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Fair Values of Financial Instruments
 6 Months Ended
Jun. 30, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUES OF FINANCIAL INSTRUMENTS FAIR VALUES OF FINANCIAL INSTRUMENTS
For financial instruments, the FASB provides guidance which defines fair value, establishes a framework for measuring fair value under GAAP, and requires additional disclosures about fair value measurements. In compliance with this GAAP guidance, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Condensed Consolidated Balance Sheets are categorized as follows:

Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. These generally provide the most reliable evidence and are used to measure fair value whenever available. The Company's Level 1 assets are equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2:  Fair value is based upon significant inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable for substantially the full term of the asset or liability through corroboration with observable market data as of the reporting date. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, model-derived valuations whose inputs are observable or whose significant value drivers are observable and other observable inputs. The Company’s Level 2 assets include fixed maturity debt securities (corporate and private bonds, government or agency securities, asset-backed and mortgage-backed securities). The Company's Level 2 liabilities include the embedded derivative on reinsurance. Valuations are generally obtained from third party pricing services for identical or comparable assets or determined through use of valuation methodologies using observable market inputs.

Level 3:  Fair value is based on significant unobservable inputs which reflect the entity’s or third party pricing service’s assumptions about the assumptions market participants would use in pricing an asset or liability. The Company’s Level 3 assets are debt securities available-for-sale, trading securities, over-the-counter derivative contracts and mortgage loans. The Company’s Level 3 liabilities consist of share-based compensation obligations, certain equity-index product-related embedded derivatives, and an embedded derivative on reinsurance. Valuations are estimated based on non-binding broker prices or internally developed valuation models or methodologies, discounted cash flow models and other similar techniques.
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, 2022
 TotalLevel 1Level 2Level 3
 (In thousands)
Debt securities, available-for-sale$8,160,952 — 7,786,995 373,957 
Debt securities, trading909,647 — 809,878 99,769 
Equity securities22,121 18,433 3,688 — 
Mortgage loans18,738 — — 18,738 
Derivatives, index options6,071 — — 6,071 
Total assets$9,117,529 18,433 8,600,561 498,535 
Policyholder account balances (a)$45,342 — — 45,342 
Other liabilities (b)(261,282)— (264,080)2,798 
Total liabilities$(215,940)— (264,080)48,140 

During the three and six months ended June 30, 2022, the Company made no transfers from Level 2 to Level 3 for debt securities available-for-sale. During the three months ended June 30, 2022, the Company made no transfers from Level 2 to Level 3 for liabilities. During the six months ended June 30, 2022, a portion of the funds withheld embedded derivative liability was reclassified from Level 2 into Level 3 due to the presence of unobservable inputs in its valuation.
 December 31, 2021
 TotalLevel 1Level 2Level 3
 (In thousands)
Debt securities, available-for-sale$9,068,946 — 8,741,984 326,962 
Debt security, trading1,077,438 — 1,002,616 74,822 
Equity securities28,217 23,795 4,422 — 
Mortgage loans8,469 — — 8,469 
Derivatives, index options101,622 — — 101,622 
Total assets$10,284,692 23,795 9,749,022 511,875 
Policyholder account balances (a)$142,761 — — 142,761 
Other liabilities (b)(76,856)— (84,725)7,869 
Total liabilities$65,905 — (84,725)150,630 

