þ | 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 |
New York | 13-3690700 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
285 Madison Avenue, 14th Floor, New York, N.Y. | 10017 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ¨ | Accelerated filer ¨ | |
Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company ¨ | |
Emerging growth company ¨ |
Page | ||
Item 1. | Financial Statements (at September 30, 2017 (Unaudited) and December 31, 2016 and for the Three Months and Nine Months Ended September 30, 2017 and 2016 (Unaudited)) | |
Item 2. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 4. | ||
Item 6. | ||
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $1,969,427 and $1,870,654, respectively) | $ | 2,020,204 | $ | 1,878,514 | ||||
Mortgage loans (net of valuation allowances of $1,679 and $1,775, respectively) | 390,470 | 406,085 | ||||||
Other invested assets, at estimated fair value | 5,366 | 8,656 | ||||||
Total investments | 2,416,040 | 2,293,255 | ||||||
Cash and cash equivalents, principally at estimated fair value | 92,011 | 18,583 | ||||||
Accrued investment income | 19,587 | 16,626 | ||||||
Premiums, reinsurance and other receivables | 569,094 | 354,939 | ||||||
Deferred policy acquisition costs and value of business acquired | 126,035 | 85,173 | ||||||
Current income tax recoverable | 60,754 | 57,736 | ||||||
Other assets | 37,545 | 48,285 | ||||||
Separate account assets | 4,957,400 | 4,758,449 | ||||||
Total assets | $ | 8,278,466 | $ | 7,633,046 | ||||
Liabilities and Stockholder's Equity | ||||||||
Liabilities | ||||||||
Future policy benefits | $ | 665,112 | $ | 627,007 | ||||
Policyholder account balances | 1,269,047 | 1,202,350 | ||||||
Other policy-related balances | 12,686 | 7,285 | ||||||
Payables for collateral under derivative transactions | 6,584 | 8,942 | ||||||
Deferred income tax liability | 194,253 | 219,839 | ||||||
Other liabilities | 495,046 | 112,441 | ||||||
Separate account liabilities | 4,957,400 | 4,758,449 | ||||||
Total liabilities | 7,600,128 | 6,936,313 | ||||||
Contingencies, Commitments and Guarantees (Note 9) | ||||||||
Stockholder's Equity | ||||||||
Common stock, par value $10 per share; 200,000 shares authorized, issued and outstanding | 2,000 | 2,000 | ||||||
Additional paid-in capital | 340,931 | 340,931 | ||||||
Retained earnings | 312,655 | 349,395 | ||||||
Accumulated other comprehensive income (loss) | 22,752 | 4,407 | ||||||
Total stockholder's equity | 678,338 | 696,733 | ||||||
Total liabilities and stockholder's equity | $ | 8,278,466 | $ | 7,633,046 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 12,229 | $ | 11,769 | $ | 14,604 | $ | 41,473 | ||||||||
Universal life and investment-type product policy fees | 25,621 | 26,129 | 77,472 | 77,366 | ||||||||||||
Net investment income | 21,517 | 13,227 | 63,468 | 39,960 | ||||||||||||
Other revenues | (12,479 | ) | (4,873 | ) | (34,090 | ) | (13,559 | ) | ||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | — | — | — | (870 | ) | |||||||||||
Other net investment gains (losses) | (674 | ) | 425 | (1,045 | ) | (1,304 | ) | |||||||||
Total net investment gains (losses) | (674 | ) | 425 | (1,045 | ) | (2,174 | ) | |||||||||
Net derivative gains (losses) | (34,583 | ) | 5,004 | (149,697 | ) | 153,655 | ||||||||||
Total revenues | 11,631 | 51,681 | (29,288 | ) | 296,721 | |||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 17,609 | 6,737 | (2,396 | ) | 45,935 | |||||||||||
Interest credited to policyholder account balances | 10,030 | 10,095 | 29,414 | 30,485 | ||||||||||||
Amortization of deferred policy acquisition costs and value of business acquired | (21,186 | ) | 9,143 | (39,984 | ) | 56,347 | ||||||||||
Other expenses | 16,076 | 13,472 | 47,676 | 42,010 | ||||||||||||
Total expenses | 22,529 | 39,447 | 34,710 | 174,777 | ||||||||||||
Income (loss) before provision for income tax | (10,898 | ) | 12,234 | (63,998 | ) | 121,944 | ||||||||||
Provision for income tax expense (benefit) | (6,058 | ) | 4,234 | (27,258 | ) | 39,741 | ||||||||||
Net income (loss) | $ | (4,840 | ) | $ | 8,000 | $ | (36,740 | ) | $ | 82,203 | ||||||
Comprehensive income (loss) | $ | (3,054 | ) | $ | 11,595 | $ | (18,395 | ) | $ | 131,433 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholder's Equity | |||||||||||||||
Balance at December 31, 2016 | $ | 2,000 | $ | 340,931 | $ | 349,395 | $ | 4,407 | $ | 696,733 | |||||||||
Net income (loss) | (36,740 | ) | (36,740 | ) | |||||||||||||||
Other comprehensive income (loss), net of income tax | 18,345 | 18,345 | |||||||||||||||||
Balance at September 30, 2017 | $ | 2,000 | $ | 340,931 | $ | 312,655 | $ | 22,752 | $ | 678,338 | |||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholder's Equity | |||||||||||||||
Balance at December 31, 2015 | $ | 2,000 | $ | 340,931 | $ | 258,985 | $ | 5,406 | $ | 607,322 | |||||||||
Net income (loss) | 82,203 | 82,203 | |||||||||||||||||
Other comprehensive income (loss), net of income tax | 49,230 | 49,230 | |||||||||||||||||
Balance at September 30, 2016 | $ | 2,000 | $ | 340,931 | $ | 341,188 | $ | 54,636 | $ | 738,755 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net cash provided by (used in) operating activities | $ | 100,188 | $ | 177,882 | |||
Cash flows from investing activities | |||||||
Sales, maturities and repayments of: | |||||||
Fixed maturity securities | 448,565 | 86,588 | |||||
Mortgage loans | 27,534 | 35,170 | |||||
Purchases of: | |||||||
Fixed maturity securities | (550,202 | ) | (161,399 | ) | |||
Mortgage loans | (10,996 | ) | (36,532 | ) | |||
Cash received in connection with freestanding derivatives | 652 | 5 | |||||
Cash paid in connection with freestanding derivatives | — | (25 | ) | ||||
Net change in short-term investments | (10 | ) | (11,984 | ) | |||
Net change in other invested assets | (5 | ) | 4 | ||||
Other, net | — | 183 | |||||
Net cash provided by (used in) investing activities | (84,462 | ) | (87,990 | ) | |||
Cash flows from financing activities | |||||||
Policyholder account balances: | |||||||
Deposits | 156,291 | 38,195 | |||||
Withdrawals | (96,231 | ) | (121,726 | ) | |||
Net change in payables for collateral under derivative transactions | (2,358 | ) | 4,150 | ||||
Net cash provided by (used in) financing activities | 57,702 | (79,381 | ) | ||||
Change in cash and cash equivalents | 73,428 | 10,511 | |||||
Cash and cash equivalents, beginning of period | 18,583 | 9,310 | |||||
Cash and cash equivalents, end of period | $ | 92,011 | $ | 19,821 | |||
Supplemental disclosures of cash flow information | |||||||
Net cash paid (received) for: | |||||||
Income tax | $ | 11,512 | $ | — |
• | Net investment gains (losses); |
• | Net derivative gains (losses) except earned income on derivatives that are hedges of investments but do not qualify for hedge accounting treatment; and |
• | Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”). |
• | Benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and |
• | Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments. |
Operating Results | ||||||||||||||||
Three Months Ended September 30, 2017 | Annuities | Life | Corporate & Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Pre-tax operating earnings (loss) | $ | 32,517 | $ | (6,754 | ) | $ | 1,185 | $ | 26,948 | |||||||
Provision for income tax expense (benefit) | 9,451 | (2,364 | ) | 100 | 7,187 | |||||||||||
Operating earnings (loss) | $ | 23,066 | $ | (4,390 | ) | $ | 1,085 | 19,761 | ||||||||
Adjustments for: | ||||||||||||||||
Net investment gains (losses) | (674 | ) | ||||||||||||||
Net derivative gains (losses) | (34,583 | ) | ||||||||||||||
Other adjustments to net income | (2,589 | ) | ||||||||||||||
Provision for income tax (expense) benefit | 13,245 | |||||||||||||||
Net income (loss) | $ | (4,840 | ) | |||||||||||||
Inter-segment revenues | $ | (9,956 | ) | $ | (7,158 | ) | $ | (128 | ) | |||||||
Interest revenue | $ | 13,865 | $ | 5,178 | $ | 2,554 |
Operating Results | ||||||||||||||||
Three Months Ended September 30, 2016 | Annuities | Life | Corporate & Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Pre-tax operating earnings (loss) | $ | 7,039 | $ | 1,125 | $ | 2,364 | $ | 10,528 | ||||||||
Provision for income tax expense (benefit) | 1,709 | 393 | 1,685 | 3,787 | ||||||||||||
Operating earnings (loss) | $ | 5,330 | $ | 732 | $ | 679 | 6,741 | |||||||||
Adjustments for: | ||||||||||||||||
Net investment gains (losses) | 425 | |||||||||||||||
Net derivative gains (losses) | 5,004 | |||||||||||||||
Other adjustments to net income | (3,723 | ) | ||||||||||||||
Provision for income tax (expense) benefit | (447 | ) | ||||||||||||||
Net income (loss) | $ | 8,000 | ||||||||||||||
Inter-segment revenues | $ | (2,216 | ) | $ | (10,146 | ) | $ | (369 | ) | |||||||
Interest revenue | $ | 5,470 | $ | 4,389 | $ | 3,441 |
Operating Results | ||||||||||||||||
Nine Months Ended September 30, 2017 | Annuities | Life | Corporate & Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Pre-tax operating earnings (loss) | $ | 54,304 | $ | (2,742 | ) | $ | 6,752 | $ | 58,314 | |||||||
Provision for income tax expense (benefit) | 14,710 | (959 | ) | 1,800 | 15,551 | |||||||||||
Operating earnings (loss) | $ | 39,594 | $ | (1,783 | ) | $ | 4,952 | 42,763 | ||||||||
Adjustments for: | ||||||||||||||||
Net investment gains (losses) | (1,045 | ) | ||||||||||||||
Net derivative gains (losses) | (149,697 | ) | ||||||||||||||
Other adjustments to net income | 28,430 | |||||||||||||||
Provision for income tax (expense) benefit | 42,809 | |||||||||||||||
Net income (loss) | $ | (36,740 | ) | |||||||||||||
Inter-segment revenues | $ | (29,770 | ) | $ | (40,407 | ) | $ | (748 | ) | |||||||
Interest revenue | $ | 42,735 | $ | 13,783 | $ | 7,189 |
Operating Results | ||||||||||||||||
Nine Months Ended September 30, 2016 | Annuities | Life | Corporate & Other | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Pre-tax operating earnings (loss) | $ | 11,072 | $ | 5,342 | $ | 7,656 | $ | 24,070 | ||||||||
Provision for income tax expense (benefit) | 326 | 1,869 | 3,290 | 5,485 | ||||||||||||
Operating earnings (loss) | $ | 10,746 | $ | 3,473 | $ | 4,366 | 18,585 | |||||||||
Adjustments for: | ||||||||||||||||
Net investment gains (losses) | (2,174 | ) | ||||||||||||||
Net derivative gains (losses) | 153,655 | |||||||||||||||
Other adjustments to net income | (53,607 | ) | ||||||||||||||
Provision for income tax (expense) benefit | (34,256 | ) | ||||||||||||||
Net income (loss) | $ | 82,203 | ||||||||||||||
Inter-segment revenues | $ | (5,350 | ) | $ | (30,516 | ) | $ | (1,143 | ) | |||||||
Interest revenue | $ | 16,354 | $ | 13,241 | $ | 10,558 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Annuities | $ | 25,535 | $ | 26,147 | $ | 79,271 | $ | 85,309 | ||||||||
Life | 14,640 | 12,605 | 22,904 | 37,253 | ||||||||||||
Corporate & Other | 3,236 | 3,952 | 8,875 | 12,063 | ||||||||||||
Adjustments | (31,780 | ) | 8,977 | (140,338 | ) | 162,096 | ||||||||||
Total | $ | 11,631 | $ | 51,681 | $ | (29,288 | ) | $ | 296,721 |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Annuities | $ | 7,072,659 | $ | 6,708,803 | |||
Life | 677,134 | 342,592 | |||||
Corporate & Other | 528,673 | 581,651 | |||||
Total | $ | 8,278,466 | $ | 7,633,046 |
September 30, 2017 | December 31, 2016 | ||||||||||||||||
In the Event of Death | At Annuitization | In the Event of Death | At Annuitization | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Annuity Contracts (1), (2) | |||||||||||||||||
Variable Annuity Guarantees | |||||||||||||||||
Total account value (3) | $ | 4,957,498 | $ | 4,109,524 | $ | 4,763,943 | $ | 3,969,485 | |||||||||
Separate account value | $ | 4,950,618 | $ | 4,108,620 | $ | 4,753,638 | $ | 3,968,482 | |||||||||
Net amount at risk | $ | 6,173 | (4) | $ | 192,765 | (5) | $ | 36,827 | (4) | $ | 209,926 | (5) | |||||
Average attained age of contractholders | 67 years | 66 years | 66 years | 65 years |
(1) | The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. |
(2) | Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 of the Notes to the Financial Statements included in the 2016 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured. |
(3) | Includes the contractholder’s investments in the general account and separate account, if applicable. |
(4) | Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death. |
(5) | Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved. |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized | Estimated Fair Value | Amortized Cost | Gross Unrealized | Estimated Fair Value | ||||||||||||||||||||||||||||||||||
Gains | Temporary Losses | OTTI Losses | Gains | Temporary Losses | OTTI Losses | ||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
U.S. corporate | $ | 720,553 | $ | 28,593 | $ | 2,105 | $ | — | $ | 747,041 | $ | 709,694 | $ | 20,400 | $ | 8,283 | $ | — | $ | 721,811 | |||||||||||||||||||
U.S. government and agency | 443,711 | 14,289 | 5,650 | — | 452,350 | 410,504 | 9,560 | 13,519 | — | 406,545 | |||||||||||||||||||||||||||||
RMBS | 212,444 | 5,217 | 1,551 | — | 216,110 | 238,676 | 2,033 | 2,322 | — | 238,387 | |||||||||||||||||||||||||||||
Foreign corporate | 280,640 | 6,845 | 4,270 | — | 283,215 | 237,412 | 2,998 | 8,070 | — | 232,340 | |||||||||||||||||||||||||||||
CMBS | 190,873 | 3,963 | 1,006 | — | 193,830 | 177,719 | 2,724 | 1,487 | — | 178,956 | |||||||||||||||||||||||||||||
State and political subdivision | 55,652 | 6,235 | 365 | — | 61,522 | 52,739 | 4,345 | 764 | — | 56,320 | |||||||||||||||||||||||||||||
ABS | 52,203 | 129 | 108 | — | 52,224 | 26,695 | 152 | 177 | — | 26,670 | |||||||||||||||||||||||||||||
Foreign government | 13,351 | 586 | 25 | — | 13,912 | 17,215 | 543 | 273 | — | 17,485 | |||||||||||||||||||||||||||||
Total fixed maturity securities | $ | 1,969,427 | $ | 65,857 | $ | 15,080 | $ | — | $ | 2,020,204 | $ | 1,870,654 | $ | 42,755 | $ | 34,895 | $ | — | $ | 1,878,514 |
Due in One Year or Less | Due After One Year Through Five Years | Due After Five Years Through Ten Years | Due After Ten Years | Structured Securities | Total Fixed Maturity Securities | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Amortized cost | $ | 34,501 | $ | 316,515 | $ | 636,160 | $ | 526,731 | $ | 455,520 | $ | 1,969,427 | |||||||||||
Estimated fair value | $ | 34,926 | $ | 326,183 | $ | 644,560 | $ | 552,371 | $ | 462,164 | $ | 2,020,204 |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||||
Less than 12 Months | Equal to or Greater than 12 Months | Less than 12 Months | Equal to or Greater than 12 Months | ||||||||||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | ||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||
U.S. corporate | $ | 111,585 | $ | 1,668 | $ | 20,362 | $ | 437 | $ | 250,559 | $ | 6,667 | $ | 17,745 | $ | 1,616 | |||||||||||||||
