Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Carrying Amounts and Fair Values of Financial Instruments

The following sets forth a comparison of the carrying amounts and fair values of our financial instruments:


	June 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities, available for sale	$	46,659,256	$	46,659,256	$	47,538,893	$	47,538,893
Mortgage loans on real estate	4,299,945		4,457,553		4,165,489		4,327,885
Real estate investments	258,237		258,237		—		—
Derivative instruments	1,459,965		1,459,965		1,310,954		1,310,954
Other investments	962,305		962,305		590,078		590,078
Cash and cash equivalents	11,524,265		11,524,265		9,095,522		9,095,522
Coinsurance deposits	4,441,950		4,077,954		4,844,927		4,411,051




Liabilities
Policy benefit reserves	64,182,610		55,231,714		61,406,599		52,928,174
Single premium immediate annuity (SPIA) benefit reserves	233,331		240,541		240,226		247,679
Notes payable	495,955		565,760		495,668		567,345
Subordinated debentures	78,264		86,214		78,112		87,951

Assets and Liabilities Measured at Fair Value on a Recurring Basis, By Fair Value Hierarchy Level

Our assets and liabilities which are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are presented below based on the fair value hierarchy levels:


	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
June 30, 2021
Assets
Fixed maturity securities, available for sale:
United States Government full faith and credit	$	38,879	$	33,257	$	5,622	$	—
United States Government sponsored agencies	1,046,186		—		1,046,186		—
United States municipalities, states and territories	3,700,225		—		3,700,225		—
Foreign government obligations	197,330		—		197,330		—
Corporate securities	31,455,817		14		31,455,803		—
Residential mortgage backed securities	1,192,423		—		1,192,423		—
Commercial mortgage backed securities	4,175,517		—		4,175,517		—
Other asset backed securities	4,852,879		—		4,852,879		—
Other investments: equity securities	356,942		350,000		6,942		—
Real estate investments	258,237		—		—		258,237
Derivative instruments	1,459,965		—		1,459,965		—
Cash and cash equivalents	11,524,265		11,524,265		—		—



	$	60,258,665	$	11,907,536	$	48,092,892	$	258,237
Liabilities

Fixed index annuities - embedded derivatives	$	8,384,764	$	—	$	—	$	8,384,764


December 31, 2020
Assets
Fixed maturity securities, available for sale:
United States Government full faith and credit	$	39,771	$	33,940	$	5,831	$	—
United States Government sponsored agencies	1,039,551		—		1,039,551		—
United States municipalities, states and territories	3,776,131		—		3,776,131		—
Foreign government obligations	202,706		—		202,706		—
Corporate securities	31,156,827		8		31,156,819		—
Residential mortgage backed securities	1,512,831		—		1,512,831		—
Commercial mortgage backed securities	4,261,227		—		4,261,227		—
Other asset backed securities	5,549,849		—		5,549,849		—


Derivative instruments	1,310,954		—		1,310,954		—
Cash and cash equivalents	9,095,522		9,095,522		—		—



	$	57,945,369	$	9,129,470	$	48,815,899	$	—
Liabilities

Fixed index annuities - embedded derivatives	$	7,938,281	$	—	$	—	$	7,938,281

Schedule of Assumptions Used in Estimating Fair Value

The following table presents average lapse rate and partial withdrawal rate assumptions, by contract duration, used in estimating the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each reporting date:


	Average Lapse Rates		Average Partial Withdrawal Rates
Contract Duration (Years)	June 30, 2021	December 31, 2020	June 30, 2021	December 31, 2020
1 - 5	1.28%	1.22%	2.61%	2.63%
6 - 10	1.51%	1.50%	3.12%	3.14%
11 - 15	6.03%	5.66%	3.59%	3.58%
16 - 20	6.56%	7.08%	3.83%	3.79%
20+	7.72%	7.36%	3.64%	3.63%

Assets and Liabilities Measured at Fair Value on Recurring Basis, Level 3 Reconciliation

The following table provides a reconciliation of the beginning and ending balances for our Level 3 assets and liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	7,680,951	$	8,451,482	$	7,938,281	$	9,624,395
Premiums less benefits	577,729		53,019		697,520		165,177
Change in fair value, net	126,084		913,984		(251,037)		(371,087)
Ending balance	$	8,384,764	$	9,418,485	$	8,384,764	$	9,418,485

Real estate investments
Beginning balance	$	—	$	—	$	—	$	—
Purchases and sales, net	258,237		—		258,237		—
Change in fair value	—		—		—		—
Ending balance	$	258,237	$	—	$	258,237	$	—