(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 the embedded derivative for funds withheld.
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, 2022
 TotalLevel 1Level 2Level 3
 (In thousands)
Debt securities, available-for-sale:    
Priced by third-party vendors$8,115,980 — 7,786,995 328,985 
Priced internally44,972 — — 44,972 
Subtotal8,160,952 — 7,786,995 373,957 
Debt securities, trading:
Priced by third-party vendors909,647 — 809,878 99,769 
Priced internally— — — — 
Subtotal909,647 — 809,878 99,769 
Equity securities:    
Priced by third-party vendors22,121 18,433 3,688 — 
Priced internally— — — — 
Subtotal22,121 18,433 3,688 — 
Mortgage loans:
Priced by third-party vendors— — — — 
Priced internally18,738 — — 18,738 
Subtotal18,738 — — 18,738 
Derivatives, index options:    
Priced by third-party vendors6,071 — — 6,071 
Priced internally— — — — 
Subtotal6,071 — — 6,071 
Total$9,117,529 18,433 8,600,561 498,535 
Percent of total100.0 %0.2 %94.3 %5.5 %
 December 31, 2021
 TotalLevel 1Level 2Level 3
 (In thousands)
Debt securities, available-for-sale:    
Priced by third-party vendors$8,955,678 — 8,741,984 213,694 
Priced internally113,268 — — 113,268 
Subtotal9,068,946 — 8,741,984 326,962 
Debt securities, trading:
Priced by third-party vendors1,077,438 — 1,002,616 74,822 
Priced internally— — — — 
Subtotal1,077,438 — 1,002,616 74,822 
Equity securities:    
Priced by third-party vendors28,217 23,795 4,422 — 
Priced internally— — — — 
Subtotal28,217 23,795 4,422 — 
Mortgage loans:
Priced by third-party vendors— — — — 
Priced internally8,469 — — 8,469 
Subtotal8,469 — — 8,469 
Derivatives, index options:    
Priced by third-party vendors101,622 — — 101,622 
Priced internally— — — — 
Subtotal101,622 — — 101,622 
Total$10,284,692 23,795 9,749,022 511,875 
Percent of total100.0 %0.2 %94.8 %5.0 %
The following tables provide additional information about fair value measurements for Level 3 for which significant unobservable inputs were utilized to determine fair value.