U.S. government and agency | 307,530 | 5,121 | 7,589 | 529 | 342,150 | 13,519 | — | — | |||||||||||||||||||||||
RMBS | 52,418 | 1,485 | 4,287 | 66 | 137,470 | 2,089 | 6,822 | 233 | |||||||||||||||||||||||
Foreign corporate | 86,737 | 2,118 | 11,558 | 2,152 | 129,093 | 3,541 | 22,965 | 4,529 | |||||||||||||||||||||||
CMBS | 37,490 | 678 | 3,816 | 328 | 42,661 | 1,068 | 3,729 | 419 | |||||||||||||||||||||||
State and political subdivision | 11,349 | 365 | — | — | 20,709 | 764 | — | — | |||||||||||||||||||||||
ABS | 22,225 | 108 | — | — | 17,504 | 177 | — | — | |||||||||||||||||||||||
Foreign government | 391 | 8 | 976 | 17 | 7,189 | 148 | 868 | 125 | |||||||||||||||||||||||
Total fixed maturity securities | $ | 629,725 | $ | 11,551 | $ | 48,588 | $ | 3,529 | $ | 947,335 | $ | 27,973 | $ | 52,129 | $ | 6,922 | |||||||||||||||
Total number of securities in an unrealized loss position | 126 | 20 | 203 | 35 |
September 30, 2017 | December 31, 2016 | ||||||||||||
Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||
(Dollars in thousands) | |||||||||||||
Mortgage loans | |||||||||||||
Commercial | $ | 269,174 | 68.9 | % | $ | 286,002 | 70.4 | % | |||||
Agricultural | 122,975 | 31.5 | 121,858 | 30.0 | |||||||||
Subtotal | 392,149 | 100.4 | 407,860 | 100.4 | |||||||||
Valuation allowances | (1,679 | ) | (0.4 | ) | (1,775 | ) | (0.4 | ) | |||||
Total mortgage loans, net | $ | 390,470 | 100.0 | % | $ | 406,085 | 100.0 | % |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Commercial | Agricultural | Total | Commercial | Agricultural | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balance, beginning of period | $ | 1,419 | $ | 356 | $ | 1,775 | $ | 578 | $ | 62 | $ | 640 | ||||||||||||
Provision (release) | (101 | ) | 5 | (96 | ) | 50 | 17 | 67 | ||||||||||||||||
Balance, end of period | $ | 1,318 | $ | 361 | $ | 1,679 | $ | 628 | $ | 79 | $ | 707 |
Recorded Investment | ||||||||||||||||||
Debt Service Coverage Ratios | % of Total | |||||||||||||||||
> 1.20x | 1.00x - 1.20x | < 1.00x | Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
September 30, 2017 | ||||||||||||||||||
Loan-to-value ratios: | ||||||||||||||||||
Less than 65% | $ | 235,915 | $ | 23,619 | $ | — | $ | 259,534 | 96.4 | % | ||||||||
65% to 75% | 6,613 | — | — | 6,613 | 2.5 | |||||||||||||
76% to 80% | 3,027 | — | — | 3,027 | 1.1 | |||||||||||||
Total | $ | 245,555 | $ | 23,619 | $ | — | $ | 269,174 | 100.0 | % | ||||||||
December 31, 2016 | ||||||||||||||||||
Loan-to-value ratios: | ||||||||||||||||||
Less than 65% | $ | 259,711 | $ | 15,614 | $ | 999 | $ | 276,324 | 96.6 | % | ||||||||
65% to 75% | 9,678 | — | — | 9,678 | 3.4 | |||||||||||||
Total | $ | 269,389 | $ | 15,614 | $ | 999 | $ | 286,002 | 100.0 | % |
September 30, 2017 | December 31, 2016 | ||||||||||||
Recorded Investment | % of Total | Recorded Investment | % of Total | ||||||||||
(Dollars in thousands) | |||||||||||||
Loan-to-value ratios: | |||||||||||||
Less than 65% | $ | 122,062 | 99.3 | % | $ | 119,974 | 98.4 | % | |||||
65% to 75% | 913 | 0.7 | 1,884 | 1.6 | |||||||||
Total | $ | 122,975 | 100.0 | % | $ | 121,858 | 100.0 | % |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Fixed maturity securities | $ | 50,777 | $ | 7,862 | |||
Derivatives | 2,423 | 4,718 | |||||
Other | 4 | — | |||||
Subtotal | 53,204 | 12,580 | |||||
Amounts allocated from: | |||||||
DAC and DSI | (18,200 | ) | (5,800 | ) | |||
Deferred income tax benefit (expense) | (12,252 | ) | (2,373 | ) | |||
Net unrealized investment gains (losses) | $ | 22,752 | $ | 4,407 |
Nine Months Ended September 30, 2017 | |||
(In thousands) | |||
Balance, beginning of period | $ | 4,407 | |
Unrealized investment gains (losses) during the period | 40,624 | ||
Unrealized investment gains (losses) relating to: | |||
DAC and DSI | (12,400 | ) | |
Deferred income tax benefit (expense) | (9,879 | ) | |
Balance, end of period | $ | 22,752 | |
Change in net unrealized investment gains (losses) | $ | 18,345 |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Invested assets on deposit (regulatory deposits) | $ | 1,541 | $ | 1,507 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount | Maximum Exposure to Loss (1) | Carrying Amount | Maximum Exposure to Loss (1) | ||||||||||||
(In thousands) | |||||||||||||||
Fixed maturity securities AFS: | |||||||||||||||
Structured Securities (2) | $ | 436,645 | $ | 436,645 | $ | 444,013 | $ | 444,013 | |||||||
Foreign corporate | 6,262 | 6,262 | 5,884 | 5,884 | |||||||||||
Total | $ | 442,907 | $ | 442,907 | $ | 449,897 | $ | 449,897 |
(1) | The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer. |
(2) | For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-backed securities issued by trusts that do not have substantial equity. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Investment income: | |||||||||||||||
Fixed maturity securities | $ | 17,870 | $ | 11,801 | $ | 52,452 | $ | 35,654 | |||||||
Mortgage loans | 4,110 | 1,727 | 12,636 | 5,240 | |||||||||||
Policy loans | 4 | 4 | 5 | 5 | |||||||||||
Cash, cash equivalents and short-term investments | 16 | 24 | 129 | 71 | |||||||||||
Other | 318 | 141 | 598 | 340 | |||||||||||
Subtotal | 22,318 | 13,697 | 65,820 | 41,310 | |||||||||||
Less: Investment expenses | 801 | 470 | 2,352 | 1,350 | |||||||||||
Net investment income | $ | 21,517 | $ | 13,227 | $ | 63,468 | $ | 39,960 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Total gains (losses) on fixed maturity securities: | |||||||||||||||
Total OTTI losses recognized — by sector and industry: | |||||||||||||||
U.S. and foreign corporate securities — by industry: | |||||||||||||||
Industrial | $ | — | $ | — | $ | — | $ | (870 | ) | ||||||
OTTI losses on fixed maturity securities recognized in earnings | — | — | — | (870 | ) | ||||||||||
Fixed maturity securities — net gains (losses) on sales and disposals | (711 | ) | 397 | (1,683 | ) | (1,295 | ) | ||||||||
Total gains (losses) on fixed maturity securities | (711 | ) | 397 | (1,683 | ) | (2,165 | ) | ||||||||
Equity securities — net gains (losses) on sales and disposals | — | — | — | 6 | |||||||||||
Mortgage loans | 6 | 87 | 41 | (40 | ) | ||||||||||
Other | 31 | (59 | ) | 597 | 25 | ||||||||||
Total net investment gains (losses) | $ | (674 | ) | $ | 425 | $ | (1,045 | ) | $ | (2,174 | ) |
Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Fixed Maturity Securities | Equity Securities | ||||||||||||||
(In thousands) | |||||||||||||||
Proceeds | $ | 214,635 | $ | 14,717 | $ | — | $ | — | |||||||
Gross investment gains | $ | 512 | $ | 646 | $ | — | $ | — | |||||||
Gross investment losses | (1,223 | ) | (249 | ) | — | — | |||||||||
OTTI losses | — | — | — | — | |||||||||||
Net investment gains (losses) | $ | (711 | ) | $ | 397 | $ | — | $ | — |
Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Fixed Maturity Securities | Equity Securities | ||||||||||||||
(In thousands) | |||||||||||||||
Proceeds | $ | 384,736 | $ | 44,566 | $ | — | $ | 183 | |||||||
Gross investment gains | $ | 1,527 | $ | 1,006 | $ | — | $ | 6 | |||||||
Gross investment losses | (3,210 | ) | (2,301 | ) | — | — | |||||||||
OTTI losses | — | (870 | ) | — | — | ||||||||||
Net investment gains (losses) | $ | (1,683 | ) | $ | (2,165 | ) | $ | — | $ | 6 |
• | Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in other comprehensive income (loss) (“OCI”) (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses). |
• | the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings; |
• | the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and |
• | a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument. |
September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Primary Underlying Risk Exposure | Gross Notional Amount | Estimated Fair Value | Gross Notional Amount | Estimated Fair Value | |||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||||
Cash flow hedges: | |||||||||||||||||||||||||
Foreign currency swaps | Foreign currency exchange rate | $ | 53,371 | $ | 2,674 | $ | 559 | $ | 33,930 | $ | 4,947 | $ | — | ||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||||||||
Foreign currency swaps | Foreign currency exchange rate | 16,299 | 2,692 | 149 | 14,063 | 3,709 | — | ||||||||||||||||||
Total | $ | 69,670 | $ | 5,366 | $ | 708 | $ | 47,993 | $ | 8,656 | $ | — |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Freestanding derivatives and hedging gains (losses) (1) | $ | (329 | ) | $ | 71 | $ | (475 | ) | $ | 2,245 | ||||||
Embedded derivatives gains (losses) | (34,254 | ) | 4,933 | (149,222 | ) | 151,410 | ||||||||||
Total net derivative gains (losses) | $ | (34,583 | ) | $ | 5,004 | $ | (149,697 | ) | $ | 153,655 |
(1) | Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note. |
September 30, 2017 | December 31, 2016 | |||||||||||||||
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement | Assets | Liabilities | Assets | Liabilities | ||||||||||||
(In thousands) | ||||||||||||||||
Gross estimated fair value of derivatives: | ||||||||||||||||
OTC-bilateral (1) | $ | 5,598 | $ | 674 | $ | 8,850 | $ | — | ||||||||
Total gross estimated fair value of derivatives (1) | 5,598 | 674 | 8,850 | — | ||||||||||||
Amounts offset on the balance sheets | — | — | — | — | ||||||||||||
Estimated fair value of derivatives presented on the balance sheets (1) | 5,598 | 674 | 8,850 | — | ||||||||||||
Gross amounts not offset on the balance sheets: | ||||||||||||||||
Gross estimated fair value of derivatives: (2) | ||||||||||||||||
OTC-bilateral | (674 | ) | (674 | ) | — | — | ||||||||||
Cash collateral: (3) | ||||||||||||||||
OTC-bilateral | (4,857 | ) | — | (8,672 | ) | — | ||||||||||
Securities collateral: (4) | ||||||||||||||||
OTC-bilateral | — | — | — | — | ||||||||||||
Net amount after application of master netting agreements and collateral | $ | 67 | $ | — | $ | 178 | $ | — |
(1) | At September 30, 2017 and December 31, 2016, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $232 thousand and $194 thousand, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($34) thousand and $0, respectively. |
(2) | Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals. |
(3) | Cash collateral received is included in cash and cash equivalents or in short-term investments, and the obligation to return it is included in payables for collateral transactions on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2017 and December 31, 2016, the Company received excess cash collateral of $1.7 million and $270 thousand, respectively, and did not provide any excess cash collateral, which is not included in the table above due to the foregoing limitation. |
(4) | Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2017, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2017 and December 31, 2016, the Company did not receive excess securities collateral. At September 30, 2017 and December 31, 2016, the Company provided excess securities collateral with an estimated fair value of $315 thousand and $0, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. |
Balance Sheet Location | September 30, 2017 | December 31, 2016 | |||||||
(In thousands) | |||||||||
Embedded derivatives within asset host contracts: | |||||||||
Ceded guaranteed minimum benefits | Premiums, reinsurance and other receivables | $ | 321,524 | $ | 379,297 | ||||
Embedded derivatives within liability host contracts: | |||||||||
Direct guaranteed minimum benefits | Policyholder account balances | $ | (44,099 | ) | $ | (23,740 | ) | ||
Fixed annuities with equity indexed returns | Policyholder account balances | 4,600 | — | ||||||
Embedded derivatives within liability host contracts | $ | (39,499 | ) | $ | (23,740 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Net derivative gains (losses) (1), (2) | $ | (34,254 | ) | $ | 4,933 | $ | (149,222 | ) | $ | 151,410 |
(1) | The valuation of direct guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were $1.7 million and $1.0 million for the three months and nine months ended September 30, 2017, respectively, and ($593) thousand and $2.6 million for the three months and nine months ended September 30, 2016, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($43.6) million and ($32.8) million for the three months and nine months ended September 30, 2017, respectively, and $5.6 million and ($50.9) million for the three months and nine months ended September 30, 2016, respectively. |
(2) | See Note 10 for discussion of related party net derivative gains (losses). |
September 30, 2017 | |||||||||||||||
Fair Value Hierarchy | Total Estimated Fair Value | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
(In thousands) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
U.S. corporate | $ | — | $ | 692,907 | $ | 54,134 | $ | 747,041 | |||||||
U.S. government and agency | 328,860 | 123,490 | — | 452,350 | |||||||||||
RMBS | — | 202,001 | 14,109 | 216,110 | |||||||||||
Foreign corporate | — | 248,270 | 34,945 | 283,215 | |||||||||||
CMBS | — | 188,567 | 5,263 | 193,830 | |||||||||||
State and political subdivision | — | 61,522 | — | 61,522 | |||||||||||
ABS | — | 47,298 | 4,926 | 52,224 | |||||||||||
Foreign government | — | 13,912 | — | 13,912 | |||||||||||
Total fixed maturity securities | 328,860 | 1,577,967 | 113,377 | 2,020,204 | |||||||||||
Derivative assets: (1) | |||||||||||||||
Foreign currency exchange rate | — | 5,366 | — | 5,366 | |||||||||||
Total derivative assets | — | 5,366 | — | 5,366 | |||||||||||
Embedded derivatives within asset host contracts (2) | — | — | 321,524 | 321,524 | |||||||||||
Separate account assets (3) | — | 4,957,400 | — | 4,957,400 | |||||||||||
Total assets | $ | 328,860 | $ | 6,540,733 | $ | 434,901 | $ | 7,304,494 | |||||||
Liabilities | |||||||||||||||
Derivative liabilities: (1) | |||||||||||||||
Foreign currency exchange rate | $ | — | $ | 708 | $ | — | $ | 708 | |||||||
Embedded derivatives within liability host contracts (2) | — | — | (39,499 | ) | (39,499 | ) | |||||||||
Total liabilities | $ | — | $ | 708 | $ | (39,499 | ) | $ | (38,791 | ) |
December 31, 2016 | |||||||||||||||
Fair Value Hierarchy | Total Estimated Fair Value | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
(In thousands) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
U.S. corporate | $ | — | $ | 681,406 | $ | 40,405 | $ | 721,811 | |||||||
U.S. government and agency | 289,186 | 117,359 | — | 406,545 | |||||||||||
RMBS | — | 217,091 | 21,296 | 238,387 | |||||||||||
Foreign corporate | — | 200,454 | 31,886 | 232,340 | |||||||||||
CMBS | — | 173,763 | 5,193 | 178,956 | |||||||||||
State and political subdivision | — | 56,320 | — | 56,320 | |||||||||||
ABS | — | 21,736 | 4,934 | 26,670 | |||||||||||
Foreign government | — | 17,485 | — | 17,485 | |||||||||||
Total fixed maturity securities | 289,186 | 1,485,614 | 103,714 | 1,878,514 | |||||||||||
Derivative assets: (1) | |||||||||||||||
