186,993 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 15,854 | 18,103 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (4,465) | 0 | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Fixed maturity securities, available for sale, fair value | 198,396 | 205,096 | |||||||
Corporate Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 29,879,520 | [1] | 29,822,172 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 2,111,969 | 2,796,926 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (827,838) | (82,259) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | (28,332) | 0 | |||||||
Fixed maturity securities, available for sale, fair value | 31,135,319 | 32,536,839 | |||||||
Residential Mortgage Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 1,671,466 | [1] | 1,477,738 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 118,172 | 101,617 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (24,605) | (3,691) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Fixed maturity securities, available for sale, fair value | 1,765,033 | 1,575,664 | |||||||
Commercial Mortgage Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 5,540,607 | [1] | 5,591,167 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 66,402 | 208,895 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (310,897) | (13,783) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | 0 | |||||||
Fixed maturity securities, available for sale, fair value | 5,296,112 | 5,786,279 | |||||||
Other Asset Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, amortized cost | 6,288,098 | [1] | 6,250,369 | ||||||
Fixed maturity securities, available for sale, gross unrealized gains | 71,952 | 90,978 | |||||||
Fixed maturity securities, available for sale, gross unrealized losses | (1,193,015) | (179,191) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | $ 0 | |||||||
Fixed maturity securities, available for sale, fair value | 5,167,035 | $ 6,162,156 | |||||||
Fixed Maturity Securities, Available For Sale | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Accrued interest receivable | $ 456,100 | ||||||||
|
Investments (Gross Unrealized Losses on Investments, By Category and Length of Time) (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Jan. 01, 2020 |
[2] | Dec. 31, 2019 |
|||||
---|---|---|---|---|---|---|---|---|---|
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | $ 14,807,510 | $ 3,259,219 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (1,392,795) | [1] | (59,699) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 2,641,615 | 4,448,519 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (1,000,487) | [1] | (232,356) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 17,449,125 | 7,707,738 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (2,393,282) | [1] | (292,055) | ||||||
Fixed maturity securities, available for sale, allowance for credit losses | 28,332 | $ 0 | |||||||
United States Government Full Faith and Credit | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 144,582 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (96) | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 0 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | 0 | ||||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 144,582 | ||||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (96) | ||||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
United States Government Sponsored Agencies | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 168,732 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (1,229) | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 201,444 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (3,556) | ||||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 370,176 | ||||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (4,785) | ||||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
United States Municipalities, States and Territories | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 209,291 | 285,481 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (4,130) | [1] | (8,173) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 0 | 3,081 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | 0 | [1] | (77) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 209,291 | 288,562 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (4,130) | [1] | (8,250) | ||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Foreign Government Obligations | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 60,079 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | [1] | (4,465) | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 0 | ||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | [1] | 0 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 60,079 | ||||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | [1] | (4,465) | |||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Corporate Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, allowance for credit losses | 28,332 | 0 | |||||||
Corporate Securities | Finance, Insurance and Real Estate Sectors | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 1,970,305 | 267,521 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (109,704) | [1] | (4,785) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 3,547 | 121,993 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (372) | [1] | (4,744) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 1,973,852 | 389,514 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (110,076) | [1] | (9,529) | ||||||
Corporate Securities | Manufacturing, Construction and Mining | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 1,154,320 | 161,633 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (60,623) | [1] | (6,039) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 24,866 | 44,606 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (6,705) | [1] | (3,951) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 1,179,186 | 206,239 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (67,328) | [1] | (9,990) | ||||||
Corporate Securities | Utilities and Related Sectors | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 1,375,023 | 334,635 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (87,628) | [1] | (7,730) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 43,307 | 51,269 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (10,413) | [1] | (3,482) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 1,418,330 | 385,904 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (98,041) | [1] | (11,212) | ||||||
Corporate Securities | Wholesale/Retail Trade | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 643,529 | 54,289 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (63,887) | [1] | (1,751) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 88,471 | 129,364 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (44,320) | [1] | (9,411) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 732,000 | 183,653 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (108,207) | [1] | (11,162) | ||||||
Corporate Securities | Services, Media and Other | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 2,683,039 | 275,135 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (366,658) | [1] | (6,135) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 183,159 | 316,086 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (105,860) | [1] | (34,231) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 2,866,198 | 591,221 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (472,518) | [1] | (40,366) | ||||||