Three Months Ended June 30, 2022
Assets
Debt Securities, Available-for-SaleTrading SecuritiesDerivatives, Index OptionsMortgage LoansTotal Assets
 (In thousands)
Beginning balance, April 1, 2022$338,201 101,504 44,861 11,120 495,686 
Total realized and unrealized gains (losses):
Included in net earnings— (3,235)(38,425)(670)(42,330)
Included in other comprehensive income (loss)(15,689)— — — (15,689)
Purchases, sales, issuances and settlements, net:
Purchases57,979 1,500 13,800 8,319 81,598 
Sales— — — — — 
Issuances— — — — — 
Settlements(6,534)— (14,165)(31)(20,730)
Transfers into (out of) Level 3— — — — — 
Balance at end of period$373,957 99,769 6,071 18,738 498,535 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$— (3,235)(26,975)(670)(30,880)
Benefits and expenses— — — — — 
Total$— (3,235)(26,975)(670)(30,880)
Three Months Ended June 30, 2022
Other Liabilities
Embedded Derivative on Funds Withheld LiabilityPolicyholder Account BalancesShare-based CompTotal Other Liabilities
 (In thousands)
Beginning balance, April 1, 2022$(2,636)84,894 8,444 90,702 
Total realized and unrealized gains (losses):
Included in net earnings(3,898)(39,187)936 (42,149)
Included in other comprehensive income (loss)— — — — 
Purchases, sales, issuances and settlements, net:
Purchases— 13,800 — 13,800 
Sales— — — — 
Issuances— — 29 29 
Settlements— (14,165)(77)(14,242)
Transfers into (out of) Level 3— — — — 
Balance at end of period$(6,534)45,342 9,332 48,140 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$(3,898)— — (3,898)
Benefits and expenses— (26,975)936 (26,039)
Total$(3,898)(26,975)936 (29,937)
Three Months Ended June 30, 2021
AssetsOther Liabilities
Derivatives, Index OptionsMortgage LoansTotal AssetsPolicyholder Account BalancesStock OptionsTotal Other Liabilities
 (In thousands)
Beginning balance, April 1, 2021$137,130 — 137,130 168,902 9,899 178,801 
Total realized and unrealized gains (losses):
Included in net earnings40,166 35 40,201 48,819 (461)48,358 
Included in other comprehensive income— — — — — — 
Purchases, sales, issuances and settlements, net:
Purchases10,974 2,694 13,668 10,974 — 10,974 
Sales— — — — — — 
Issuances— — — — — — 
Settlements(73,430)— (73,430)(73,430)(1,294)(74,724)
Transfers into (out of) Level 3— — — — — — 
Balance at end of period$114,840 2,729 117,569 155,265 8,144 163,409 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$24,767 35 24,802 — — — 
Benefits and expenses— — — 24,767 (461)24,306 
Total$24,767 35 24,802 24,767 (461)24,306 
Six Months Ended June 30, 2022
Assets
Debt Securities, Available-for-SaleTrading SecuritiesDerivatives, Index OptionsMortgage LoansTotal Assets
 (In thousands)
Beginning balance, January 1, 2022$326,962 74,822 101,622 8,469 511,875 
Total realized and unrealized gains (losses):
Included in net earnings— (6,603)(76,624)(1,128)(84,355)
Included in other comprehensive income (loss)(30,693)— — — (30,693)
Purchases, sales, issuances and settlements, net:
Purchases95,984 31,550 26,257 11,459 165,250 
Sales— — — — — 
Issuances— — — — — 
Settlements(18,296)— (45,184)(62)(63,542)
Transfers into (out of) Level 3— — — — — 
Balance at end of period$373,957 99,769 6,071 18,738 498,535 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$— (6,603)(59,382)(1,128)(67,113)
Benefits and expenses— — — — — 
Total$— (6,603)(59,382)(1,128)(67,113)
Six Months Ended June 30, 2022
Other Liabilities
Embedded Derivative on Funds Withheld LiabilityPolicyholder Account BalancesShare-based CompTotal Other Liabilities
 (In thousands)
Beginning balance, January 1, 2022$— 142,761 7,869 150,630 
Total realized and unrealized gains (losses):
Included in net earnings(7,703)(78,492)2,511 (83,684)
Included in other comprehensive income (loss)— — — — 
Purchases, sales, issuances and settlements, net:
Purchases— 26,257 — 26,257 
Sales— — — — 
Issuances— — 29 29 
Settlements— (45,184)(1,077)(46,261)
Transfers into (out of) Level 31,169 — — 1,169 
Balance at end of period(6,534)45,342 9,332 48,140 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$(7,703)— — (7,703)
Benefits and expenses— (59,382)2,511 (56,871)
Total$(7,703)(59,382)2,511 (64,574)
For the Six Months Ended June 30, 2021
AssetsOther Liabilities
Derivatives, Index OptionsMortgage LoansTotal AssetsPolicyholder Account BalancesStock OptionsTotal Other Liabilities
 (In thousands)
Beginning balance, January 1, 2021$132,821 — 132,821 161,351 6,202 167,553 
Total realized and unrealized gains (losses):
Included in net earnings68,190 35 68,225 80,085 3,918 84,003 
Included in other comprehensive income— — — — — — 
Purchases, sales, issuances and settlements, net:
Purchases22,183 2,694 24,877 22,183 — 22,183 
Sales— — — — — — 
Issuances— — — — — — 
Settlements(108,354)— (108,354)(108,354)(1,976)(110,330)
Transfers into (out of) Level 3— — — — — — 
Balance at end of period$114,840 2,729 117,569 155,265 8,144 163,409 
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets/liabilities held at the end of the reporting period:
Net investment income$51,361 35 51,396 — — — 
Benefits and expenses— — — 51,361 3,917 55,278 
Total$51,361 35 51,396 51,361 3,917 55,278 
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, 2022
 Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
 (In thousands)
Assets:
Debt securities available-for-sale$44,972 Discounted cash flowsDiscount rate
2.76% - 6.14% (4.58%)
Derivatives, index options6,071 Broker pricesImplied volatility
12.07% - 18.40% (15.92%)
Mortgage loans18,738Discounted cash flowsSpread
175 - 275 bps
Total assets$69,781 
Liabilities:
Policyholder account balances$45,342 Deterministic cash flow modelProjected option cost
0.00% - 4.63% (0.16%)
Share-based compensation9,332 Black-Scholes modelExpected term
1.4 to 9.5 years
Expected volatility34.85%
Total liabilities$54,674 
 December 31, 2021
 Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
 (In thousands)
Assets:
Debt securities available-for-sale$113,268 Discounted cash flowsDiscount rate
2.40% - 6.14% (4.06%)
Derivatives, index options101,622 Broker pricesImplied volatility
11.76% - 16.54% (14.55%)
Mortgage loans8,469 Discounted cash flowsSpread
100 - 250 bps
Total assets$223,359 
Liabilities:
Policyholder account balances$142,761 Deterministic cash flow modelProjected option cost
0.03% - 14.49% (2.65%)
Share-based compensation7,869 Black-Scholes modelExpected term
1.9 to 10.0 years
Expected volatility35.05%
Total liabilities$150,630 