Foreign currency exchange rate | — | 8,656 | — | 8,656 | |||||||||||
Total derivative assets | — | 8,656 | — | 8,656 | |||||||||||
Embedded derivatives within asset host contracts (2) | — | — | 379,297 | 379,297 | |||||||||||
Separate account assets (3) | — | 4,758,449 | — | 4,758,449 | |||||||||||
Total assets | $ | 289,186 | $ | 6,252,719 | $ | 483,011 | $ | 7,024,916 | |||||||
Liabilities | |||||||||||||||
Derivative liabilities: (1) | |||||||||||||||
Foreign currency exchange rate | $ | — | $ | — | $ | — | $ | — | |||||||
Embedded derivatives within liability host contracts (2) | — | — | (23,740 | ) | (23,740 | ) | |||||||||
Total liabilities | $ | — | $ | — | $ | (23,740 | ) | $ | (23,740 | ) |
(1) | Derivative assets are presented within other invested assets on the balance sheets and derivative liabilities are presented within other liabilities on the balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the balance sheets. |
(2) | Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the balance sheets. |
(3) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. |
Instrument | Level 2 Observable Inputs | Level 3 Unobservable Inputs | |||
Fixed Maturity Securities | |||||
U.S. corporate and Foreign corporate securities | |||||
Valuation Approaches: Principally the market and income approaches. | Valuation Approaches: Principally the market approach. | ||||
Key Inputs: | Key Inputs: | ||||
• | quoted prices in markets that are not active | • | illiquidity premium | ||
• | benchmark yields; spreads off benchmark yields; new issuances; issuer rating | • | delta spread adjustments to reflect specific credit-related issues | ||
• | trades of identical or comparable securities; duration | • | credit spreads | ||
• | Privately-placed securities are valued using the additional key inputs: | • | quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2 | ||
• | market yield curve; call provisions | ||||
• | observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer | • | independent non-binding broker quotations | ||
• | delta spread adjustments to reflect specific credit-related issues | ||||
U.S. government and agency, State and political subdivision and Foreign government securities | |||||
Valuation Approaches: Principally the market approach. | • | N/A | |||
Key Inputs: | |||||
• | quoted prices in markets that are not active | ||||
• | benchmark U.S. Treasury yield or other yields | ||||
• | the spread off the U.S. Treasury yield curve for the identical security | ||||
• | issuer ratings and issuer spreads; broker-dealer quotes | ||||
• | comparable securities that are actively traded | ||||
Structured Securities | |||||
Valuation Approaches: Principally the market and income approaches. | Valuation Approaches: Principally the market and income approaches. | ||||
Key Inputs: | Key Inputs: | ||||
• | quoted prices in markets that are not active | • | credit spreads | ||
• | spreads for actively traded securities; spreads off benchmark yields | • | quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2 | ||
• | expected prepayment speeds and volumes | ||||
• | current and forecasted loss severity; ratings; geographic region | • | independent non-binding broker quotations | ||
• | weighted average coupon and weighted average maturity | ||||
• | average delinquency rates; debt-service coverage ratios | ||||
• | issuance-specific information, including, but not limited to: | ||||
• | collateral type; structure of the security; vintage of the loans | ||||
• | payment terms of the underlying assets | ||||
• | payment priority within the tranche; deal performance | ||||
Separate Account Assets (1) | |||||
Mutual funds without readily determinable fair values as prices are not published publicly | |||||
Key Input: | • | N/A | |||
• | quoted prices or reported net asset value provided by the fund managers |
(1) | Estimated fair value equals carrying value, based on the value of the underlying assets, including mutual funds. |
Instrument | Foreign Currency Exchange Rate | |
Inputs common to Level 2 by instrument type | • | swap yield curves |
• | basis curves | |
• | currency spot rates | |
• | cross currency basis curves |
September 30, 2017 | December 31, 2016 | Impact of Increase in Input on Estimated Fair Value (2) | |||||||||||||||||
Valuation Techniques | Significant Unobservable Inputs | Range | Weighted Average (1) | Range | Weighted Average (1) | ||||||||||||||
Fixed maturity securities (3) | |||||||||||||||||||
U.S. corporate and foreign corporate | • | Matrix pricing | • | Offered quotes (4) | 96 | - | 140 | 107 | 94 | - | 136 | 107 | Increase | ||||||
• | Market pricing | • | Quoted prices (4) | 74 | - | 110 | 98 | 75 | - | 110 | 97 | Increase | |||||||
RMBS | • | Market pricing | • | Quoted prices (4) | 59 | - | 100 | 83 | 56 | - | 111 | 86 | Increase (5) | ||||||
CMBS | • | Market pricing | • | Quoted prices (4) | 104 | - | 104 | 104 | Increase (5) | ||||||||||
Embedded derivatives | |||||||||||||||||||
Direct and ceded guaranteed minimum benefits | • | Option pricing techniques | • | Mortality rates: | |||||||||||||||
Ages 0 - 40 | 0% | - | 0.09% | 0% | - | 0.09% | Decrease (6) | ||||||||||||
Ages 41 - 60 | 0.04% | - | 0.65% | 0.04% | - | 0.65% | Decrease (6) | ||||||||||||
Ages 61 - 115 | 0.26% | - | 100% | 0.26% | - | 100% | Decrease (6) | ||||||||||||
• | Lapse rates: | ||||||||||||||||||
Durations 1 - 10 | 0.25% | - | 100% | 0.25% | - | 100% | Decrease (7) | ||||||||||||
Durations 11 - 20 | 2% | - | 100% | 2% | - | 100% | Decrease (7) | ||||||||||||
Durations 21 - 116 | 2% | - | 100% | 2% | - | 100% | Decrease (7) | ||||||||||||
• | Utilization rates | 0% | - | 25% | 0% | - | 25% | Increase (8) | |||||||||||
• | Withdrawal rates | 0.25% | - | 10% | 0.25% | - | 10% | (9) | |||||||||||
• | Long-term equity volatilities | 17.40% | - | 25% | 17.40% | - | 25% | Increase (10) | |||||||||||
• | Nonperformance risk spread | 0.66% | - | 1.59% | 0.04% | - | 0.57% | Decrease (11) |
(1) | The weighted average for fixed maturity securities is determined based on the estimated fair value of the securities. |
(2) | The impact of a decrease in input would have the opposite impact on estimated fair value. For embedded derivatives, changes to direct guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions. |
(3) | Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations. |
(4) | Range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par. |
(5) | Changes in the assumptions used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates. |
(6) | Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. |
(7) | Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. |
(8) | The utilization rate assumption estimates the percentage of contractholders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. |
(9) | The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value. |
(10) | Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. |
(11) | Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative. |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||
Fixed Maturity Securities | ||||||||||||
Corporate (1) | Structured Securities | Net Embedded Derivatives (2) | ||||||||||
(In thousands) | ||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||
Balance, beginning of period | $ | 83,981 | $ | 27,860 | $ | 401,443 | ||||||
Total realized/unrealized gains (losses) included in net income (loss) (3) (4) | (19 | ) | 105 | (34,254 | ) | |||||||
Total realized/unrealized gains (losses) included in AOCI | 788 | 107 | — | |||||||||
Purchases (5) | 4,895 | — | — | |||||||||
Sales (5) | (566 | ) | (3,774 | ) | — | |||||||
Issuances (5) | — | — | — | |||||||||
Settlements (5) | — | — | (6,166 | ) | ||||||||
Transfers into Level 3 (6) | — | — | — | |||||||||
Transfers out of Level 3 (6) | — | — | — | |||||||||
Balance, end of period | $ | 89,079 | $ | 24,298 | $ | 361,023 | ||||||
Three Months Ended September 30, 2016 | ||||||||||||
Balance, beginning of period | $ | 60,369 | $ | 8,682 | $ | 495,566 | ||||||
Total realized/unrealized gains (losses) included in net income (loss) (3) (4) | 416 | 83 | 4,933 | |||||||||
Total realized/unrealized gains (losses) included in AOCI | (273 | ) | (90 | ) | — | |||||||
Purchases (5) | — | 808 | — | |||||||||
Sales (5) | (2,704 | ) | (445 | ) | — | |||||||
Issuances (5) | — | — | — | |||||||||
Settlements (5) | — | — | (6,140 | ) | ||||||||
Transfers into Level 3 (6) | — | 4,312 | — | |||||||||
Transfers out of Level 3 (6) | — | — | — | |||||||||
Balance, end of period | $ | 57,808 | $ | 13,350 | $ | 494,359 | ||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (7) | $ | (19 | ) | $ | 105 | $ | (28,782 | ) | ||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7) | $ | (26 | ) | $ | 83 | $ | 6,029 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||
Fixed Maturity Securities | ||||||||||||
Corporate (1) | Structured Securities | Net Embedded Derivatives (2) | ||||||||||
(In thousands) | ||||||||||||
Nine Months Ended September 30, 2017 | ||||||||||||
Balance, beginning of period | $ | 72,291 | $ | 31,423 | $ | 403,037 | ||||||
Total realized/unrealized gains (losses) included in net income (loss) (3) (4) | (74 | ) | 296 | (149,222 | ) | |||||||
Total realized/unrealized gains (losses) included in AOCI | 3,618 | 544 | — | |||||||||
Purchases (5) | 14,549 | — | — | |||||||||
Sales (5) | (1,305 | ) | (7,965 | ) | — | |||||||
Issuances (5) | — | — | — | |||||||||
Settlements (5) | — | — | 107,208 | |||||||||
Transfers into Level 3 (6) | — | — | — | |||||||||
Transfers out of Level 3 (6) | — | — | — | |||||||||
Balance, end of period | $ | 89,079 | $ | 24,298 | $ | 361,023 | ||||||
Nine Months Ended September 30, 2016 | ||||||||||||
Balance, beginning of period | $ | 55,189 | $ | 13,862 | $ | 360,381 | ||||||
Total realized/unrealized gains (losses) included in net income (loss) (3) (4) | (60 | ) | 213 | 151,410 | ||||||||
Total realized/unrealized gains (losses) included in AOCI | 2,819 | (207 | ) | — | ||||||||
Purchases (5) | 2,029 | 829 | — | |||||||||
Sales (5) | (306 | ) | (1,347 | ) | — | |||||||
Issuances (5) | — | — | — | |||||||||
Settlements (5) | — | — | (17,432 | ) | ||||||||
Transfers into Level 3 (6) | — | — | — | |||||||||
Transfers out of Level 3 (6) | (1,863 | ) | — | — | ||||||||
Balance, end of period | $ | 57,808 | $ | 13,350 | $ | 494,359 | ||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (7) | $ | 1 | $ | 322 | $ | (141,675 | ) | |||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7) | $ | (59 | ) | $ | 212 | $ | 156,272 |
(1) | Comprised of U.S. and foreign corporate securities. |
(2) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. |
(3) | Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net embedded derivatives are reported in net derivatives gains (losses). |
(4) | Interest accruals, as well as cash interest coupons received, are excluded from the rollforward. |
(5) | Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements. |
(6) | Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward. |
(7) | Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net embedded derivatives are reported in net derivative gains (losses). |
September 30, 2017 | |||||||||||||||||||
Fair Value Hierarchy | |||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | |||||||||||||||
(In thousands) | |||||||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 390,470 | $ | — | $ | — | $ | 390,862 | $ | 390,862 | |||||||||
Premiums, reinsurance and other receivables | $ | 22,697 | $ | — | $ | 2,453 | $ | 24,735 | $ | 27,188 | |||||||||
Liabilities | |||||||||||||||||||
Policyholder account balances | $ | 1,170,350 | $ | — | $ | — | $ | 1,160,784 | $ | 1,160,784 |
December 31, 2016 | |||||||||||||||||||
Fair Value Hierarchy | |||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | |||||||||||||||
(In thousands) | |||||||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 406,085 | $ | — | $ | — | $ | 404,079 | $ | 404,079 | |||||||||
Premiums, reinsurance and other receivables | $ | 30,122 | $ | — | $ | 2,095 | $ | 30,272 | $ | 32,367 | |||||||||
Liabilities | |||||||||||||||||||
Policyholder account balances | $ | 1,214,186 | $ | — | $ | — | $ | 1,283,338 | $ | 1,283,338 |
Three Months Ended September 30, 2017 | |||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Total | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 18,645 | $ | 2,321 | $ | 20,966 | |||||
OCI before reclassifications | 3,183 | (1,145 | ) | 2,038 | |||||||
Deferred income tax benefit (expense) | (1,114 | ) | 401 | (713 | ) | ||||||
AOCI before reclassifications, net of income tax | 20,714 | 1,577 | 22,291 | ||||||||
Amounts reclassified from AOCI | 712 | (2 | ) | 710 | |||||||
Deferred income tax benefit (expense) | (249 | ) | — | (249 | ) | ||||||
Amounts reclassified from AOCI, net of income tax | 463 | (2 | ) | 461 | |||||||
Balance, end of period | $ | 21,177 | $ | 1,575 | $ | 22,752 |
Three Months Ended September 30, 2016 | |||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Total | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 47,646 | $ | 3,395 | $ | 51,041 | |||||
OCI before reclassifications | 6,569 | (579 | ) | 5,990 | |||||||
Deferred income tax benefit (expense) | (2,337 | ) | 202 | (2,135 | ) | ||||||
AOCI before reclassifications, net of income tax | 51,878 | 3,018 | 54,896 | ||||||||
Amounts reclassified from AOCI | (398 | ) | — | (398 | ) | ||||||
Deferred income tax benefit (expense) | 138 | — | 138 | ||||||||
Amounts reclassified from AOCI, net of income tax | (260 | ) | — | (260 | ) | ||||||
Balance, end of period | $ | 51,618 | $ | 3,018 | $ | 54,636 |
Nine Months Ended September 30, 2017 | |||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Total | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 1,340 | $ | 3,067 | $ | 4,407 | |||||
OCI before reclassifications | 28,841 | (2,294 | ) | 26,547 | |||||||
Deferred income tax benefit (expense) | (10,095 | ) | 803 | (9,292 | ) | ||||||
AOCI before reclassifications, net of income tax | 20,086 | 1,576 | 21,662 | ||||||||
Amounts reclassified from AOCI | 1,678 | (1 | ) | 1,677 | |||||||
Deferred income tax benefit (expense) | (587 | ) | — | (587 | ) | ||||||
Amounts reclassified from AOCI, net of income tax | 1,091 | (1 | ) | 1,090 | |||||||
Balance, end of period | $ | 21,177 | $ | 1,575 | $ | 22,752 |
Nine Months Ended September 30, 2016 | |||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Total | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 3,333 | $ | 2,073 | $ | 5,406 | |||||
OCI before reclassifications | 72,250 | 1,459 | 73,709 | ||||||||
Deferred income tax benefit (expense) | (25,326 | ) | (511 | ) | (25,837 | ) | |||||
AOCI before reclassifications, net of income tax | 50,257 | 3,021 | 53,278 | ||||||||