Residential Mortgage Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 740,561 | 212,404 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (23,072) | [1] | (2,686) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 10,375 | 11,332 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (1,533) | [1] | (1,005) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 750,936 | 223,736 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (24,605) | [1] | (3,691) | ||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | ||||||||
Commercial Mortgage Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 3,979,173 | 602,394 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (296,598) | [1] | (9,366) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 94,240 | 194,328 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (14,299) | [1] | (4,417) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 4,073,413 | 796,722 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (310,897) | [1] | (13,783) | ||||||
Fixed maturity securities, available for sale, allowance for credit losses | 0 | 0 | |||||||
Other Asset Backed Securities | |||||||||
Debt Securities, Available-for-sale [Line Items] | |||||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, fair value | 1,992,190 | 752,413 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, less than 12 months, unrealized losses | (376,030) | [1] | (11,709) | ||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, fair value | 2,193,650 | 3,375,016 | |||||||
Fixed maturity securities, available for sale, continuous unrealized loss position, 12 months or more, unrealized losses | (816,985) | [1] | (167,482) | ||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, fair value | 4,185,840 | 4,127,429 | |||||||
Fixed maturity securities, available for sale securities, continuous unrealized loss position, total, unrealized losses | (1,193,015) | [1] | $ (179,191) | ||||||
Fixed maturity securities, available for sale, allowance for credit losses | $ 0 | $ 0 | |||||||
|
Investments (Cumulative Credit Loss Portion of Other Than Temporary Impairment Recognized in Operations) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Investments [Abstract] | |
Cumulative credit loss at beginning of period | $ (175,398) |
Additions for the amount related to credit losses for which OTTI has not previously been recognized | 0 |
Additional credit losses on securities for which OTTI has previously been recognized | 0 |
Accumulated losses on securities that were disposed of during the period | 0 |
Cumulative credit loss at end of period | $ (175,398) |
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Operating activities | ||
Net income (loss) | $ 242,947 | $ (30,010) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Interest sensitive and index product benefits | 400,219 | 136,674 |
Amortization of deferred sales inducements | 73,591 | 33,309 |
Annuity product charges | (59,549) | (52,966) |
Change in fair value of embedded derivatives | (1,250,061) | 766,323 |
Change in traditional life and accident and health insurance reserves | (38) | (425) |
Policy acquisition costs deferred | (64,444) | (108,420) |
Amortization of deferred policy acquisition costs | 120,702 | 45,132 |
Provision for depreciation and other amortization | 1,082 | 949 |
Amortization of discounts and premiums on investments | 9,802 | 4,485 |
Realized gains (losses) on investments and net credit losses recognized in operations | 20,336 | 563 |
Change in fair value of derivatives | 941,874 | (384,381) |
Deferred income taxes | 71,427 | (11,309) |
Loss on extinguishment of debt | 2,024 | 0 |
Share-based compensation | 2,289 | 4,205 |
Change in accrued investment income | 159 | (28,735) |
Change in income taxes recoverable/payable | (46,753) | 1,856 |
Change in other assets | 2,033 | (5,001) |
Change in other policy funds and contract claims | (9,488) | (6,059) |
Change in collateral held for derivatives | (1,106,464) | 424,890 |
Change in collateral held for securities lending | (489,047) | 321,009 |
Change in other liabilities | (27,216) | 1,912 |
Other | (125) | (2,009) |
Net cash provided by (used in) operating activities | (1,164,700) | 1,111,992 |
Sales, maturities, or repayments of investments: | ||
Fixed maturity securities, available for sale | 1,916,960 | 286,855 |
Mortgage loans on real estate | 83,584 | 57,599 |
Derivative instruments | 320,953 | 55,500 |
Other investments | 2,980 | 1,062 |
Acquisitions of investments: | ||
Fixed maturity securities, available for sale | (956,095) | (960,575) |
Mortgage loans on real estate | (315,091) | (165,450) |
Derivative instruments | (181,640) | (194,364) |
Other investments | (5,249) | (5,021) |
Purchases of property, furniture and equipment | (10,110) | (720) |
Net cash provided by (used in) investing activities | 856,292 | (925,114) |
Financing activities | ||
Receipts credited to annuity policyholder account balances | 699,455 | 1,234,429 |
Coinsurance deposits | 114,531 | 37,802 |
Return of annuity policyholder account balances | (1,025,021) | (817,739) |
Repayment of subordinated debentures | (81,450) | 0 |
Net proceeds from amounts due under repurchase agreements | 186,105 | 134,033 |
Proceeds from issuance of common stock, net | 1,255 | 112 |
Change in checks in excess of cash balance | (40,149) | (4,021) |
Preferred stock dividends | (6,611) | 0 |
Net cash provided by (used in) financing activities | (151,885) | 584,616 |
Increase (decrease) in cash and cash equivalents | (460,293) | 771,494 |
Cash and cash equivalents at beginning of period | 2,293,392 | 344,396 |
Cash and cash equivalents at end of period | 1,833,099 | 1,115,890 |
Cash paid during period for interest: | ||
Interest expense | 2,523 | 5,792 |
Cash paid during period for income taxes: | ||
Income taxes | 11 | 0 |
Non-cash operating activity: | ||
Deferral of sales inducements | $ 24,552 | $ 45,621 |
Earnings (Loss) Per Common Share and Stockholders' Equity |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Common Share and Stockholders' Equity | Earnings (Loss) Per Common Share and Stockholders' Equity Earnings (Loss) Per Common Share The following table sets forth the computation of earnings (loss) per common share and earnings (loss) per common share - assuming dilution:
During the three months ended March 31, 2020, there were 50,000 options to purchase shares of our common stock outstanding, with an exercise price of $26.70, excluded from the computation of diluted earnings (loss) per common share. There were no options to purchase shares of our common stock outstanding excluded from the computation of diluted earnings (loss) per common share during the three months ended March 31, 2019, as the exercise price of all options outstanding was less than the average market price of our common shares for those periods. Stockholders' Equity On November 21, 2019 we issued 16,000 shares of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A (the "preferred stock") with a $1.00 par value per share and a liquidation preference of $25,000 per share, for aggregate net proceeds of $388.9 million. We used a portion of the proceeds to redeem all of our floating rate subordinated debentures. Dividends on the preferred stock are payable on a non-cumulative basis only when, as and if declared, quarterly in arrears on the first day of March, June, September and December of each year, commencing March 1, 2020. On March 1, 2020, we paid dividends totaling $6.6 million on the preferred stock. The preferred stock ranks senior to our common stock with respect to dividends, to the extent declared, and in liquidation, to the extent of the liquidation preference. The preferred stock is not subject to any mandatory redemption, sinking fund, retirement fund, purchase fund or similar provisions.