Realized gains (losses) on debt securities are reported in the Condensed Consolidated Statements of Earnings as Net realized investment gains (losses) with liabilities reported as expenses. Unrealized gains (losses) on available-for-sale debt securities are reported as Other comprehensive income (loss) within the stockholders' equity section of the Condensed Consolidated Balance Sheets. Unrealized gains (losses) on trading debt securities are reported in the Condensed Consolidated Statements of Earnings as Net investment income.

The fair value hierarchy classifications are reviewed each reporting period. Reclassification of certain financial assets and liabilities may result based on changes in the observability of valuation attributes. Reclassifications are reported as transfers into and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.
The carrying amounts and fair values of the Company's financial instruments are as follows:

June 30, 2022
 Fair Value Hierarchy Level
Carrying
Values		Fair
Values		Level 1Level 2Level 3
 (In thousands)
ASSETS    
Debt securities, available-for-sale$8,160,952 8,160,952 — 7,786,995 373,957 
Debt securities, trading909,647 909,647 — 809,878 99,769 
Cash and cash equivalents530,559 530,559 530,559 — — 
Mortgage loans511,936 483,367 — — 483,367 
Real estate28,242 48,077 — — 48,077 
Policy loans71,443 94,526 — — 94,526 
Other loans21,652 22,688 — — 22,688 
Derivatives, index options6,071 6,071 — — 6,071 
Equity securities22,121 22,121 18,433 3,688 — 
Life interest in Libbie Shearn Moody Trust8,254 12,775 — — 12,775 
Other investments4,513 26,192 — — 26,192 
LIABILITIES
Deferred annuity contracts$6,287,489 5,002,438 — — 5,002,438 
Immediate annuity and supplemental contracts411,053 410,039 — — 410,039 
December 31, 2021
 Fair Value Hierarchy Level
Carrying
Values		Fair
Values		Level 1Level 2Level 3
 (In thousands)
ASSETS    
Debt securities, available-for-sale$9,068,946 9,068,946 — 8,741,984 326,962 
Debt securities, trading1,077,438 1,077,438 — 1,002,616 74,822 
Cash and cash equivalents714,624 714,624 702,632 11,992 — 
Mortgage loans487,304 513,246 — — 513,246 
Real estate28,606 47,027 — — 47,027 
Policy loans71,286 110,492 — — 110,492 
Other loans24,266 25,085 — — 25,085 
Derivatives, index options101,622 101,622 — — 101,622 
Equity securities28,217 28,217 23,795 4,422 — 
Life interest in Libbie Shearn Moody Trust8,254 12,775 — — 12,775 
Other investments4,537 24,876 — — 24,876 
LIABILITIES
Deferred annuity contracts$6,463,314 4,703,331 — — 4,703,331 
Immediate annuity and supplemental contracts422,209 457,787 — — 457,787 

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.