Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of the date indicated:



	June 30, 2017
	Total		Level 1	Level 2	Level 3
	(In thousands)

Debt securities, available for sale	$	3,023,140	—	3,023,140	—
Equity securities, available for sale	19,618		19,618	—	—
Derivatives, index options	149,341		—	—	149,341

Total assets	$	3,192,099	19,618	3,023,140	149,341

Policyholder account balances (a)	$	157,988	—	—	157,988
Other liabilities (b)	15,368		—	—	15,368

Total liabilities	$	173,356	—	—	173,356

During the three and six months ended June 30, 2017, the Company had no transfers into or out of Levels 1, 2 or 3.



	December 31, 2016
	Total		Level 1	Level 2	Level 3
	(In thousands)

Debt securities, available for sale	$	3,042,050	—	3,042,050	—
Equity securities, available for sale	18,313		18,313	—	—
Derivatives, index options	120,644		—	—	120,644

Total assets	$	3,181,007	18,313	3,042,050	120,644

Policyholder account balances (a)	$	122,666	—	—	122,666
Other liabilities (b)	12,027		—	—	12,027

Total liabilities	$	134,693	—	—	134,693

(a) Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

(b) Represents the liability for share-based compensation.

Schedule of Assets by Pricing Source and Fair Value Hierarchy Measured on Recurring Basis

The following tables present, by pricing source and fair value hierarchy level, the Company’s assets that are measured at fair value on a recurring basis:



	June 30, 2017
	Total			Level 1		Level 2		Level 3
	(In thousands)

Debt securities, available for sale:
Priced by third-party vendors	$	3,023,140		—		3,023,140		—
Priced internally	—			—		—		—
Subtotal	3,023,140			—		3,023,140		—

Equity securities, available for sale:
Priced by third-party vendors	19,618			19,618		—		—
Priced internally	—			—		—		—
Subtotal	19,618			19,618		—		—

Derivatives, index options:
Priced by third-party vendors	149,341			—		—		149,341
Priced internally	—			—		—		—
Subtotal	149,341			—		—		149,341

Total	$	3,192,099		19,618		3,023,140		149,341

Percent of total	100.0		%	0.6	%	94.7	%	4.7	%



	December 31, 2016
	Total			Level 1		Level 2		Level 3
	(In thousands)

Debt securities, available for sale:
Priced by third-party vendors	$	3,042,050		—		3,042,050		—
Priced internally	—			—		—		—
Subtotal	3,042,050			—		3,042,050		—

Equity securities, available for sale:
Priced by third-party vendors	18,313			18,313		—		—
Priced internally	—			—		—		—
Subtotal	18,313			18,313		—		—

Derivatives, index options:
Priced by third-party vendors	120,644			—		—		120,644
Priced internally	—			—		—		—
Subtotal	120,644			—		—		120,644

Total	$	3,181,007		18,313		3,042,050		120,644

Percent of total	100.0		%	0.6	%	95.6	%	3.8	%

Schedule of Significant Unobservable Inputs for Fair Value Measurements

The following tables provide additional information about fair value measurements for which significant unobservable (Level 3) inputs were utilized to determine fair value.



	For the Three Months Ended June 30, 2017
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)

Balance at April 1, 2017	$	—	—	149,847		149,847		167,008
Total realized and unrealized gains (losses):
Included in net income	—		—	32,216		32,216		39,466
Purchases, sales, issuances and settlements, net:
Purchases	—		—	18,938		18,938		18,938
Sales	—		—	—		—		—
Issuances	—		—	—		—		515
Settlements	—		—	(51,660	)	(51,660	)	(52,571	)
Transfers into (out of) Level 3	—		—	—		—		—

Balance at end of period	$	—	—	149,341		149,341		173,356

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	12,559		12,559		—
Benefits and expenses	—		—	—		—		15,423

Total	$	—	—	12,559		12,559		15,423



	For the Three Months ended June 30, 2016
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options	Total Assets	Other Liabilities
	(In thousands)

Balance at April 1, 2016	$	—	—	42,179	42,179	69,470
Total realized and unrealized gains (losses):
Included in net income	—		—	2,094	2,094	(7,760	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,046	19,046	19,046
Sales	—		—	—	—	—
Issuances	—		—	—	—	309
Settlements	—		—	—	—	(9	)
Transfers into (out of) Level 3	—		—	—	—	—

Balance at end of period	$	—	—	63,319	63,319	81,056

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	2,100	2,100	—
Benefits and expenses	—		—	—	—	458

Total	$	—	—	2,100	2,100	458



	Six Months Ended June 30, 2017
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)