|
Mortgage Loans on Real Estate |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate | Mortgage Loans on Real Estate Our financing receivables currently consist of one portfolio segment which is our commercial mortgage loan portfolio. Our commercial mortgage loan portfolio is summarized in the following table. There were commitments outstanding of $247.5 million at March 31, 2020.
Our commercial mortgage loan portfolio consists of loans collateralized by the related properties and diversified as to property type, location and loan size. Our mortgage lending policies establish limits on the amount that can be loaned to one borrower and other criteria to attempt to reduce the risk of default. The mortgage loan portfolio is summarized by geographic region and property type as follows:
Commercial mortgage loans are reported at cost, adjusted for amortization of premiums and accrual of discounts. Amortized cost excludes accrued interest receivable. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Interest income is included in Net investment income on our consolidated statements of operations. Accrued interest receivable, which was $12.8 million as of March 31, 2020, is included in Accrued investment income on our consolidated balance sheets. All loans are subject to the Company's internal and external review and monitoring to assess the credit quality of our loan portfolio. We rate each of our loans based on an analysis of the current state of the borrower's credit quality. The analysis of credit quality includes a review of factors such as loan-to-value ("LTV") and debt service coverage ("DSC") ratios and economic outlook, among others. LTV and DSC ratios are the driving factors for the risk ratings which are utilized for estimating the allowance for loan losses. LTV and DSC ratios are originally calculated at the time of loan origination and are updated annually for each loan using information such as rent rolls, assessment of lease maturity dates and property operating statements, which are reviewed in the context of current leasing and in place rents compared to market leasing and market rents. A DSC ratio of less than 1.0 indicates that a property's operations do not generate sufficient income to cover debt payments. An LTV ratio in excess of 100% indicates the unpaid loan amount exceeds the value of the underlying collateral. All of our mortgage loans that have a debt service coverage ratio of less than 1.0 are performing under the original contractual loan terms at March 31, 2020. A summary of our portfolio by LTV and DSC ratios based on the most recent information collected follows (by year of origination):
We evaluate our commercial mortgage loan portfolio for the establishment of a loan loss allowance by specific identification of impaired loans. A mortgage loan is impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. If we determine that the value of any specific mortgage loan is impaired, the carrying amount of the mortgage loan will be reduced to its fair value, based upon the present value of expected future cash flows from the loan discounted at the loan's effective interest rate, or the fair value of the underlying collateral less estimated costs to sell. We analyze our commercial mortgage loan portfolio for the need of a general loan allowance for expected credit losses on all other loans on a quantitative and qualitative basis by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual loan. The amount of the general loan allowance is based upon management's evaluation of the collectability of the loan portfolio, historical loss experience, delinquencies, credit concentrations, underwriting standards and national and local economic conditions. We do not measure a credit loss allowance on accrued interest receivable as we write off any uncollectible accrued interest receivable balance to net investment income in a timely manner. We did not charge off any uncollectible accrued interest receivable on our commercial mortgage loan portfolio during the period ended March 31, 2020. Our commercial mortgage loans are pooled by risk rating and property collateral type and an estimated loss ratio is applied against each risk pool. The loss ratios are generally based upon historical loss experience for each risk pool and are adjusted for current and forecasted economic factors management believes to be relevant and supportable. Economic factors are forecasted for two years with immediate reversion to historical experience. The following table presents a rollforward of our specific and general valuation allowances for our commercial mortgage loan portfolio:
(1) Upon adoption of authoritative guidance effective January 1, 2020, we updated our accounting policies and methodology for calculating the general loan loss allowance, resulting in an adjustment to our commercial mortgage loan valuation allowance. See Note 1 for further details. The specific allowance represents the total credit loss allowances on loans which are individually evaluated for impairment. The general allowance is for the group of loans discussed above which are collectively evaluated for impairment. Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of Other investments and the loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. Recoveries are situations where we have received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance). We did not own any real estate during the three months ended March 31, 2020 and 2019. We analyze credit risk of our mortgage loans by analyzing all available evidence on loans that are delinquent and loans that are in a workout period.
