Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities that are measured at fair value on a 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:

	September 30, 2019
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	3,409,466	—	3,409,466	—
Equity securities	19,462		19,462	—	—
Derivatives, index options	106,364		—	—	106,364
Total assets	$	3,535,292	19,462	3,409,466	106,364
Policyholder account balances (a)	$	110,272	—	—	110,272
Other liabilities (b)	13,418		—	—	13,418
Total liabilities	$	123,690	—	—	123,690

During the three and nine months ended September 30, 2019, the Company made no transfers into or out of Levels 1, 2 or 3.

	December 31, 2018
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,946,059	—	2,946,059	—
Equity securities	17,491		17,491	—	—
Derivatives, index options	14,684		—	—	14,684
Total assets	$	2,978,234	17,491	2,946,059	14,684
Policyholder account balances (a)	$	44,781	—	—	44,781
Other liabilities (b)	11,923		—	—	11,923
Total liabilities	$	56,704	—	—	56,704

(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 and contingent consideration for businesses acquired.

Schedule of assets by by pricing source and fair value hierarchy level

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:

	September 30, 2019
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	3,409,466		—		3,409,466		—
Priced internally	—			—		—		—
Subtotal	3,409,466			—		3,409,466		—
Equity securities:
Priced by third-party vendors	19,462			19,462		—		—
Priced internally	—			—		—		—
Subtotal	19,462			19,462		—		—
Derivatives, index options:
Priced by third-party vendors	106,364			—		—		106,364
Priced internally	—			—		—		—
Subtotal	106,364			—		—		106,364
Total	$	3,535,292		19,462		3,409,466		106,364
Percent of total	100.0		%	0.6	%	96.4	%	3.0	%

	December 31, 2018
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,946,059		—		2,946,059		—
Priced internally	—			—		—		—
Subtotal	2,946,059			—		2,946,059		—
Equity securities, available for sale:
Priced by third-party vendors	17,491			17,491		—		—
Priced internally	—			—		—		—
Subtotal	17,491			17,491		—		—
Derivatives, index options:
Priced by third-party vendors	14,684			—		—		14,684
Priced internally	—			—		—		—
Subtotal	14,684			—		—		14,684
Total	$	2,978,234		17,491		2,946,059		14,684
Percent of total	100.0		%	0.6	%	98.9	%	0.5	%

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.

	Three Months Ended September 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at July 1, 2019	$	—	—	89,900		89,900		112,500
Total realized and unrealized gains (losses):
Included in net income	—		—	3,296		3,296		(1,978	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,872		19,872		19,872
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(6,704	)	(6,704	)	(6,704	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	106,364		106,364		123,690
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	$	—	—	(2,020	)	(2,020	)	—
Benefits and expenses	—		—	—		—		(464	)
Total	$	—	—	(2,020	)	(2,020	)	(464	)

	Three Months Ended September 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at July 1, 2018	$	—	—	102,007		102,007		133,013
Total realized and unrealized gains (losses):
Included in net income	—		—	69,683		69,683		65,316
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,026		19,026		19,026
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(54,281	)	(54,281	)	(54,519	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	136,435		136,435		162,836
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	$	—	—	65,927		65,927		—
Benefits and expenses	—		—	—		—		67,640
Total	$	—	—	65,927		65,927		67,640

	Nine Months Ended September 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2019	$	—	—	14,684		14,684		56,704
Total realized and unrealized gains (losses):
Included in net income	—		—	63,127		63,127		37,255
Purchases, sales, issuances and settlements, net:
Purchases	—		—	56,494		56,494		56,494
Sales	—		—	—		—		—
Issuances	—		—	—		—		3,700
Settlements	—		—	(27,941	)	(27,941	)	(30,463	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	106,364		106,364		123,690
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	$	—	—	42,794		42,794		—
Other operating expenses	—		—	—		—		43,111
Total	$	—	—	42,794		42,794		43,111

	Nine Months Ended September 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2018	$	—	—	194,731		194,731		226,401
Total realized and unrealized gains (losses):
Included in net income	—		—	35,581		35,581		32,496
Purchases, sales, issuances and settlements, net:
Purchases	—		—	63,303		63,303		63,303
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(157,180	)	(157,180	)	(159,364	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	136,435		136,435		162,836
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	$	—	—	42,200		42,200		—
Other operating expenses	—		—	—		—		44,621
Total	$	—	—	42,200		42,200		44,621

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:

	September 30, 2019
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	106,364	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	106,364
Policyholder account balances	$	110,272	Deterministic cash flow model	Projected option cost
Other liabilities, share-based compensation	9,453		Black-Scholes model	Expected term, Forfeiture assumptions
Other liabilities, contingent consideration on businesses acquired	3,965		Probabilistic Method	Projected renewal premium
Total liabilities	$	123,690

	December 31, 2018
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	14,684	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	14,684
Policyholder account balances	$	44,781	Deterministic cash flow model	Projected option cost
Other liabilities	11,923		Black-Scholes model	Expected term
				Forfeiture assumptions
Total liabilities	$	56,704

Schedule of carrying amounts and fair values of the Company's financial instruments

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

	September 30, 2019
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,224,459	7,537,665	—	7,536,101	1,564
Debt securities available for sale	3,409,466		3,409,466	—	3,409,466	—
Cash and cash equivalents	171,509		171,509	171,509	—	—
Mortgage loans	224,048		227,159	—	—	227,159
Policy loans	80,272		127,874	—	—	127,874
Other loans	13,864		14,028	—	—	14,028
Derivatives, index options	106,364		106,364	—	—	106,364
Equity securities	19,462		19,462	19,462	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,087,363	5,827,205	—	—	5,827,205
Immediate annuity and supplemental contracts	405,516		432,789	—	—	432,789
Contingent consideration on businesses acquired	3,965		3,965	—	—	3,965

	December 31, 2018
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,285,254	7,228,268	—	7,226,362	1,906
Debt securities available for sale	2,946,059		2,946,059	—	2,946,059	—
Cash and cash equivalents	131,976		131,976	131,976	—	—
Mortgage loans	203,180		202,762	—	—	202,762
Policy loans	54,724		90,802	—	—	90,802
Other loans	12,272		12,709	—	—	12,709
Derivatives, index options	14,684		14,684	—	—	14,684
Equity securities	17,491		17,491	17,491	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,455,642	6,403,007	—	—	6,403,007
Immediate annuity and supplemental contracts	407,413		415,726	—	—	415,726