Beginning balance, January 1, 2017	$	—	—	120,644		120,644		134,693
Total realized and unrealized gains (losses):
Included in net income	—		—	93,422		93,422		103,642
Purchases, sales, issuances and settlements, net:
Purchases	—		—	35,379		35,379		35,379
Sales	—		—	—		—
Issuances	—		—	—		—		744
Settlements	—		—	(100,104	)	(100,104	)	(101,102	)
Transfers into (out of) Level 3	—		—	—		—		—

Balance at end of period	$	—	—	149,341		149,341		173,356

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	67,104		67,104		—
Other operating expenses	—		—	—		—		70,519

Total	$	—	—	67,104		67,104		70,519



	Six Months Ended June 30, 2016
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)

Beginning balance, January 1, 2016	$	—	—	38,409		38,409		66,028
Total realized and unrealized gains (losses):
Included in net income	—		—	(10,807	)	(10,807	)	(21,184	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	37,539		37,539		37,539
Sales	—		—	—		—		—
Issuances	—		—	—		—		533
Settlements	—		—	(1,822	)	(1,822	)	(1,860	)
Transfers into (out of) Level 3	—		—	—		—		—

Balance at end of period	$	—	—	63,319		63,319		81,056

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	(8,223	)	(8,223	)	—
Other operating expenses	—		—	—		—		(11,568	)

Total	$	—	—	(8,223	)	(8,223	)	(11,568	)

Schedule of quantitative information of Level 3 liabilities

The following table presents the valuation method for financial assets and liabilities categorized as level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	June 30, 2017
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)

Derivatives, index options	$	149,341	Broker prices	Implied volatility
				Inputs from broker proprietary models

Total assets	$	149,341

Policyholder account balances	$	157,988	Deterministic cash flow model	Projected option cost
Other liabilities	15,368		Black-Scholes model	Expected term
				Forfeiture assumptions

Total liabilities	$	173,356



	December 31, 2016
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)

Derivatives, index options	$	120,644	Broker prices	Implied volatility
				Inputs from broker proprietary models

Total assets	$	120,644

Policyholder account balances	$	122,666	Deterministic cash flow model	Projected option cost
Other liabilities	12,027		Black-Scholes model	Expected term
				Forfeiture assumptions

Total liabilities	$	134,693

Schedule of quantitative information of Level 3 assets

The following table presents the valuation method for financial assets and liabilities categorized as level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	June 30, 2017
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)

Derivatives, index options	$	149,341	Broker prices	Implied volatility
				Inputs from broker proprietary models

Total assets	$	149,341

Policyholder account balances	$	157,988	Deterministic cash flow model	Projected option cost
Other liabilities	15,368		Black-Scholes model	Expected term
				Forfeiture assumptions

Total liabilities	$	173,356



	December 31, 2016
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)

Derivatives, index options	$	120,644	Broker prices	Implied volatility
				Inputs from broker proprietary models

Total assets	$	120,644

Policyholder account balances	$	122,666	Deterministic cash flow model	Projected option cost
Other liabilities	12,027		Black-Scholes model	Expected term
				Forfeiture assumptions

Total liabilities	$	134,693

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The carrying amounts and fair values of the Company's financial instruments are as follows:



	June 30, 2017
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Investments in debt and equity securities:
Securities held to maturity	$	7,230,187	7,466,140	—	7,466,140	—
Securities available for sale	3,042,758		3,042,758	19,618	3,023,140	—

Cash and cash equivalents	109,068		109,068	109,068	—	—
Mortgage loans	183,698		184,561	—	—	184,561
Policy loans	57,899		104,009	—	—	104,009
Other loans	14,541		14,991	—	—	14,991
Derivatives, index options	149,341		149,341	—	—	149,341
Short-term investments	—		—	—	—	—
Life interest in Trust	7,550		12,775	—	—	12,775

LIABILITIES
Deferred annuity contracts	$	7,751,899	7,370,364	—	—	7,370,364
Immediate annuity and supplemental contracts	443,553		474,164	—	—	474,164



	December 31, 2016
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Investments in debt and equity securities:
Securities held to maturity	$	7,159,259	7,337,611	—	7,337,611	—
Securities available for sale	3,060,363		3,060,363	18,313	3,042,050	—

Cash and cash equivalents	51,247		51,247	51,247	—	—
Mortgage loans	174,534		176,890	—	—	176,890
Policy loans	58,699		101,092	—	—	101,092
Other loans	14,343		14,898	—	—	14,898
Derivatives, index options	120,644		120,644	—	—	120,644
Life interest in Trust	7,550		12,775	—	—	12,775

LIABILITIES
Deferred annuity contracts	$	7,739,337	7,367,851	—	—	7,367,851
Immediate annuity and supplemental contracts	443,226		470,414	—	—	470,414