Loans that are categorized as "in workout" consist of loans that we have agreed to lower or no mortgage payments for a period of time while the borrowers address cash flow and/or operational issues. The key features of these workouts are determined on a loan-by-loan basis. Most of these loans are in a period of low cash flow due to tenants vacating their space or tenants requesting rent relief during difficult economic periods. Generally, we allow the borrower a six month interest only period and in some cases a twelve month period of interest only. Interest only workout loans are expected to return to their regular debt service payments after the interest only period. Interest only loans that are not fully amortizing will have a larger balance at their balloon date than originally contracted. Fully amortizing loans that are in interest only periods will have larger debt service payments for their remaining term due to lost principal payments during the interest only period. In limited circumstances we have allowed borrowers to pay the principal portion of their loan payment into an escrow account that can be used for capital and tenant improvements for a period of not more than twelve months. In these situations new loan amortization schedules are calculated based on the principal not collected during this twelve month workout period and larger payments are collected for the remaining term of each loan. In all cases, the original interest rate and maturity date have not been modified, and we have not forgiven any principal amounts. Loans that are categorized as "collateral dependent" consist of loans for which we will depend on the value of the collateral real estate to satisfy the outstanding principal of the loan. Mortgage loans are considered delinquent when they become 60 days or more past due. When loans become more than 90 days past due we place them on non-accrual status and discontinue recognizing interest income. If payments are received on a delinquent loan, interest income is recognized to the extent it would have been recognized if normal principal and interest would have been received timely. If payments are received to bring a delinquent loan back to current, we will resume accruing interest income on that loan. There were no loans in non-accrual status at March 31, 2020 and December 31, 2019. We recognized no interest income on loans in non-accrual status during the three months ended March 31, 2020 and 2019. All of our commercial mortgage loans depend on the cash flow of the borrower to be at a sufficient level to service the principal and interest payments as they come due. In general, cash inflows of the borrowers are generated by collecting monthly rent from tenants occupying space within the borrowers' properties. Our borrowers face collateral risks such as tenants going out of business, tenants struggling to make rent payments as they become due, and tenants canceling leases and moving to other locations. We have a number of loans where the real estate is occupied by a single tenant. Our borrowers sometimes face both a reduction in cash flow on their mortgage property as well as a reduction in the fair value of the real estate collateral. If borrowers are unable to replace lost rent revenue and increases in the fair value of their property do not materialize, we could potentially incur more losses than what we have allowed for in our specific and general loan loss allowances. Aging of financing receivables is summarized in the following table, with loans in a "workout" period as of the reporting date considered current if payments are current in accordance with agreed upon terms:
A Troubled Debt Restructuring ("TDR") is a situation where we have granted a concession to a borrower for economic or legal reasons related to the borrower's financial difficulties that we would not otherwise consider. A mortgage loan that has been granted new terms, including workout terms as described previously, would be considered a TDR if it meets conditions that would indicate a borrower is experiencing financial difficulty and the new terms constitute a concession on our part. We analyze all loans where we have agreed to workout terms and all loans that we have refinanced to determine if they meet the definition of a TDR. We consider the following factors in determining whether or not a borrower is experiencing financial difficulty:
If the borrower is determined to be in financial difficulty, we consider the following conditions to determine if the borrower is granted a concession:
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Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Revenues: | ||
Premiums and other considerations | $ 7,664 | $ 5,410 |
Annuity product charges | 59,549 | 52,966 |
Net investment income | 573,318 | 558,438 |
Change in fair value of derivatives | (941,874) | 384,469 |
Net realized gains (losses) on investments, excluding credit losses on fixed maturity securities, available for sale | 11,035 | (563) |
Credit losses on fixed maturity securities, available for sale | (31,371) | 0 |
Loss on extinguishment of debt | (2,024) | 0 |
Total revenues | (323,703) | 1,000,720 |
Benefits and expenses: | ||
Insurance policy benefits and change in future policy benefits | 10,072 | 9,299 |
Interest sensitive and index product benefits | 400,219 | 136,674 |
Amortization of deferred sales inducements | 73,591 | 33,309 |
Change in fair value of embedded derivatives | (1,250,061) | 766,323 |
Interest expense on notes payable | 6,385 | 6,379 |
Interest expense on subordinated debentures | 1,588 | 4,088 |
Amortization of deferred policy acquisition costs | 120,702 | 45,132 |
Other operating costs and expenses | 43,626 | 38,979 |
Total benefits and expenses | (593,878) | 1,040,183 |
Income (loss) before income taxes | 270,175 | (39,463) |
Income tax expense (benefit) | 27,228 | (9,453) |
Net income (loss) | 242,947 | (30,010) |
Less: Preferred stock dividends | 6,611 | 0 |
Net income (loss) available to common stockholders | $ 236,336 | $ (30,010) |
Earnings (loss) per common share | $ 2.58 | $ (0.33) |
Earnings (loss) per common share - assuming dilution | $ 2.57 | $ (0.33) |
Weighted average common shares outstanding: earnings (loss) per common share | 91,644,315 | 90,883,254 |
Weighted average common shares outstanding: earnings (loss) per common share - assuming dilution | 92,021,079 | 91,743,759 |
Notes Payable and Amounts Due Under Repurchase Agreements (Repurchase Agreements Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Debt Disclosure [Abstract] | ||
Repurchase agreement, average borrowings | $ 24.6 | $ 89.2 |
Repurchase agreement, maximum amount borrowed | $ 186.4 | $ 243.6 |
Repurchase agreement, weighted average interest rate | 1.51% | 2.67% |
Derivative Instruments (Change in Fair Value of Derivatives Included in the Consolidated Statement of Operations) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of derivatives | $ (941,874) | $ 384,469 |
Change in fair value of embedded derivatives | (1,250,061) | 766,323 |
Call Options | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of derivatives | (941,936) | 385,166 |
Interest Rate Swap | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of derivatives | 0 | (368) |
Interest Rate Caps | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of derivatives | 62 | (329) |
Fixed Index Annuities - Embedded Derivatives | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of embedded derivatives | (1,285,071) | 652,642 |
Other Changes in Difference Between Policy Benefit Reserves Computed Using Derivative Accounting Vs. Long-Duration Contracts Accounting | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Change in fair value of embedded derivatives | $ 35,010 | $ 113,681 |