Amounts reclassified from AOCI | 2,096 | (5 | ) | 2,091 | |||||||
Deferred income tax benefit (expense) | (735 | ) | 2 | (733 | ) | ||||||
Amounts reclassified from AOCI, net of income tax | 1,361 | (3 | ) | 1,358 | |||||||
Balance, end of period | $ | 51,618 | $ | 3,018 | $ | 54,636 |
(1) | See Note 4 for information on offsets to investments related to DAC and DSI. |
AOCI Components | Amounts Reclassified from AOCI | Statements of Operations and Comprehensive Income (Loss) Locations | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
(In thousands) | ||||||||||||||||||
Net unrealized investment gains (losses): | ||||||||||||||||||
Net unrealized investment gains (losses) | $ | (711 | ) | $ | 398 | $ | (1,694 | ) | $ | (2,158 | ) | Net investment gains (losses) | ||||||
Net unrealized investment gains (losses) | (1 | ) | — | 16 | 62 | Net investment income | ||||||||||||
Net unrealized investment gains (losses), before income tax | (712 | ) | 398 | (1,678 | ) | (2,096 | ) | |||||||||||
Income tax (expense) benefit | 249 | (138 | ) | 587 | 735 | |||||||||||||
Net unrealized investment gains (losses), net of income tax | (463 | ) | 260 | (1,091 | ) | (1,361 | ) | |||||||||||
Unrealized gains (losses) on derivatives - cash flow hedges: | ||||||||||||||||||
Foreign currency swaps | 2 | — | 1 | 5 | Net derivative gains (losses) | |||||||||||||
Gains (losses) on cash flow hedges, before income tax | 2 | — | 1 | 5 | ||||||||||||||
Income tax (expense) benefit | — | — | — | (2 | ) | |||||||||||||
Gains (losses) on cash flow hedges, net of income tax | 2 | — | 1 | 3 | ||||||||||||||
Total reclassifications, net of income tax | $ | (461 | ) | $ | 260 | $ | (1,090 | ) | $ | (1,358 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Compensation | $ | 3,640 | $ | 1,752 | $ | 9,977 | $ | 6,352 | ||||||||
Pension, postretirement and postemployment benefit costs | — | 187 | — | 608 | ||||||||||||
Commissions | 9,584 | 4,289 | 23,085 | 12,536 | ||||||||||||
Volume-related costs | 1,692 | 1,288 | 2,953 | 3,653 | ||||||||||||
Related party expenses on ceded reinsurance | — | 2,984 | 4,523 | 7,798 | ||||||||||||
Capitalization of DAC | (5,111 | ) | (1,194 | ) | (11,079 | ) | (3,588 | ) | ||||||||
Premium taxes, licenses and fees | 762 | 640 | 1,662 | 2,107 | ||||||||||||
Professional services | 874 | 427 | 2,792 | 1,012 | ||||||||||||
Rent and related expenses | 84 | 273 | 368 | 822 | ||||||||||||
Other | 4,551 | 2,826 | 13,395 | 10,710 | ||||||||||||
Total other expenses | $ | 16,076 | $ | 13,472 | $ | 47,676 | $ | 42,010 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Income | $ | (65,249 | ) | $ | (31,068 | ) | $ | (266,607 | ) | $ | 165,899 | ||||
Expense | $ | (6,496 | ) | $ | (11,887 | ) | $ | (48,573 | ) | $ | (43,780 | ) |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Assets | $ | 534,026 | $ | 322,394 | |||
Liabilities | $ | 471,696 | $ | 99,641 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Premiums | |||||||||||||||
Reinsurance ceded | $ | (7,000 | ) | $ | (10,273 | ) | $ | (43,347 | ) | $ | (31,030 | ) | |||
Universal life and investment-type product policy fees | |||||||||||||||
Reinsurance ceded | $ | (908 | ) | $ | (911 | ) | $ | (2,719 | ) | $ | (2,738 | ) | |||
Other revenues | |||||||||||||||
Reinsurance ceded | $ | (15,666 | ) | $ | (7,567 | ) | $ | (43,566 | ) | $ | (21,474 | ) | |||
Policyholder benefits and claims | |||||||||||||||
Reinsurance ceded | $ | (14,580 | ) | $ | (16,678 | ) | $ | (72,985 | ) | $ | (57,597 | ) | |||
Interest credited to policyholder account balances | |||||||||||||||
Reinsurance ceded | $ | (71 | ) | $ | (88 | ) | $ | (227 | ) | $ | (242 | ) | |||
Amortization of deferred policy acquisition costs and value of business acquired | |||||||||||||||
Reinsurance ceded | $ | (186 | ) | $ | (913 | ) | $ | (635 | ) | $ | (2,203 | ) | |||
Other expenses | |||||||||||||||
Reinsurance ceded | $ | (1,932 | ) | $ | 349 | $ | (1,221 | ) | $ | (194 | ) |
September 30, 2017 | December 31, 2016 | ||||||||
(In thousands) | |||||||||
Assets | |||||||||
Premiums, reinsurance and other receivables | $ | 534,601 | $ | 321,868 | |||||
Deferred policy acquisition costs and value of business acquired | (4,912 | ) | (4,309 | ) | |||||
Total assets | $ | 529,689 | $ | 317,559 | |||||
Liabilities | |||||||||
Other liabilities | $ | 471,669 | $ | 99,641 | |||||
Total liabilities | $ | 471,669 | $ | 99,641 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Fee income | $ | 3,183 | $ | 2,531 | $ | 9,163 | $ | 7,409 | |||||||
Commission expense | $ | 10,246 | $ | 8,126 | $ | 27,212 | $ | 23,045 |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Fee income receivables | $ | 1,040 | $ | 934 |
(i) | liabilities for future policy benefits; |
(ii) | accounting for reinsurance; |
(iii) | capitalization and amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”); |
(iv) | estimated fair values of investments in the absence of quoted market values; |
(v) | investment impairments; |
(vi) | estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; |
(vii) | measurement of income taxes and the valuation of deferred tax assets; and |
(viii) | liabilities for litigation and regulatory matters. |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Revenues | |||||||
Premiums | $ | 14,604 | $ | 41,473 | |||
Universal life and investment-type product policy fees | 77,472 | 77,366 | |||||
Net investment income | 63,468 | 39,960 | |||||
Other revenues | (34,090 | ) | (13,559 | ) | |||
Net investment gains (losses) | (1,045 | ) | (2,174 | ) | |||
Net derivative gains (losses) | (149,697 | ) | 153,655 | ||||
Total revenues | (29,288 | ) | 296,721 | ||||
Expenses | |||||||
Policyholder benefits and claims | (2,396 | ) | 45,935 | ||||
Interest credited to policyholder account balances | 29,414 | 30,485 | |||||
Capitalization of DAC | (11,079 | ) | (3,588 | ) | |||
Amortization of DAC and VOBA | (39,984 | ) | 56,347 | ||||
Other expenses | 58,755 | 45,598 | |||||
Total expenses | 34,710 | 174,777 | |||||
Income (loss) before provision for income tax | (63,998 | ) | 121,944 | ||||
Provision for income tax expense (benefit) | (27,258 | ) | 39,741 | ||||
Net income (loss) | $ | (36,740 | ) | $ | 82,203 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Guaranteed minimum living benefits | $ | (120,347 | ) | $ | 98,053 | ||
Amortization of DAC and VOBA | 172 | 89 | |||||
Other derivative instruments | (1,100 | ) | 2,052 | ||||
Net investment gains (losses) | (1,045 | ) | (2,174 | ) | |||
Other adjustments | 8 | (146 | ) | ||||
Operating earnings (loss) before provision for income tax | 58,314 | 24,070 | |||||
Income (loss) before provision for income tax | (63,998 | ) | 121,944 | ||||
Provision for income tax expense (benefit) | (27,258 | ) | 39,741 | ||||
Net income (loss) | $ | (36,740 | ) | $ | 82,203 |
• | a decrease of $175.2 million ($113.9 million, net of income tax), recognized in net derivative gains (losses), driven by the impact of interest rates declining less in the current period than in the prior period, as well as the impact of higher equity markets, on our embedded derivatives; and |
• | a decrease of $125.1 million ($81.3 million, net of income tax), recognized in net derivative gains (losses), driven by the recapture, from MLIC, of ceded reinsurance agreements covering certain risks of our variable annuity business; partially offset by |
• | an increase of $76.2 million ($49.5 million, net of income tax) from lower DAC amortization. |
• | a decrease of $82.4 million ($53.6 million, net of income tax) recognized in net derivative gains (losses) driven mostly by changes regarding lapse and withdrawal rates; partially offset by; |
• | an increase of $25.1 million ($16.3 million, net of income tax) from the DAC amortization offset. |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Net income (loss) | $ | (36,740 | ) | $ | 82,203 | ||
Add: Provision for income tax expense (benefit) | (27,258 | ) | 39,741 | ||||
Net income (loss) before provision for income tax | (63,998 | ) | 121,944 | ||||
Less: Guaranteed minimum living benefits | (120,347 | ) | 98,053 | ||||
Less: Amortization of DAC and VOBA | 172 | 89 | |||||
Less: Other derivative instruments | (1,100 | ) | 2,052 | ||||
Less: Net investment gains (losses) | (1,045 | ) | (2,174 | ) | |||
Less: Other adjustments | 8 | (146 | ) | ||||
Operating earnings (loss) before provision for income tax | 58,314 | 24,070 | |||||
Less: Provision for income tax expense (benefit) | 15,551 | 5,485 | |||||
Operating earnings (loss) | $ | 42,763 | $ | 18,585 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(In thousands) | |||||||
Fee income | $ | 118,293 | $ | 99,393 | |||
Net investment spread | 21,289 | 19,971 | |||||
Insurance-related activities | (38,498 | ) | (38,252 | ) | |||
Amortization of DAC and VOBA | 4,906 | (15,167 | ) | ||||
Other expenses, net of DAC capitalization | (47,676 | ) | (41,875 | ) | |||
Operating earnings (loss) before provision for income tax | 58,314 | 24,070 | |||||
Provision for income tax expense (benefit) | 15,551 | 5,485 | |||||
Operating earnings (loss) | $ | 42,763 | $ | 18,585 |
• | an increase of $9.3 million from higher amortization of the deferred ceded commission related to the recapture and novation of the variable annuity reinsurance previously ceded to MLIC; and |
• | an increase of $2.1 million from the recapture in the current period of yearly renewable term life business previously ceded to MLIC. |
Non-GAAP financial measure: | Comparable GAAP financial measure: | ||
— | operating earnings (loss) | — | net income (loss) |
• | Net investment gains (losses); |
• | Net derivative gains (losses) except earned income on derivatives that are hedges of investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and |
• | Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”). |
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and |
• | Amortization of DAC and VOBA related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments. |
Component of Operating Earnings (Loss) | How Derived from GAAP (1) | ||
(i) | Fee income | (i) | Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance. |
(ii) | Net investment spread | (ii) | Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits. |
(iii) | Insurance-related activities | (iii) | Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits, and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets. |
(iv) | Amortization of DAC and VOBA | (iv) | Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs, and (d) Market Value Adjustments). |
(v) | Other expenses, net of DAC capitalization | (v) | Other expenses reduced by capitalization of DAC. |
(vi) | Provision for income tax expense (benefit) | (vi) | Tax impact of the above items. |
• | We sometimes refer to sales activity for various products. Statistical sales information for life sales are calculated using the LIMRA (Life Insurance and Marketing Research Association) definition of sales for core direct sales, excluding company sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 10% of direct statutory premiums, excluding company sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity. |
• | Allocated equity is the portion of common stockholder’s equity that management allocates to each of its segments and sub-segments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements and Other Financial Information — Operating Earnings” included in the 2016 Annual Report and Note 2 of the Notes to the Interim Condensed Financial Statements for further details regarding allocated equity and the use of an internal capital models. |
• | differences between actual experience and actuarial assumptions; |
• | the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; |
• | the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; |
• | the effectiveness of our risk management policies and procedures; |
• | the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; |
• | heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; |
• | changes in accounting standards, practices and/or policies applicable to us; |
• | our ability to market and distribute our products through distribution channels; |
• | the impact of the Separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties; |
• | whether the operational, strategic and other benefits of the Separation can be achieved, and our ability to implement our business strategy; |
• | whether all or any portion of the Separation tax consequences are not as expected, leading to material additional taxes or material adverse consequences to tax attributes booked to us; |
• | the uncertainty of the outcome of any disputes with MetLife over tax-related matters and agreements including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments; |
• | the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the Separation; |
• | the potential material negative tax impact of proposed legislation that could decrease the value of our tax attributes, lead to increased RBC requirements and cause other cash expenses, such as reserves, to increase materially; |
• | whether the Distribution will qualify for non-recognition treatment for U.S. federal income tax purposes and potential indemnification to MetLife if the Distribution does not so qualify; |
• | our ability to attract and retain key personnel; and |
• | other factors described in this report and from time to time in documents that we file with the SEC. |
• | reducing new sales of insurance products and annuity products; |
• | adversely affecting our relationships with independent sales intermediaries; |
• | increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; |
• | requiring us to reduce prices for many of our products and services to remain competitive; |
• | providing termination rights for the benefit of our derivative instrument counterparties; |
• | adversely affecting our ability to obtain reinsurance at reasonable prices, if at all; and |
• | subjecting us to potentially increased regulatory scrutiny. |
• | a modification of the calculation of the DRD; |
• | a change in how deductions are determined for insurance reserves; |
• | an increase in the amount of policy acquisition expense (also called tax “DAC”); |
• | limitations on the use of NOLs; and |
• | limitations on deductions for net interest expense. |
Exhibit No. | Description | |
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
BRIGHTHOUSE LIFE INSURANCE COMPANY OF NY | |||
By: | /s/ Lynn A. Dumais | ||
Name: | Lynn A. Dumais | ||
Title: | Vice President and Chief Financial Officer | ||
(Authorized Signatory and Principal Financial Officer) |
Exhibit No. | Description | |
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
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 |
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. |
