Fair Value of Derivative Instruments as Presented in the Consolidated Balance Sheets |
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: | | | | | | | | | | | | | September 30, 2020 | | December 31, 2019 | | (Dollars in thousands) | Assets | | | | Derivative instruments | | | | Call options | $ | 874,741 | | | $ | 1,355,989 | | Other assets | | | | Interest rate caps | — | | | 6 | | | | | | | $ | 874,741 | | | $ | 1,355,995 | | Liabilities | | | | Policy benefit reserves - annuity products | | | | Fixed index annuities - embedded derivatives, net | $ | 7,475,216 | | | $ | 9,624,395 | | | | | | | | | | | | | |
|
Schedule of Changes in Fair Value of Derivative Instruments |
The changes in fair value of derivatives included in the unaudited consolidated statements of operations are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2020 | | 2019 | | 2020 | | 2019 | | (Dollars in thousands) | Change in fair value of derivatives: | | | | | | | | Call options | $ | 205,011 | | | $ | (19,997) | | | $ | (409,263) | | | $ | 442,111 | | Interest rate swap | — | | | (3) | | | — | | | (1,059) | | Interest rate caps | — | | | (42) | | | 62 | | | (580) | | | $ | 205,011 | | | $ | (20,042) | | | $ | (409,201) | | | $ | 440,472 | | Change in fair value of embedded derivatives: | | | | | | | | Fixed index annuities - embedded derivatives | $ | (2,021,513) | | | $ | 24,998 | | | $ | (2,392,600) | | | $ | 882,230 | | Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting | 289,016 | | | 187,280 | | | 536,977 | | | 423,933 | | | $ | (1,732,497) | | | $ | 212,278 | | | $ | (1,855,623) | | | $ | 1,306,163 | |
|
Schedule of Call Options by Counterparty |
The notional amount and fair value of our call options by counterparty and each counterparty's current credit rating are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 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 | | $ | 2,534,503 | | | $ | 59,082 | | | $ | 2,680,543 | | | $ | 80,692 | | | | | | | | | | | | | | | Barclays | | A | | A1 | | 6,222,261 | | | 234,710 | | | 5,753,868 | | | 217,536 | | | | | | | | | | | | | | | Canadian Imperial Bank of Commerce | | A+ | | Aa2 | | 5,076,462 | | | 169,396 | | | 4,110,525 | | | 154,917 | | Citibank, N.A. | | A+ | | Aa3 | | 3,683,100 | | | 50,058 | | | 4,075,544 | | | 109,046 | | Credit Suisse | | A+ | | A1 | | 3,475,584 | | | 31,566 | | | 4,526,414 | | | 116,659 | | | | | | | | | | | | | | | | | | | | | | | | | | | | J.P. Morgan | | A+ | | Aa2 | | 4,016,877 | | | 25,190 | | | 4,703,234 | | | 151,651 | | Morgan Stanley | | A+ | | A1 | | 2,871,578 | | | 26,384 | | | 1,886,995 | | | 41,253 | | Royal Bank of Canada | | AA- | | A2 | | 1,440,582 | | | 31,525 | | | 2,565,202 | | | 101,511 | | Societe Generale | | A | | A1 | | 1,612,361 | | | 14,632 | | | 3,280,286 | | | 139,101 | | Truist | | A | | A2 | | 2,579,446 | | | 77,930 | | | 2,051,229 | | | 74,910 | | | | | | | | | | | | | | | Wells Fargo | | A+ | | Aa2 | | 5,251,699 | | | 151,799 | | | 4,221,408 | | | 163,520 | | Exchange traded | | | | | | 173,879 | | | 2,469 | | | 191,948 | | | 5,193 | | | | | | | | $ | 38,938,332 | | | $ | 874,741 | | | $ | 40,047,196 | | | $ | 1,355,989 | |
|