Investments Investments (Rollforward of Allowance for Credit Losses) (Details) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2020
USD ($)
| |
Debt Securities, Available-for-sale, Allowance for Credit Loss [Line Items] | |
Additions for credit losses not previously recorded | $ 31,371 |
Reduction for securities with credit losses due to intent to sell | (3,039) |
Ending balance | 28,332 |
Corporate Securities | |
Debt Securities, Available-for-sale, Allowance for Credit Loss [Line Items] | |
Additions for credit losses not previously recorded | 28,332 |
Reduction for securities with credit losses due to intent to sell | 0 |
Ending balance | 28,332 |
Commercial Mortgage Backed Securities | |
Debt Securities, Available-for-sale, Allowance for Credit Loss [Line Items] | |
Additions for credit losses not previously recorded | 2,491 |
Reduction for securities with credit losses due to intent to sell | (2,491) |
Ending balance | 0 |
Other Asset Backed Securities | |
Debt Securities, Available-for-sale, Allowance for Credit Loss [Line Items] | |
Additions for credit losses not previously recorded | 548 |
Reduction for securities with credit losses due to intent to sell | (548) |
Ending balance | $ 0 |
Investments (Narrative) (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020
USD ($)
Securities
|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2019
Securities
|
|
Investments [Abstract] | |||
Percentage of fixed maturity portfolio rated investment grade based on NAIC designations | 98.00% | 98.00% | |
Number of securities in unrealized loss position | Securities | 2,475 | 1,033 | |
Percentage of unrealized losses on fixed maturity securities where securities are rated investment grade | 84.00% | 79.00% | |
Proceeds from sales of available for sale fixed maturity securities | $ 910,300 | $ 136,000 | |
Principal repayments, calls and tenders for available for sale fixed maturity securities | $ 1,000,000 | 150,900 | |
Other than temporary impairment losses | $ 0 |
Investments (Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation) (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
|||
---|---|---|---|---|---|
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | $ 47,254,063 | [1] | $ 48,238,946 | ||
Fixed maturity securities, available for sale, fair value | 47,704,867 | 51,580,490 | |||
NAIC, Class 1 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 26,309,850 | 27,781,525 | |||
Fixed maturity securities, available for sale, fair value | 27,739,779 | 30,122,657 | |||
NAIC, Class 2 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 19,582,082 | 19,278,355 | |||
Fixed maturity securities, available for sale, fair value | 18,999,760 | 20,316,911 | |||
NAIC, Class 3 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 1,167,772 | 1,001,087 | |||
Fixed maturity securities, available for sale, fair value | 838,628 | 977,191 | |||
NAIC, Class 4 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 128,826 | 114,497 | |||
Fixed maturity securities, available for sale, fair value | 104,090 | 112,534 | |||
NAIC, Class 5 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 60,550 | 57,952 | |||
Fixed maturity securities, available for sale, fair value | 18,433 | 45,205 | |||
NAIC, Class 6 Designation | |||||
Investment Holdings [Line Items] | |||||
Fixed maturity securities, available for sale, amortized cost | 4,983 | 5,530 | |||
Fixed maturity securities, available for sale, fair value | $ 4,177 | $ 5,992 | |||
|
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|||
Net income (loss) | $ 242,947 | $ (30,010) | ||
Other comprehensive income (loss): | ||||
Change in net unrealized investment gains/losses (1) | [1] | (1,625,075) | 716,913 | |
Reclassification of unrealized investment gains/losses to net income (loss) (1) | [1] | 7,420 | (294) | |
Other comprehensive income (loss) before income tax | (1,617,655) | 716,619 | ||
Income tax effect related to other comprehensive income (loss) | 339,708 | (150,490) | ||
Other comprehensive income (loss) | (1,277,947) | 566,129 | ||
Comprehensive income (loss) | $ (1,035,000) | $ 536,119 | ||
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Cover Page - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
May 01, 2020 |
|
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-31911 | |
Entity Registrant Name | American Equity Investment Life Holding Co | |
Entity Incorporation, State or Country Code | IA | |
Entity Tax Identification Number | 42-1447959 | |
Entity Address, Address Line One | 6000 Westown Parkway | |
Entity Address, City or Town | West Des Moines | |
Entity Address, State or Province | IA | |
Entity Address, Postal Zip Code | 50266 | |
City Area Code | 515 | |
Local Phone Number | 221-0002 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 91,525,952 | |
Entity Central Index Key | 0001039828 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false | |
Common Stock | ||
Entity Information [Line Items] | ||
Title of 12(b) Security | Common stock, par value $1 | |
Trading Symbol | AEL | |
Security Exchange Name | NYSE | |
Series A Preferred Stock | ||
Entity Information [Line Items] | ||
Title of 12(b) Security | Depositary Shares, each representing a 1/1,000th interest in a share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A | |
Trading Symbol | AELPRA | |
Security Exchange Name | NYSE |
Significant Accounting Policies |
3 Months Ended |
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Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Consolidation and Basis of Presentation The accompanying consolidated financial statements of American Equity Investment Life Holding Company ("we", "us", "our" or the "Company") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for the three month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires the use of management estimates. For further information related to a description of areas of judgment and estimates and other information necessary to understand our financial position and results of operations, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019. Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that significantly changed the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model that requires these assets be presented at the net amount expected to be collected. In addition, credit losses on available for sale debt securities will be recorded through an allowance account subsequent to the adoption of this ASU. We adopted this ASU on January 1, 2020. The adoption of this ASU resulted in an increase in our mortgage loan allowance for credit losses of $8.6 million and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances of $3.2 million on the date of adoption. Retained earnings was decreased by $9.3 million, which reflects the net of tax impact of the increase in the mortgage loan allowance for credit losses and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances on the date of adoption. New Accounting Pronouncements In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ ("MRB") and requiring all contract features meeting the definition of an MRB to be measured at fair value, simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant basis over the expected term of the related contracts rather than based on actual and estimated gross profits and enhancing disclosure requirements. While this ASU is effective for us on January 1, 2022, the transition date (the remeasurement date) is January 1, 2020. Early adoption of this ASU is permitted. We are in the process of evaluating the impact this guidance will have on our consolidated financial statements.