/s/ Peter M. Carlson | |
Peter M. Carlson Chairman of the Board, President and Chief Executive Officer |
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 |
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. |
/s/ Lynn Dumais | |
Lynn Dumais Vice President and Chief Financial Officer |
/s/ Peter M. Carlson | |
Peter M. Carlson Chairman of the Board, President and Chief Executive Officer |
/s/ Lynn Dumais | |
Lynn Dumais Vice President and Chief Financial Officer |
Document and Entity Information - USD ($) $ in Millions |
9 Months Ended | |
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Sep. 30, 2017 |
Nov. 13, 2017 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | BRIGHTHOUSE LIFE INSURANCE Co OF NY | |
Entity Central Index Key | 0001167609 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Public Float | $ 0 | |
Entity Common Stock, Shares Outstanding | 200,000 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets | ||
Amortized cost of fixed maturity securities available-for-sale | $ 1,969,427 | $ 1,870,654 |
Mortgage loans valuation allowances | $ 1,679 | $ 1,775 |
Stockholder's Equity | ||
Common stock, par value | $ 10 | $ 10 |
Common stock, shares authorized | 200,000 | 200,000 |
Common stock, shares issued | 200,000 | 200,000 |
Common stock, shares outstanding | 200,000 | 200,000 |
Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Revenues | ||||
Premiums | $ 12,229 | $ 11,769 | $ 14,604 | $ 41,473 |
Universal life and investment-type product policy fees | 25,621 | 26,129 | 77,472 | 77,366 |
Net investment income | 21,517 | 13,227 | 63,468 | 39,960 |
Other revenues | (12,479) | (4,873) | (34,090) | (13,559) |
Net investment gains (losses): | ||||
Other-than-temporary impairments on fixed maturity securities | 0 | 0 | 0 | (870) |
Other net investment gains (losses) | (674) | 425 | (1,045) | (1,304) |
Net derivative gains (losses) | (34,583) | 5,004 | (149,697) | 153,655 |
Total net investment gains (losses) | (674) | 425 | (1,045) | (2,174) |
Total revenues | 11,631 | 51,681 | (29,288) | 296,721 |
Expenses | ||||
Expenses | 17,609 | 6,737 | (2,396) | 45,935 |
Policyholder benefits and claims and policyholder dividends | 10,030 | 10,095 | 29,414 | 30,485 |
Deferred Policy Acquisition Costs and Present Value of Future Insurance Profits, Amortization | (21,186) | 9,143 | (39,984) | 56,347 |
Other expenses | 16,076 | 13,472 | 47,676 | 42,010 |
Total expenses | 22,529 | 39,447 | 34,710 | 174,777 |
Income (loss) before provision for income tax | (10,898) | 12,234 | (63,998) | 121,944 |
Provision for income tax expense (benefit) | (6,058) | 4,234 | (27,258) | 39,741 |
Net income (loss) | (4,840) | 8,000 | (36,740) | 82,203 |
Comprehensive income (loss) | $ (3,054) | $ 11,595 | $ (18,395) | $ 131,433 |
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2015 | $ 607,322 | $ 2,000 | $ 340,931 | $ 258,985 | $ 5,406 |
Net income (loss) | 82,203 | 82,203 | |||
Other comprehensive income (loss), net of income tax | 49,230 | 49,230 | |||
Ending Balance at Sep. 30, 2016 | 738,755 | 2,000 | 340,931 | 341,188 | 54,636 |
Beginning Balance at Dec. 31, 2016 | 696,733 | 2,000 | 340,931 | 349,395 | 4,407 |
Net income (loss) | (36,740) | (36,740) | |||
Other comprehensive income (loss), net of income tax | 18,345 | 18,345 | |||
Ending Balance at Sep. 30, 2017 | $ 678,338 | $ 2,000 | $ 340,931 | $ 312,655 | $ 22,752 |
Business, Basis of Presentation and Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business, Basis of Presentation and Summary of Significant Accounting Policies | 1. Business, Basis of Presentation and Summary of Significant Accounting Policies Business “Brighthouse NY” and the “Company” refer to Brighthouse Life Insurance Company of NY, a New York domiciled life insurance company. Brighthouse Life Insurance Company of NY is a wholly-owned subsidiary of Brighthouse Life Insurance Company (“Brighthouse Insurance”), which is an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (together with its subsidiaries and affiliates, “Brighthouse”). The Company markets and/or administers traditional life, universal life, variable annuity and fixed annuity products to individuals. The Company is licensed to transact business in the state of New York. The Company is organized into two segments: Annuities and Life. On January 12, 2016, MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”) announced its plan to pursue the separation of a substantial portion of its former U.S. retail business (the “Separation”). Additionally, on July 21, 2016, MetLife, Inc. announced that the separated business would be rebranded as “Brighthouse Financial.” Effective March 6, 2017, and in connection with the Separation, the Company changed its name from First MetLife Investors Insurance Company to Brighthouse Life Insurance Company of NY. On October 5, 2016, Brighthouse Financial, Inc., which until the completion of the Separation on August 4, 2017, was a wholly-owned subsidiary of MetLife, Inc., filed a registration statement on Form 10 (as amended, the “Form 10”) with the U.S. Securities and Exchange Commission (“SEC”) that was declared effective by the SEC on July 6, 2017. The Form 10 disclosed MetLife, Inc.’s plans to undertake several actions, including an internal reorganization involving its U.S. retail business (the “Restructuring”) and include the Company and certain affiliates in the planned separated business, and distribute at least 80.1% of the shares of Brighthouse Financial, Inc.’s common stock on a pro rata basis to the holders of MetLife, Inc. common stock. In connection with the Restructuring, effective April 2017, following receipt of applicable regulatory approvals, MetLife, Inc. contributed certain affiliated reinsurance companies and the Company to Brighthouse Insurance. On July 28, 2017, MetLife, Inc. contributed Brighthouse Holdings, LLC, an intermediate holding company, to Brighthouse Financial, Inc., resulting in the Company becoming an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. On August 4, 2017, MetLife, Inc. completed the Separation through a distribution of 96,776,670 of the 119,773,106 shares of the common stock of Brighthouse Financial, Inc, representing 80.8% of MetLife Inc.’s interest in Brighthouse, to holders of MetLife, Inc. common stock. Basis of Presentation The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. The accompanying interim condensed financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2016 balance sheet data was derived from audited financial statements included in Brighthouse NY’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed financial statements should be read in conjunction with the financial statements of the Company included in the 2016 Annual Report. Adoption of New Accounting Pronouncements Effective January 1, 2017, the Company early adopted guidance relating to business combinations. The new guidance clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard will result in fewer acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. The adoption did not have an impact on the Company’s financial statements. Effective January 1, 2017, the Company retrospectively adopted guidance relating to consolidation. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a variable interest entities (“VIEs”) by changing how a reporting entity that is a single decision maker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The adoption of this new guidance did not have a material impact on the Company’s financial statements. Future Adoption of New Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on accounting for hedging activities (Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. The ASU (i) refines and expands the criteria for achieving hedge accounting on certain hedging strategies, (ii) requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported, and (iii) eliminates the requirement to separately measure and report hedge ineffectiveness. The ASU also makes other changes to simplify the application of existing guidance related to the assessment of hedge effectiveness and creates new disclosure requirements. The Company is currently evaluating the impact of this guidance on its financial statements. In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of this guidance on its financial statements. In February 2017, the FASB issued new guidance on derecognition of nonfinancial assets (ASU 2017- 05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted for interim or annual reporting periods beginning after December 15, 2017. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The adoption of this guidance will not have a material impact on the Company’s financial statements. In November 2016, the FASB issued new guidance on restricted cash (ASU 2016-18, Statement of Cash Flows (Topic 230): a consensus of the FASB Emerging Issues Task Force). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The adoption of this guidance will not have a material impact on the Company’s financial statements. In October 2016, the FASB issued new guidance on tax accounting for intra-entity transfers of assets (ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted. The new guidance eliminates the prohibition on recognizing current or deferred income taxes related to inter-entity asset transfers other than inventory by requiring recognition when the transfer occurs. The adoption of this guidance will not have a material impact on the Company’s financial statements. In August 2016, the FASB issued new guidance on cash flow statement presentation (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified on the statement of cash flows. The adoption of this guidance will not have a material impact on the Company’s financial statements. In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and has determined the most significant impacts will be to its mortgage loan investments. The Company is currently assessing the accounting and reporting system changes that will be required to comply with the guidance along with the overall impacts to its financial statements. In January 2016, the FASB issued new guidance (ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities) on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Additionally, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. The Company has assessed the population of financial instruments that are subject to the new guidance and has determined that the most significant impact will be the requirement to report changes in fair value in net income each reporting period for all equity securities currently classified as available-for-sale (“AFS”) and to a lesser extent, the elimination of the cost method of accounting for equity method investments. The adoption of this guidance will not have a material impact on the Company’s financial statements. In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014‑09, Revenue from Contracts with Customers (Topic 606)), effective for fiscal years beginning after December 15, 2017 and interim periods within those years. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The new guidance will supersede nearly all existing revenue recognition guidance under U.S. GAAP; however, it will not impact the accounting for insurance and investment contracts within the scope of Financial Services insurance (Topic 944), leases, financial instruments and guarantees. For those contracts that are impacted, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The adoption of this guidance will not have a material impact on the Company’s financial statements. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 2. Segment Information The Company is organized into two segments: Annuities and Life. In addition, the Company reports certain of its results of operations in Corporate & Other. Annuities The Annuities segment offers a variety of variable, fixed, index-linked and income annuities designed to address contractholders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security. Life The Life segment currently offers life insurance products and services, including term and universal life, designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis. Corporate & Other Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, ancillary U.S. term life business sold direct to consumer and expenses associated with income tax audit issues. Financial Measures and Segment Accounting Policies Operating earnings (loss) is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. The Company believes the presentation of operating earnings (loss), as the Company measures it for management purposes, enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Consistent with GAAP guidance for segment reporting, operating earnings (loss) is also the Company’s GAAP measure of segment performance and is reported below. Operating earnings (loss) should not be viewed as a substitute for net income (loss). Operating earnings (loss) is a measure that focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products. The following are excluded from total revenues in calculating operating earnings (loss):
The following are excluded from total expenses in calculating operating earnings (loss):
The tax impact of the adjustments mentioned above are calculated net of the U.S. statutory tax rate, which could differ from the Company’s effective tax rate. Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and nine months ended September 30, 2017 and 2016. The segment accounting policies are the same as those used to prepare the Company’s financial statements, except for operating earnings (loss) adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below. The internal capital model is a risk capital model that reflects management’s judgment and view of required capital to represent the measurement of the risk profile of the business, to meet the Company’s long term promises to clients, to service long-term obligations and to support the credit ratings of the Company. It accounts for the unique and specific nature of the risks inherent in the Company’s business. Management is responsible for the ongoing production and enhancement of the internal capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards. The Company allocates equity to the segments based on the internal capital model, and aligns with emerging standards and consistent risk principles. Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s net investment income or net income (loss). Net investment income is based upon the actual results within a specifically identifiable investment portfolio and is allocated to segments at a rate based upon each product’s net GAAP liability, adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee time incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.