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Significant Accounting Policies (Policies) |
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Adopted and New Accounting Pronouncements, Policy | Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that significantly changed the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model that requires these assets be presented at the net amount expected to be collected. In addition, credit losses on available for sale debt securities will be recorded through an allowance account subsequent to the adoption of this ASU. We adopted this ASU on January 1, 2020. The adoption of this ASU resulted in an increase in our mortgage loan allowance for credit losses of $8.6 million and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances of $3.2 million on the date of adoption. Retained earnings was decreased by $9.3 million, which reflects the net of tax impact of the increase in the mortgage loan allowance for credit losses and the recognition of an allowance for credit losses on our reinsurance recoverable/coinsurance deposits balances on the date of adoption. New Accounting Pronouncements In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ ("MRB") and requiring all contract features meeting the definition of an MRB to be measured at fair value, simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant basis over the expected term of the related contracts rather than based on actual and estimated gross profits and enhancing disclosure requirements. While this ASU is effective for us on January 1, 2022, the transition date (the remeasurement date) is January 1, 2020. Early adoption of this ASU is permitted. We are in the process of evaluating the impact this guidance will have on our consolidated financial statements.
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Fair Values of Financial Instruments, Policy | Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The objective of a fair value measurement is to determine that price for each financial instrument at each measurement date. We meet this objective using various methods of valuation that include market, income and cost approaches. We categorize our financial instruments into three levels of fair value hierarchy based on the priority of inputs used in determining fair value. The hierarchy defines the highest priority inputs (Level 1) as quoted prices in active markets for identical assets or liabilities. The lowest priority inputs (Level 3) are our own assumptions about what a market participant would use in determining fair value such as estimated future cash flows. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We categorize financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:
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Investments, Policy | We review and analyze all investments on an ongoing basis for changes in market interest rates and credit deterioration. This review process includes analyzing our ability to recover the amortized cost basis of each investment that has a fair value that is materially lower than its amortized cost and requires a high degree of management judgment and involves uncertainty. The evaluation of securities for credit loss is a quantitative and qualitative process, which is subject to risks and uncertainties. We have a policy and process to identify securities that could potentially have credit loss. This process involves monitoring market events and other items that could impact issuers. The evaluation includes but is not limited to such factors as:
We determine whether an allowance for credit loss should be established for debt securities by assessing all facts and circumstances surrounding each security. Where the decline in fair value of debt securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and we anticipate recovery of all contractual or expected cash flows, we do not consider these investments to have credit loss because we do not intend to sell these investments and it is not more likely than not we will be required to sell these investments before a recovery of amortized cost, which may be maturity. If we intend to sell a debt security or if it is more likely than not that we will be required to sell a debt security before recovery of its amortized cost basis, credit loss has occurred and the difference between amortized cost and fair value will be recognized as a loss in operations. If we do not intend to sell and it is not more likely than not we will be required to sell the debt security but also do not expect to recover the entire amortized cost basis of the security, a credit loss would be recognized in operations for the amount of the expected credit loss. We determine the amount of expected credit loss by calculating the present value of the cash flows expected to be collected discounted at each security's acquisition yield based on our consideration of whether the security was of high credit quality at the time of acquisition. The difference between the present value of expected future cash flows and the amortized cost basis of the security is the amount of credit loss recognized in operations. The determination of the credit loss component of a mortgage backed security is based on a number of factors. The primary consideration in this evaluation process is the issuer's ability to meet current and future interest and principal payments as contractually stated at time of purchase. Our review of these securities includes an analysis of the cash flow modeling under various default scenarios considering independent third party benchmarks, the seniority of the specific tranche within the structure of the security, the composition of the collateral and the actual default, loss severity and prepayment experience exhibited. With the input of third party assumptions for default projections, loss severity and prepayment expectations, we evaluate the cash flow projections to determine whether the security is performing in accordance with its contractual obligation. We utilize models from a leading structured product software specialist serving institutional investors. These models incorporate each security's seniority and cash flow structure. In circumstances where the analysis implies a potential for principal loss at some point in the future, we use the "best estimate" cash flow projection discounted at the security's effective yield at acquisition to determine the amount of our potential credit loss associated with this security. The discounted expected future cash flows equates to our expected recovery value. Any shortfall of the expected recovery when compared to the amortized cost of the security will be recorded as credit loss. The cash flow modeling is performed on a security-by-security basis and incorporates actual cash flows on the residential mortgage backed securities through the current period, as well as the projection of remaining cash flows using a number of assumptions including default rates, prepayment rates and loss severity rates. The default curves we use are tailored to the Prime or Alt-A residential mortgage backed securities that we own, which assume lower default rates and loss severity for Prime securities versus Alt-A securities. These default curves are scaled higher or lower depending on factors such as current underlying mortgage loan performance, rating agency loss projections, loan to value ratios, geographic diversity, as well as other appropriate considerations. The determination of the credit loss component of a corporate bond is based on the underlying financial performance of the issuer and their ability to meet their contractual obligations. Considerations in our evaluation include, but are not limited to, credit rating changes, financial statement and ratio analysis, changes in management, significant changes in credit spreads, breaches of financial covenants and a review of the economic outlook for the industry and markets in which they trade. In circumstances where an issuer appears unlikely to meet its future obligation, an estimate of credit loss is determined. Credit loss is calculated using default probabilities as derived from the credit default swaps markets in conjunction with recovery rates derived from independent third party analysis or a best estimate of credit loss. This credit loss rate is then incorporated into a present value calculation based on an expected principal loss in the future discounted at the yield at the date of purchase and compared to amortized cost to determine the amount of credit loss associated with the security. We do not measure a credit loss allowance on accrued interest receivable as we write off any accrued interest receivable balance to net investment income in a timely manner when we have concerns regarding collectability. Amounts on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if we intend to sell a security or when it is more likely than not we will be required to sell the security before the recovery of its amortized cost.
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Mortgage Loans on Real Estate, Allowance for Loan Losses, Policy | We evaluate our commercial mortgage loan portfolio for the establishment of a loan loss allowance by specific identification of impaired loans. A mortgage loan is impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. If we determine that the value of any specific mortgage loan is impaired, the carrying amount of the mortgage loan will be reduced to its fair value, based upon the present value of expected future cash flows from the loan discounted at the loan's effective interest rate, or the fair value of the underlying collateral less estimated costs to sell. We analyze our commercial mortgage loan portfolio for the need of a general loan allowance for expected credit losses on all other loans on a quantitative and qualitative basis by grouping assets with similar risk characteristics when there is not a specific expectation of a loss for an individual loan. The amount of the general loan allowance is based upon management's evaluation of the collectability of the loan portfolio, historical loss experience, delinquencies, credit concentrations, underwriting standards and national and local economic conditions. We do not measure a credit loss allowance on accrued interest receivable as we write off any uncollectible accrued interest receivable balance to net investment income in a timely manner. We did not charge off any uncollectible accrued interest receivable on our commercial mortgage loan portfolio during the period ended March 31, 2020. Our commercial mortgage loans are pooled by risk rating and property collateral type and an estimated loss ratio is applied against each risk pool. The loss ratios are generally based upon historical loss experience for each risk pool and are adjusted for current and forecasted economic factors management believes to be relevant and supportable. Economic factors are forecasted for two years with immediate reversion to historical experience.
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Mortgage Loans on Real Estate, Real Estate Acquired Through Foreclosure, Policy | Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of Other investments and the loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. Recoveries are situations where we have received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance). | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate, Non-Accrual Loan Status, Policy | Loans that are categorized as "in workout" consist of loans that we have agreed to lower or no mortgage payments for a period of time while the borrowers address cash flow and/or operational issues. The key features of these workouts are determined on a loan-by-loan basis. Most of these loans are in a period of low cash flow due to tenants vacating their space or tenants requesting rent relief during difficult economic periods. Generally, we allow the borrower a six month interest only period and in some cases a twelve month period of interest only. Interest only workout loans are expected to return to their regular debt service payments after the interest only period. Interest only loans that are not fully amortizing will have a larger balance at their balloon date than originally contracted. Fully amortizing loans that are in interest only periods will have larger debt service payments for their remaining term due to lost principal payments during the interest only period. In limited circumstances we have allowed borrowers to pay the principal portion of their loan payment into an escrow account that can be used for capital and tenant improvements for a period of not more than twelve months. In these situations new loan amortization schedules are calculated based on the principal not collected during this twelve month workout period and larger payments are collected for the remaining term of each loan. In all cases, the original interest rate and maturity date have not been modified, and we have not forgiven any principal amounts. Loans that are categorized as "collateral dependent" consist of loans for which we will depend on the value of the collateral real estate to satisfy the outstanding principal of the loan. Mortgage loans are considered delinquent when they become 60 days or more past due. When loans become more than 90 days past due we place them on non-accrual status and discontinue recognizing interest income. If payments are received on a delinquent loan, interest income is recognized to the extent it would have been recognized if normal principal and interest would have been received timely. If payments are received to bring a delinquent loan back to current, we will resume accruing interest income on that loan.