The following table presents total revenues with respect to the Company’s segments, as well as Corporate & Other:
The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
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Insurance |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance | 3. Insurance Guarantees As discussed in Notes 1 and 3 of the Notes to the Financial Statements included in the 2016 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 5. Information regarding the Company’s guarantee exposure was as follows at:
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | 4. Investments Fixed Maturity Securities Available-for-Sale Fixed Maturity Securities Available-for-Sale by Sector The following table presents the fixed maturity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate fixed maturity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
The Company did not hold non-income producing fixed maturity securities at both September 30, 2017 and December 31, 2016. Maturities of Fixed Maturity Securities The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2017:
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities As described more fully in Notes 1 and 6 of the Notes to the Financial Statements included in the 2016 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired. Current Period Evaluation Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at September 30, 2017. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads, as well as a change in the Company’s intention to hold or sell a security that is in an unrealized loss position. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods. Gross unrealized losses on fixed maturity securities decreased $19.8 million during the nine months ended September 30, 2017 to $15.1 million. The decrease in gross unrealized losses for the nine months ended September 30, 2017 was primarily attributable to narrowing credit spreads and decreasing longer-term interest rates. At September 30, 2017, there were no gross unrealized losses on fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater. Mortgage Loans Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at:
Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment At both September 30, 2017 and December 31, 2016, the Company had no impaired mortgage loans and all mortgage loans were evaluated collectively for credit losses. Valuation Allowance Rollforward by Portfolio Segment The changes in the valuation allowance, by portfolio segment, were as follows:
Credit Quality of Commercial Mortgage Loans The credit quality of commercial mortgage loans was as follows at:
Credit Quality of Agricultural Mortgage Loans The credit quality of agricultural mortgage loans was as follows at:
Past Due and Nonaccrual Mortgage Loans The Company has a high quality, well performing mortgage loan portfolio, with all mortgage loans classified as performing at both September 30, 2017 and December 31, 2016. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial mortgage loans — 60 days and agricultural mortgage loans — 90 days. The Company had no past due and nonaccrual mortgage loans at both September 30, 2017 and December 31, 2016. Mortgage Loans Modified in a Troubled Debt Restructuring During both the three months and nine months ended September 30, 2017 and 2016, there were no mortgage loans modified in a troubled debt restructuring. Cash Equivalents The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $52.9 million and $9.2 million at September 30, 2017 and December 31, 2016, respectively. Net Unrealized Investment Gains (Losses) Unrealized investment gains (losses) on fixed maturity securities AFS and the effect on DAC, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in accumulated other comprehensive income (loss) (“AOCI”). The components of net unrealized investment gains (losses), included in AOCI, were as follows:
The changes in net unrealized investment gains (losses) were as follows:
Concentrations of Credit Risk There were no investments in any counterparty that were greater than 10% of the Company’s stockholder’s equity, other than the U.S. government and its agencies, at both September 30, 2017 and December 31, 2016. Invested Assets on Deposit Invested assets on deposit are presented below at estimated fair value for fixed maturity securities at:
Variable Interest Entities The Company has invested in legal entities that are VIEs. In certain instances, the Company may hold both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, it would be deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. Consolidated VIEs There were no VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at either September 30, 2017 or December 31, 2016. Unconsolidated VIEs The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
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Net Investment Income The components of net investment income were as follows:
See “— Related Party Investment Transactions” for discussion of related party investment expenses. Net Investment Gains (Losses) Components of Net Investment Gains (Losses) The components of net investment gains (losses) were as follows:
Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($7) thousand and $539 thousand for the three months and nine months ended September 30, 2017, respectively, and ($25) thousand and $5 thousand for the three months and nine months ended September 30, 2016, respectively. Sales or Disposals and Impairments of Fixed Maturity Securities Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below.
Related Party Investment Transactions There were no invested assets transferred during both the three months and nine months ended September 30, 2017. During both the three months and nine months ended September 30, 2016, the Company transferred mortgage loans with an estimated fair value of $1.5 million and amortized cost of $1.4 million to Metropolitan Life Insurance Company (“MLIC”), a former affiliate. Net investment gains (losses) recognized on these transfers was $64 thousand. The Company receives investment administrative services from MLIC. The related investment administrative service charges were $704 thousand and $2.1 million for the three months and nine months ended September 30, 2017, respectively, and $453 thousand and $1.3 million for the three months and nine months ended September 30, 2016, respectively. |
Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | 5. Derivatives Accounting for Derivatives Freestanding Derivatives Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses). Hedge Accounting To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). Embedded Derivatives The Company sells variable annuities and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees. See Note 6 for information about the fair value hierarchy for derivatives. Derivative Strategies The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives. Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are bilateral contracts between two counterparties (“OTC-bilateral”). The Company primarily uses foreign currency swaps. Foreign Currency Exchange Rate Derivatives The Company uses foreign currency swaps to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets denominated in foreign currencies. In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in cash flow and nonqualifying hedging relationships. Primary Risks Managed by Derivatives The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
Net Derivative Gains (Losses) The components of net derivative gains (losses) were as follows:
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The Company recognized net investment income from settlement payments related to qualifying hedges of $149 thousand and $430 thousand for the three months and nine months ended September 30, 2017, respectively, and $143 thousand and $410 thousand for the three months and nine months ended September 30, 2016, respectively. The Company recognized net derivative gains (losses) from settlement payments related to nonqualifying hedges of $81 thousand and $239 thousand for the three months and nine months ended September 30, 2017, respectively, and $73 thousand and $193 thousand for the three months and nine months ended September 30, 2016, respectively. Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging The amounts of net derivative gains (losses) from foreign currency exchange rate derivatives that were not designated or qualifying as hedging instruments were ($545) thousand and ($1.1) million for the three months and nine months ended September 30, 2017, respectively, and $118 thousand and $2.6 million for the three months and nine months ended September 30, 2016, respectively. Cash Flow Hedges The Company designates and accounts for foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets, as cash flow hedges, when they have met the requirements of cash flow hedging. In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). For both the three months and nine months ended September 30, 2017 and 2016, there were no amounts reclassified into net derivative gains (losses) related to such discontinued cash flow hedges. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments, for both September 30, 2017 and December 31, 2016. At September 30, 2017 and December 31, 2016, the balance in AOCI associated with foreign currency swaps designated and qualifying as cash flow hedges was $2.4 million and $4.7 million, respectively. Gains (losses) deferred in AOCI related to foreign currency swaps were ($1.2) million and ($2.3) million for the three months and nine months ended September 30, 2017, respectively, and ($579) thousand and $1.5 million for the three months and nine months ended September 30, 2016, respectively. For the three months ended September 30, 2017, the amounts the Company reclassified into net derivatives gains (losses) related to foreign currency swaps were $0. For the nine months ended September 30, 2017, the Company reclassified $1 thousand into net derivative gains (losses) related to foreign currency swaps. For the three months ended September 30, 2016, the amounts reclassified into net derivative gains (losses) related to foreign currency swaps were not significant. For the nine months ended September 30, 2016, $5 thousand was reclassified into net derivative gains (losses) related to foreign currency swaps. For the three months ended September 30, 2017, $1 thousand was reclassified into net derivative gains (losses) representing the ineffective portion of all cash flow hedges. For the nine months ended September 30, 2017, $2 thousand was reclassified into net derivative gains (losses) representing the ineffective portion of all cash flow hedges. For both the three months and nine months ended September 30, 2016, the amounts the Company recognized in net derivative gains (losses) representing the ineffective portion of all cash flow hedges were not significant. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. At September 30, 2017, the Company expects to reclassify $204 thousand of deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months. Credit Risk on Freestanding Derivatives The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements. The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives. See Note 6 for a description of the impact of credit risk on the valuation of derivatives. The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
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The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the collateral amount owed by that counterparty reaches a minimum transfer amount. In addition, the Company’s netting agreements for derivatives contain provisions that require both the Company and the counterparty to maintain a specific investment grade credit rating from each of Moody’s Investors Service and Standard & Poor’s Global Ratings 500 Index. If a party’s credit or financial strength ratings, as applicable, were to fall below that specific investment grade credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives. At both September 30, 2017 and December 31, 2016, the Company held no OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements. The Company’s collateral arrangements require both parties to be fully collateralized, as such, the Company would not be required to post additional collateral as a result of a downgrade in its financial strength rating. Embedded Derivatives The Company issues certain products that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; related party ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; and fixed annuities with equity-indexed returns. The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
The following table presents changes in estimated fair value related to embedded derivatives:
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | 6. Fair Value Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Recurring Fair Value Measurements The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented below at:
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The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy. Investments Valuation Controls and Procedures The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by MetLife Investment Advisors, LLC (“MLIA”), a related party investment manager. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary, based on changing market conditions. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse’s Board of Directors regarding compliance with fair value accounting standards. The fair value of financial assets and financial liabilities is based on quoted market prices, where available. The Company assesses whether prices received represent a reasonable estimate of fair value through controls designed to ensure valuations represent an exit price. MLIA performs several controls, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing”, are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments. Fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and 9% of the total estimated fair value of Level 3 fixed maturity securities at September 30, 2017. MLIA also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, MLIA will use the last available price. The Company reviews outputs of MLIA’s controls and performs additional controls, including certain monthly controls, which include but are not limited to, performing balance sheet analytics to assess reasonableness of period to period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the nine months ended September 30, 2017. Securities When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances. The valuation of all instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.
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Derivatives The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments — Valuation Controls and Procedures.” The significant inputs to the pricing models for most OTC-bilateral derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments. Most inputs for OTC-bilateral derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. Freestanding Derivatives Level 2 Valuation Approaches and Key Inputs: This level includes all types of derivatives utilized by the Company. These derivatives are principally valued using the income approach. Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques. Key inputs are as follows:
Embedded Derivatives Embedded derivatives principally include certain direct variable annuity guarantees and certain affiliated ceded reinsurance agreements related to such variable annuity guarantees. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income. The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the balance sheets. The Company’s actuarial department calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience. The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for Brighthouse Financial, Inc.’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims paying ability of the issuing insurance subsidiaries as compared to Brighthouse Financial, Inc.’s overall financial strength. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income. The Company ceded to a former affiliate the risk associated with certain of the GMIBs, GMABs and GMWBs described above. These reinsurance agreements contain embedded derivatives and are included within premiums, reinsurance and other receivables on the balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. Embedded Derivatives Within Asset and Liability Host Contracts Level 3 Valuation Approaches and Key Inputs: Direct guaranteed minimum benefits These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curves, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curves and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin. Reinsurance ceded on certain guaranteed minimum benefits These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct guaranteed minimum benefits” and also include counterparty credit spreads. Transfers between Levels Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period. Transfers between Levels 1 and 2: There were no transfers between Levels 1 and 2 for assets and liabilities measured at estimated fair value and still held at both September 30, 2017 and December 31, 2016. Transfers into or out of Level 3: Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
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The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3 use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table.
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Fair Value of Financial Instruments Carried at Other Than Fair Value The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income and payables for collateral under derivative transactions. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure. The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows: Mortgage Loans The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans. Premiums, Reinsurance and Other Receivables Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, and have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty. Policyholder Account Balances These policyholder account balances include investment contracts which primarily include fixed deferred annuities, fixed term payout annuities and total control accounts. The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability. Other Liabilities Other liabilities consist primarily of payable for securities purchased. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are equal to carrying values. |
Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | 7. Equity Accumulated Other Comprehensive Income (Loss) Information regarding changes in the balances of each component of AOCI was as follows:
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Information regarding amounts reclassified out of each component of AOCI was as follows:
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Other Expenses |
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Other Expenses | 8. Other Expenses Information on other expenses was as follows:
Related Party Expenses Commissions and capitalization of DAC include the impact of related party reinsurance transactions. See Note 10 for a discussion of related party expenses included in the table above. |
Contingencies, Commitments and Guarantees |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies, Commitments and Guarantees | 9. Contingencies, Commitments and Guarantees Contingencies Litigation Various litigation, claims and assessments against the Company, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, investor, and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company's financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company's net income or cash flows in particular quarterly or annual periods. Commitments Mortgage Loan Commitments The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $42 thousand at both September 30, 2017 and December 31, 2016. Commitments to Fund Private Corporate Bond Investments The Company commits to lend funds under private corporate bond investments. The amounts of these unfunded commitments were $15.2 million at September 30, 2017. The Company did not have commitments to lend funds under private corporate bond investments at December 31, 2016. Guarantees In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. The Company had no liability for indemnities, guarantees and commitments at both September 30, 2017 and December 31, 2016. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | 10. Related Party Transactions The Company has various existing arrangements with its Brighthouse affiliates and MetLife for services necessary to conduct its activities. Subsequent to the Separation, certain of the MetLife services continued, as provided for under a master service agreement and various transition services agreements entered into in connection with the Separation. Non-Broker-Dealer Transactions The following table summarizes income and expense from transactions with related parties (excluding broker-dealer transactions) for the periods indicated:
The following table summarizes assets and liabilities from transactions with related parties (excluding broker-dealer transactions) at:
The material arrangements between the Company and its related parties are as follows: Reinsurance Agreements The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth. The Company has reinsurance agreements with its parent, Brighthouse Life Insurance Company, and certain MetLife, Inc. subsidiaries, including MLIC and MetLife Reinsurance Company of Vermont, all of which were related parties as of September 30, 2017. Information regarding the significant effects of related party reinsurance included on the interim condensed statements of operations and comprehensive income (loss) was as follows:
Information regarding the significant effects of ceded related party reinsurance included on the interim condensed balance sheets was as follows at:
The Company cedes risks to Brighthouse Insurance related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were $321.5 million and $211.2 million at September 30, 2017 and December 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($44.1) million and ($59.3) million for the three months and nine months ended September 30, 2017, respectively, and ($9.8) million and $77.2 million for the three months and nine months ended September 30, 2016, respectively. The Company ceded 100% of certain variable annuities including guaranteed minimum benefit guarantees on a modified coinsurance basis to MLIC. In January 2017, the Company executed a novation and reassigned this reinsurance agreement with Brighthouse Insurance, as reinsurer. These transactions were treated as a termination of the existing reinsurance agreement with recognition of a loss and a new reinsurance agreement with no recognition of a gain or loss. These transactions resulted in an increase in other liabilities of $129.8 million. The Company recognized a loss of $84.4 million, net of income tax, as a result of these transactions. In May 2017, the Company recaptured from MLIC risks related to multiple life products under yearly renewable term and coinsurance agreements, previously issued by the Company. This recapture resulted in an increase in cash and cash equivalents of $25.6 million and a decrease in premiums, reinsurance and other receivables of $22.4 million. The Company recognized a gain of $2.1 million, net of income tax, as a result of reinsurance termination. Concurrent with the recapture from MLIC, the Company executed a reinsurance agreement with Brighthouse Insurance, as reinsurer to cede on a yearly renewable term basis risks related to multiple life products. The transaction resulted in an increase in premiums, reinsurance and other receivables of $24.7 million, an increase in other liabilities of $22.7 million a decrease in premiums of $22.7 million and a reduction in policyholder benefits and claims of $24.7 million. The Company recognized a gain of $1.3 million, net of income tax, as a result of this transaction. Investment Transactions Prior to the Separation, the Company had extended loans to certain subsidiaries of MetLife, Inc. Additionally, in the ordinary course of business, the Company had previously transferred invested assets, primarily consisting of fixed maturity securities, to and from former affiliates. See Note 4 for further discussion of the related party investment transactions. Shared Services and Overhead Allocations Brighthouse affiliates and MetLife provide the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting, and information technology. In 2017, the Company is charged for the MetLife services through a transition services agreement and allocated to the legal entities and products within the Company. When specific identification to a particular legal entity and/or product is not practicable, an allocation methodology based on various performance measures or activity-based costing, such as sales, new policies/contracts issued, reserves, and in-force policy counts is used. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual incidence of cost incurred by the Company and/or affiliate. Management believes that the methods used to allocate expenses under these arrangements are reasonable. Expenses incurred with the Brighthouse affiliates and MetLife related to these arrangements, recorded in other expenses, were $10.2 million and $26.5 million for the three months and nine months ended September 30, 2017, respectively, and $5.2 million and $15.8 million for the three months and nine months ended September 30, 2016, respectively. Broker-Dealer Transactions Beginning in March 2017, Brighthouse Securities, LLC, a registered broker-dealer affiliate, began distributing certain of the Company’s existing and future variable insurance products, and the MetLife broker-dealers discontinued such distributions. Prior to March 2017, the Company recognized related party revenues and expenses arising from transactions with MetLife broker-dealers that previously sold the Company’s variable annuity and life products. The related party expense for the Company was commissions collected on the sale of variable products by the Company and passed through to the broker-dealer. The related party revenue for the Company was fee income from trusts and mutual funds whose shares serve as investment options of policyholders of the Company. The following table summarizes income and expense from transactions with related party broker-dealers for the periods indicated:
The following table summarizes assets and liabilities from transactions with related party broker-dealers as follow at:
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Business, Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates. |
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Consolidation of Subsidiaries | Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. The accompanying interim condensed financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2016 balance sheet data was derived from audited financial statements included in Brighthouse NY’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed financial statements should be read in conjunction with the financial statements of the Company included in the 2016 Annual Report. |
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Investments | Maturities of Fixed Maturity Securities Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. Past Due and Nonaccrual Mortgage Loans The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial mortgage loans — 60 days and agricultural mortgage loans — 90 days. Variable Interest Entities The Company has invested in legal entities that are VIEs. In certain instances, the Company may hold both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, it would be deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. |
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Derivatives | Accounting for Derivatives Freestanding Derivatives Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses). Hedge Accounting To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). Embedded Derivatives The Company sells variable annuities and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees. Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are bilateral contracts between two counterparties (“OTC-bilateral”). The Company primarily uses foreign currency swaps Derivative Strategies The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements. |
Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information, by Segment |
The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
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Reconciliation of Revenue from Segments to Consolidated | The following table presents total revenues with respect to the Company’s segments, as well as Corporate & Other:
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Insurance (Tables) |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantees related to Annuity, Universal and Variable Life Contracts | Information regarding the Company’s guarantee exposure was as follows at:
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Maturity and Equity Securities Available-for-Sale | The following table presents the fixed maturity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate fixed maturity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
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Available-for-sale fixed maturity securities by contractual maturity date | The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2017:
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Continuous Gross Unrealized Loss and OTTI Loss for Fixed Maturity and Equity Securities Available-for-Sale | The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
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Disclosure of Mortgage Loans Net of Valuation Allowance | Mortgage loans are summarized as follows at:
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Allowance for Credit Losses on Financing Receivables | The changes in the valuation allowance, by portfolio segment, were as follows:
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Components of net unrealized investment gains (losses) included in accumulated other comprehensive income (loss) | The components of net unrealized investment gains (losses), included in AOCI, were as follows:
The changes in net unrealized investment gains (losses) were as follows:
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Invested Assets on Deposit, Held in Trust and Pledged as Collateral | Invested assets on deposit are presented below at estimated fair value for fixed maturity securities at:
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The Components of Net Investment Income | The components of net investment income were as follows:
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The components of net investment gains (losses) | The components of net investment gains (losses) were as follows:
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Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains and losses | Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below.