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Mortgage Loans on Real Estate, Troubled Debt Restructuring, Policy | A Troubled Debt Restructuring ("TDR") is a situation where we have granted a concession to a borrower for economic or legal reasons related to the borrower's financial difficulties that we would not otherwise consider. A mortgage loan that has been granted new terms, including workout terms as described previously, would be considered a TDR if it meets conditions that would indicate a borrower is experiencing financial difficulty and the new terms constitute a concession on our part. We analyze all loans where we have agreed to workout terms and all loans that we have refinanced to determine if they meet the definition of a TDR. We consider the following factors in determining whether or not a borrower is experiencing financial difficulty:
If the borrower is determined to be in financial difficulty, we consider the following conditions to determine if the borrower is granted a concession:
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Commitments and Contingencies, Policy | In accordance with applicable accounting guidelines, we establish an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. As a litigation or regulatory matter is developing we, in conjunction with outside counsel, evaluate on an ongoing basis whether the matter presents a loss contingency that meets conditions indicating the need for accrual and/or disclosure, and if not, the matter will continue to be monitored for further developments. If and when the loss contingency related to litigation or regulatory matters is deemed to be both probable and estimable, we will establish an accrued liability with respect to that matter and will continue to monitor the matter for further developments that may affect the amount of the accrued liability. |
Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Derivative Instruments None of our derivatives qualify for hedge accounting, thus, any change in the fair value of the derivatives is recognized immediately in the consolidated statements of operations. The fair value of our derivative instruments, including derivative instruments embedded in fixed index annuity contracts, presented in the consolidated balance sheets are as follows:
The changes in fair value of derivatives included in the unaudited consolidated statements of operations are as follows:
The amounts presented as "Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting" represents the total change in the difference between policy benefit reserves for fixed index annuities computed under the derivative accounting standard and the long-duration contracts accounting standard at each balance sheet date, less the change in fair value of our fixed index annuities embedded derivatives that is presented as Level 3 liabilities in Note 2. We have fixed index annuity products that guarantee the return of principal to the policyholder and credit interest based on a percentage of the gain in a specified market index. When fixed index annuity deposits are received, a portion of the deposit is used to purchase derivatives consisting of call options on the applicable market indices to fund the index credits due to fixed index annuity policyholders. Substantially all such call options are one year options purchased to match the funding requirements of the underlying policies. The call options are marked to fair value with the change in fair value included as a component of revenues. The change in fair value of derivatives includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open positions. On the respective anniversary dates of the index policies, the index used to compute the index credit is reset and we purchase new call options to fund the next index credit. We manage the cost of these purchases through the terms of our fixed index annuities, which permit us to change caps, participation rates, and/or asset fees, subject to guaranteed minimums on each policy's anniversary date. By adjusting caps, participation rates, or asset fees, we can generally manage option costs except in cases where the contractual features would prevent further modifications. Our strategy attempts to mitigate any potential risk of loss due to the nonperformance of the counterparties to these call options through a regular monitoring process which evaluates the program's effectiveness. We do not purchase call options that would require payment or collateral to another institution and our call options do not contain counterparty credit-risk-related contingent features. We are exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, we purchase our option contracts from multiple counterparties and evaluate the creditworthiness of all counterparties prior to purchase of the contracts. All non-exchange traded options have been purchased from nationally recognized financial institutions with a Standard and Poor's credit rating of A- or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. We also have credit support agreements that allow us to request the counterparty to provide collateral to us when the fair value of our exposure to the counterparty exceeds specified amounts. The notional amount and fair value of our call options by counterparty and each counterparty's current credit rating are as follows:
As of March 31, 2020 and December 31, 2019, we held $241.8 million and $1.3 billion, respectively, of cash and cash equivalents and other investments from counterparties for derivative collateral, which is included in Other liabilities on our consolidated balance sheets. This derivative collateral limits the maximum amount of economic loss due to credit risk that we would incur if parties to the call options failed completely to perform according to the terms of the contracts to $6.4 million and $25.2 million at March 31, 2020 and December 31, 2019, respectively. The future index credits on our fixed index annuities are treated as a "series of embedded derivatives" over the expected life of the applicable contract. We do not purchase call options to fund the index liabilities which may arise after the next policy anniversary date. We must value both the call options and the related forward embedded options in the policies at fair value. We entered into an interest rate swap and interest rate caps to manage interest rate risk associated with the floating rate component on certain of our subordinated debentures. See Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on our subordinated debentures. As of March 31, 2020, all of our floating rate subordinated debentures have been redeemed and the interest rate swap and interest rate caps have been terminated. The terms of the interest rate swap provided that we paid a fixed rate of interest and receive a floating rate of interest. The terms of the interest rate caps limited the three month LIBOR to 2.50%. The interest rate swap and caps were not effective hedges under accounting guidance for derivative instruments and hedging activities. Therefore, we recorded the interest rate swap and caps at fair value and any net cash payments received or paid were included in the change in fair value of derivatives in the unaudited consolidated statements of operations.
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Commitments and Contingencies (Narrative) (Details) $ in Millions |
Mar. 31, 2020
USD ($)
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Limited Partnerships | |
Other Commitments [Line Items] | |
Unfunded commitments | $ 41.4 |
Fixed Maturity Securities | |
Other Commitments [Line Items] | |
Unfunded commitments | $ 102.7 |
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