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Variable Interest Entity, Not Primary Beneficiary [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entity [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
______________
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Commercial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of the mortgage loans portfolio segment by the recorded investment, prior to valuation allowances, by credit quality indicator categories | The credit quality of commercial mortgage loans was as follows at:
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Agricultural | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of the mortgage loans portfolio segment by the recorded investment, prior to valuation allowances, by credit quality indicator categories | The credit quality of agricultural mortgage loans was as follows at:
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Derivatives (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location | The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
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Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral | The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
______________
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Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral | The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
______________
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Derivative Instruments, Gain (Loss) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Derivatives Gains (Losses) | The components of net derivative gains (losses) were as follows:
______________
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Embedded Derivative Financial Instruments [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Derivatives Gains (Losses) | The following table presents changes in estimated fair value related to embedded derivatives:
______________
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Schedule of Derivative Instruments | The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
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Fair Value (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recurring Fair Value Measurements | The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented below at:
______________
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Fair Value Inputs, Quantitative Information | The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
______________
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Fair Value Inputs, Quantitative Information | The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
______________
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Fair Value, Measured on Recurring Basis, Unobservable Input Reconciliation | The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
______________
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Fair Value of Financial Instruments Carried at Other Than Fair Value | The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
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Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income (Loss) | Information regarding changes in the balances of each component of AOCI was as follows:
______________
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Reclassification out of Accumulated Other Comprehensive Income (Loss) | Information regarding amounts reclassified out of each component of AOCI was as follows:
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Other Expenses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Expenses | Information on other expenses was as follows:
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Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosure [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions [Table Text Block] | The following table summarizes assets and liabilities from transactions with related parties (excluding broker-dealer transactions) at:
The following table summarizes income and expense from transactions with related parties (excluding broker-dealer transactions) for the periods indicated:
The following table summarizes income and expense from transactions with related party broker-dealers for the periods indicated:
The following table summarizes assets and liabilities from transactions with related party broker-dealers as follow at:
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Effects of reinsurance | Information regarding the significant effects of related party reinsurance included on the interim condensed statements of operations and comprehensive income (loss) was as follows:
Information regarding the significant effects of ceded related party reinsurance included on the interim condensed balance sheets was as follows at:
|
Business, Basis of Presentation and Summary of Significant Accounting Policies (Narrative) (Details) |
9 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2017
Segment
shares
|
Aug. 04, 2017
shares
|
Jun. 30, 2017 |
Dec. 31, 2016
shares
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Number of segments | Segment | 2 | |||
Instrument [Line Items] | ||||
Common Stock, Shares, Issued | 200,000 | 200,000 | ||
Spinoff [Member] | ||||
Instrument [Line Items] | ||||
Planned Common Stock Distribution by Parent | 80.80% | |||
Common Stock, Shares, Issued | 119,773,106 | |||
Spinoff [Member] | Minimum | ||||
Instrument [Line Items] | ||||
Planned Common Stock Distribution by Parent | 80.10% | |||
Parent Company [Member] | Spinoff [Member] | ||||
Instrument [Line Items] | ||||
Common Stock, Shares, Issued | 96,776,670 |
Segment Information (Reconciliation of Operating Revenues to Total Revenues) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | $ 11,631 | $ 51,681 | $ (29,288) | $ 296,721 |
Operating Segments | Annuities | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 25,535 | 26,147 | 79,271 | 85,309 |
Operating Segments | Life | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 14,640 | 12,605 | 22,904 | 37,253 |
Operating Segments | Corporate & Other | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 3,236 | 3,952 | 8,875 | 12,063 |
Segment Reconciling Items | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | $ (31,780) | $ 8,977 | $ (140,338) | $ 162,096 |
Segment Information (Total Assets) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Total assets | $ 8,278,466 | $ 7,633,046 |
Annuities | ||
Segment Reporting Information [Line Items] | ||
Total assets | 7,072,659 | 6,708,803 |
Life | ||
Segment Reporting Information [Line Items] | ||
Total assets | 677,134 | 342,592 |
Corporate & Other | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 528,673 | $ 581,651 |
Segment Information (Narrative) (Details) |
9 Months Ended |
---|---|
Sep. 30, 2017
Segment
| |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Insurance (Guarantees Related to Annuity Contracts) (Details) - Variable Annuity Guarantees - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Guaranteed Death Benefits | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value | $ 4,957,498 | $ 4,763,943 |
Separate account value | 4,950,618 | 4,753,638 |
Net amount at risk | $ 6,173 | $ 36,827 |
Average attained age of contractholders | 67 years | 66 years |
Guaranteed Annuitization Benefits | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value | $ 4,109,524 | $ 3,969,485 |
Separate account value | 4,108,620 | 3,968,482 |
Net amount at risk | $ 192,765 | $ 209,926 |
Average attained age of contractholders | 66 years | 65 years |
Investments (Maturities of Fixed Maturity Securities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Available-for-sale Securities, Debt Maturities [Abstract] | ||
Due in One Year or Less | $ 34,501 | |
Due After One Year Through Five Years | 316,515 | |
Due After Five Years Through Ten Years | 636,160 | |
Due After Ten Years | 526,731 | |
Structured Securities | 455,520 | |
Amortized cost | 1,969,427 | $ 1,870,654 |
Due in One Year or Less | 34,926 | |
Due After One Year Through Five Years | 326,183 | |
Due After Five Years Through Ten Years | 644,560 | |
Due After Ten Years | 552,371 | |
Structured Securities | 462,164 | |
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $1,969,427 and $1,870,654, respectively) | $ 2,020,204 | $ 1,878,514 |
Investments (Mortgage Loans by Portfolio Segment) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Company-held mortgage loans held-for-investment, net | ||||
Commercial | $ 269,174 | $ 286,002 | ||
Percentage of loans receivable on commercial mortgage loans | 68.90% | 70.40% | ||
Agricultural | $ 122,975 | $ 121,858 | ||
Percentage of loans receivable on agricultural mortgage loans | 31.50% | 30.00% | ||
Subtotal | $ 392,149 | $ 407,860 | ||
Percentage of loans receivable on subtotal | 100.40% | 100.40% | ||
Valuation allowances | $ (1,679) | $ (1,775) | $ (707) | $ (640) |
Percentage of loans receivable on valuation allowances | (0.40%) | (0.40%) | ||
Total mortgage loans, net | $ 390,470 | $ 406,085 | ||
Percentage Of Mortgage Loans On Real Estate Commercial And Consumer Net To Mortgage Loans On Real Estate Commercial And Consumer Net | 100.00% | 100.00% |
Investments (Valuation Allowance Rollforward by Portfolio Segment) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Mortgage Loans on Real Estate [Line Items] | ||
Balance, beginning of period | $ 1,775 | $ 640 |
Provision (release) | (96) | 67 |
Balance, end of period | 1,679 | 707 |
Commercial | ||
Mortgage Loans on Real Estate [Line Items] | ||
Balance, beginning of period | 1,419 | 578 |
Provision (release) | (101) | 50 |
Balance, end of period | 1,318 | 628 |
Agricultural | ||
Mortgage Loans on Real Estate [Line Items] | ||
Balance, beginning of period | 356 | 62 |
Provision (release) | 5 | 17 |
Balance, end of period | $ 361 | $ 79 |
Investments (Credit Quality of Agricultural and Residential Mortgage Loans) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Agricultural Mortgage Loans - by Credit Quality Indicator: | ||
Recorded Investment | $ 122,975 | $ 121,858 |
% of Total | 100.00% | 100.00% |
Less than 65% | ||
Agricultural Mortgage Loans - by Credit Quality Indicator: | ||
Recorded Investment | $ 122,062 | $ 119,974 |
% of Total | 99.30% | 98.40% |
65% to 75% | ||
Agricultural Mortgage Loans - by Credit Quality Indicator: | ||
Recorded Investment | $ 913 | $ 1,884 |
% of Total | 0.70% | 1.60% |
Investments (Net Unrealized Investment Gains Losses) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Components of net unrealized investment gains (losses) included in accumulated other comprehensive loss | ||
Fixed maturity securities | $ 50,777 | $ 7,862 |
Derivatives | 2,423 | 4,718 |
Net Unrealized Investment Gains Losses Included In Accumulated Other Comprehensive Income Loss Related To Other Investments | 4 | 0 |
Subtotal | 53,204 | 12,580 |
DAC and DSI | (18,200) | (5,800) |
Deferred income tax benefit (expense) | (12,252) | (2,373) |
Net unrealized investment gains (losses) | $ 22,752 | $ 4,407 |
Investments (Changes in Net Unrealized Investment Gains Losses) (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Changes In Net Unrealized Investment Gains Losses Included In Accumulated Other Comprehensive Loss [Abstract] | |
Balance, beginning of period | $ 4,407 |
Unrealized investment gains (losses) during the period | 40,624 |
Unrealized investment gains (losses) relating to [Abstract] | |
DAC and DSI | (12,400) |
Deferred income tax benefit (expense) | (9,879) |
Balance, end of period | 22,752 |
Change in net unrealized investment gains (losses) | $ 18,345 |
Investments (Invested Assets on Deposit, Held In Trust and Pledged as Collateral) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Invested assets on deposit (regulatory deposits) | $ 1,541 | $ 1,507 |
Investments (Unconsolidated Variable Interest Entities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Carrying Amount Asset | $ 442,907 | $ 449,897 |
Carrying Amount liability | 442,907 | 449,897 |
Structured securities | ||
Variable Interest Entity [Line Items] | ||
Carrying Amount Asset | 436,645 | 444,013 |
Carrying Amount liability | 436,645 | 444,013 |
Foreign corporate | ||
Variable Interest Entity [Line Items] | ||
Carrying Amount Asset | 6,262 | 5,884 |
Carrying Amount liability | $ 6,262 | $ 5,884 |
Investments (Net Investment Income) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Net Investment Income [Line Items] | ||||
Less: Investment expenses | $ 801 | $ 470 | $ 2,352 | $ 1,350 |
Net investment income | 21,517 | 13,227 | 63,468 | 39,960 |
Securities Investment | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | 22,318 | 13,697 | 65,820 | 41,310 |
Fixed maturity securities | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | 17,870 | 11,801 | 52,452 | 35,654 |
Mortgage loans | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | 4,110 | 1,727 | 12,636 | 5,240 |
Policy Loans [Member] | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | 4 | 4 | 5 | 5 |
Cash, cash equivalents and short-term investments | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | 16 | 24 | 129 | 71 |
Other | ||||
Net Investment Income [Line Items] | ||||
Gross Investment Income, Operating | $ 318 | $ 141 | $ 598 | $ 340 |
Investments (Components of Net Investment Gains Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Marketable Securities, Gain (Loss) [Abstract] | ||||
Gain (Loss) on Sale of Equity Investments | $ 0 | $ 0 | $ 0 | $ 6 |
Fixed maturity securities — net gains (losses) on sales and disposals | (711) | 397 | (1,683) | (1,295) |
Other net investment gains (losses): | ||||
Mortgage loans | 6 | 87 | 41 | (40) |
Other | 31 | (59) | 597 | 25 |
Total net investment gains (losses) | (674) | 425 | (1,045) | (2,174) |
Fixed maturity securities | ||||
Marketable Securities, Gain (Loss) [Abstract] | ||||
Total OTTI losses recognized in earnings | 0 | 0 | 0 | (870) |
Net investment gains (losses) | (711) | 397 | (1,683) | (2,165) |
Industrial | ||||
Marketable Securities, Gain (Loss) [Abstract] | ||||
Total OTTI losses recognized in earnings | $ 0 | $ 0 | $ 0 | $ (870) |
Investments (Sales or Disposals and Impairments of Fixed Maturity and Equity Securities) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Fixed maturity securities | ||||
Components of Sales or Disposals of Fixed Maturity and Equity Securities | ||||
Proceeds | $ 214,635 | $ 14,717 | $ 384,736 | $ 44,566 |
Gross investment gains | 512 | 646 | 1,527 | 1,006 |
Gross investment losses | (1,223) | (249) | (3,210) | (2,301) |
Total OTTI losses recognized in earnings: | ||||
Total OTTI losses recognized in earnings | 0 | 0 | 0 | (870) |
Net investment gains (losses) | (711) | 397 | (1,683) | (2,165) |
Equity Securities [Member] | ||||
Components of Sales or Disposals of Fixed Maturity and Equity Securities | ||||
Proceeds | 0 | 0 | 0 | 183 |
Gross investment gains | 0 | 0 | 0 | 6 |
Gross investment losses | 0 | 0 | 0 | 0 |
Total OTTI losses recognized in earnings: | ||||
Total OTTI losses recognized in earnings | 0 | 0 | 0 | 0 |
Net investment gains (losses) | $ 0 | $ 0 | $ 0 | $ 6 |
Investments (Fixed Maturity and Equity Securities Available-For-Sale - Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale Securities, Debt Securities | $ 2,020,204 | $ 1,878,514 |
Non-Income Producing Debt Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale Securities, Debt Securities | $ 0 | $ 0 |
Investments (Evaluation of Available-For-Sale Securities for OTTI and Evaluating Temporarily Impaired AFS Securities - Narrative) (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Schedule of Available-for-sale Securities [Line Items] | |
Fixed Maturity Securities Available for Sale with Gross Unrealized Loss of Equal to Or Greater Than Stated Percentage | 20.00% |
Fixed maturity securities | |
Schedule of Available-for-sale Securities [Line Items] | |
Available-for-sale Securities, Change in Net Unrealized Holding Gain (Loss) before Taxes | $ (19,800) |
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss | 15,100 |
Twenty Percent Or More | Six Months Or Greater | Fixed maturity securities | |
Schedule of Available-for-sale Securities [Line Items] | |
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss | $ 0 |
Investments (Mortgage Loans - Narrative) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016 |
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016 |
Dec. 31, 2016
USD ($)
|
|
Investments, Debt and Equity Securities [Abstract] | |||||
Carrying Value | $ 0 | $ 0 | $ 0 | ||
Recorded Investment | $ 0 | $ 0 | $ 0 | ||
Financing Receivable, Modifications, Subsequent Default, Number of Contracts | 0 | 0 | 0 | 0 | |
Percentage of Mortgage Loans Classified as Performing | 100.00% | 100.00% | 100.00% | ||
Financing Receivable Number of Contract of Recorded Investment Past Due | 0 | 0 | 0 | ||
Loans and Leases Receivable, Number of Contract, Nonperforming, Nonaccrual of Interest | 0 | 0 | 0 |
Investments (Cash Equivalents - Narrative) (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Cash equivalents | $ 52.9 | $ 9.2 |
Investments (Concentrations of Credit Risk - Narrative) (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Securities holdings exposure in single issuer greater than stated percentage of Company's equity | 10.00% | |
Investments in any counterparty that were greater than 10% of equity | $ 0 | $ 0 |
Investments (Consolidated Variable Interest Entities - Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract] | ||
Variable interest, consoldidated carrying amount assets and liabilities net | $ 0 | $ 0 |
Investments (Net Investment Gains Losses - Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Gains (losses) from foreign currency transactions | $ (7) | $ (25) | $ 539 | $ 5 |
Investments (Related Party Invesment Transactions - Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Related Party Transaction [Line Items] | ||||
Related party investment administrative services | $ 704 | $ 453 | $ 2,100 | $ 1,300 |
Commercial Loan [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related Party Transaction, Other Revenues from Transactions with Related Party | 64 | 64 | ||
Affiliated Entity | Commercial Loan [Member] | ||||
Related Party Transaction [Line Items] | ||||
Assets Transferred To Affiliates, Estimated Fair Value | $ 0 | 1,500 | $ 0 | 1,500 |
Related Party Loan One [Member] | Affiliated Entity | Commercial Loan [Member] | ||||
Related Party Transaction [Line Items] | ||||
Long-term Debt | $ 1,400 | $ 1,400 |
Derivatives (Primary Risks) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Gross Notional Amount | $ 69,670 | $ 47,993 |
Estimated Fair Value Assets | 5,366 | 8,656 |
Estimated Fair Value Liabilities | 708 | 0 |
Derivatives Designated as Hedging Instruments: | Cash Flow Hedges | Foreign currency swaps | ||
Derivatives, Fair Value [Line Items] | ||
Gross Notional Amount | 53,371 | 33,930 |
Estimated Fair Value Assets | 2,674 | 4,947 |
Estimated Fair Value Liabilities | 559 | 0 |
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | Foreign currency swaps | ||
Derivatives, Fair Value [Line Items] | ||
Gross Notional Amount | 16,299 | 14,063 |
Estimated Fair Value Assets | 2,692 | 3,709 |
Estimated Fair Value Liabilities | $ 149 | $ 0 |
Derivatives (Net Derivative Gains Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Components of Net Derivatives Gains (Losses) | ||||
Derivatives and hedging gains (losses) | $ (329) | $ 71 | $ (475) | $ 2,245 |
Embedded derivatives gains (losses) | (34,254) | 4,933 | (149,222) | 151,410 |
Total net derivative gains (losses) | $ (34,583) | $ 5,004 | $ (149,697) | $ 153,655 |
Derivatives (Gains Losses Recognized in Income Not Designated or Qualifying) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | Net derivative gains (losses) | Foreign currency exchange rate derivatives | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net Derivative Gains (Losses) Recognized for Derivatives | $ (545) | $ 100 | $ (1,053) | $ 2,600 |
Derivatives (Embedded Derivatives) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Embedded Derivative, Fair Value of Embedded Derivative, Net [Abstract] | ||
Embedded derivatives within liability host contracts | $ (39,499) | $ (23,740) |
Ceded guaranteed minimum benefits | Premiums, reinsurance and other receivables | ||
Embedded Derivative, Fair Value of Embedded Derivative, Net [Abstract] | ||
Embedded derivatives within asset host contracts | 321,524 | 379,297 |
Direct guaranteed minimum benefits | Policyholder account balances | ||
Embedded Derivative, Fair Value of Embedded Derivative, Net [Abstract] | ||
Embedded derivatives within liability host contracts | (44,099) | (23,740) |
Fixed annuities with equity indexed returns | Policyholder account balances | ||
Embedded Derivative, Fair Value of Embedded Derivative, Net [Abstract] | ||
Embedded derivatives within liability host contracts | $ 5,000 | $ 0 |
Derivatives (Changes in Estimated Fair Value Related to Embedded Derivatives) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net derivatives gains (losses) | $ (34,254) | $ 4,933 | $ (149,222) | $ 151,410 |
Net derivative gains (losses) | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net derivatives gains (losses) | $ (34,254) | $ 4,933 | $ (149,222) | $ 151,410 |
Derivatives (Earned Income On Derivatives - Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Derivatives Designated as Hedging Instruments: | Net investment income | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total earned income | $ 149 | $ 143 | $ 410 | $ 430 |
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | Net derivative gains (losses) | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total earned income | $ 81 | $ 73 | $ 239 | $ 193 |
Derivatives (Cash Flow Hedges - Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (Loss) on Discontinuation of Cash Flow Hedge Due to Forecasted Transaction Probable of Not Occurring, Net | $ 0 | $ 0 | $ 0 | $ 0 | |
Derivatives in cash flow hedging relationships | |||||
Discontinuation of Cash Flow Hedge | 0 | 0 | |||
Cash Flow Hedges | Foreign currency swaps | |||||
Derivatives in cash flow hedging relationships | |||||
Amount of Gains (Losses) Deferred in AOCI on Derivatives | (1,200,000) | (600,000) | $ (2,300,000) | 1,500,000 | |
Cash Flow Hedges | Net derivative gains (losses) | |||||
Derivatives in cash flow hedging relationships | |||||
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | 1,000 | 0 | 2,000 | 0 | |
Amount and Location of Gains (Losses) Reclassified from AOCI into Income (Loss) | $ 0 | $ 0 | $ 1,000 | $ 5,000 |
Derivatives (Credit Risk on Freestanding Derivatives - Narrative) (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Credit Derivatives [Line Items] | ||
Estimated Fair Value of Derivatives in Net Liability Position | $ 0 | $ 0 |
Over the Counter [Member] | ||
Credit Derivatives [Line Items] | ||
Derivative, Collateral, Right to Reclaim Securities | $ 0 | $ 0 |
Fair Value (Financial Instruments Carried at Other Than Fair Value) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Carrying Value | ||
Assets | ||
Mortgage loans | $ 390,470 | $ 406,085 |
Premiums, reinsurance and other receivables | 22,697 | 30,122 |
Liabilities | ||
Policyholder account balances | 1,170,350 | 1,214,186 |
Estimated Fair Value | ||
Assets | ||
Mortgage loans | 390,862 | 404,079 |
Premiums, reinsurance and other receivables | 27,188 | 32,367 |
Liabilities | ||
Policyholder account balances | 1,160,784 | 1,283,338 |
Estimated Fair Value | Level 1 | ||
Assets | ||
Mortgage loans | 0 | 0 |
Premiums, reinsurance and other receivables | 0 | 0 |
Liabilities | ||
Policyholder account balances | 0 | 0 |
Estimated Fair Value | Level 2 | ||
Assets | ||
Mortgage loans | 0 | 0 |
Premiums, reinsurance and other receivables | 2,453 | 2,095 |
Liabilities | ||
Policyholder account balances | 0 | 0 |
Estimated Fair Value | Level 3 | ||
Assets | ||
Mortgage loans | 390,862 | 404,079 |
Premiums, reinsurance and other receivables | 24,735 | 30,272 |
Liabilities | ||
Policyholder account balances | $ 1,160,784 | $ 1,283,338 |
Fair Value (Transfers Between Levels - Narrative) (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Fair Value Disclosures [Abstract] | ||
Fair Value Assets And Liabilities Transferred Between Levels 1 And Levels 2 | $ 0 | $ 0 |
Other Expenses (Other Expenses) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Other Income and Expenses [Abstract] | ||||
Compensation | $ 3,640 | $ 1,752 | $ 9,977 | $ 6,352 |
Pension, postretirement and postemployment benefit costs | 0 | 187 | 0 | 608 |
Commissions | 9,584 | 4,289 | 23,085 | 12,536 |
Volume-related costs | 1,692 | 1,288 | 2,953 | 3,653 |
Related party expenses on ceded reinsurance | 0 | 2,984 | 4,523 | 7,798 |
Capitalization of DAC | (5,111) | (1,194) | (11,079) | (3,588) |
Premium taxes, licenses and fees | 762 | 640 | 1,662 | 2,107 |
Professional services | 874 | 427 | 2,792 | 1,012 |
Rent and related expenses | 84 | 273 | 368 | 822 |
Other | 4,551 | 2,826 | 13,395 | 10,710 |
Total other expenses | $ 16,076 | $ 13,472 | $ 47,676 | $ 42,010 |
Contingencies, Commitments and Guarantees (Commitments and Guarantees - Narrative) (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Guarantor Obligations, Current Carrying Value | $ 0 | $ 0 |
Mortgage Loan Commitments | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Fair Value Disclosure, Off-balance Sheet Risks, Face Amount, Liability | 42 | 42 |
Commitments to Extend Credit [Member] | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Fair Value Disclosure, Off-balance Sheet Risks, Face Amount, Liability | $ 15,200 | $ 0 |
Related Party Transactions (Effects of Affiliated Reinsurance on Balance Sheets) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Assets: | |||||
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | $ (10,898) | $ 12,234 | $ (63,998) | $ 121,944 | |
Premiums, reinsurance and other receivables | 569,094 | 569,094 | $ 354,939 | ||
Deferred policy acquisition costs and value of business acquired | 126,035 | 126,035 | 85,173 | ||
Liabilities: | |||||
Future policy benefits | 665,112 | 665,112 | 627,007 | ||
Policyholder account balances | 1,269,047 | 1,269,047 | 1,202,350 | ||
Other policy-related balances | 12,686 | 12,686 | 7,285 | ||
Other Liabilities | 495,046 | 495,046 | 112,441 | ||
Ceded | Affiliated Entity | |||||
Assets: | |||||
Premiums, reinsurance and other receivables | 534,601 | 534,601 | 321,868 | ||
Deferred policy acquisition costs and value of business acquired | (4,912) | (4,912) | (4,309) | ||
Total assets | 529,689 | 529,689 | 317,559 | ||
Liabilities: | |||||
Other Liabilities | 471,669 | 471,669 | 99,641 | ||
Total liabilities | $ 471,669 | $ 471,669 | $ 99,641 |
Related Party Transactions (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Related Party Transaction [Line Items] | ||||
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party | $ 704 | $ 453 | $ 2,100 | $ 1,300 |
Affiliated Entity | ||||
Related Party Transaction [Line Items] | ||||
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party | $ 10,200 | $ 5,200 | $ 26,500 | $ 15,800 |
Subsequent Events (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Subsequent Event [Line Items] | |||||
Deferred policy acquisition costs and value of business acquired | $ 126,035 | $ 126,035 | $ 85,173 | ||
Premiums and Other Receivables, Net | (569,094) | (569,094) | $ (354,939) | ||
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | $ (10,898) | $ 12,234 | $ (63,998) | $ 121,944 |
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