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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

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:


	June 30, 2022
	Total		Level 1	Level 2	Level 3

	(In thousands)

Debt securities, available-for-sale	$	8,160,952	—	7,786,995	373,957
Debt securities, trading	909,647		—	809,878	99,769
Equity securities	22,121		18,433	3,688	—
Mortgage loans	18,738		—	—	18,738
Derivatives, index options	6,071		—	—	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


	December 31, 2021
	Total		Level 1	Level 2	Level 3

	(In thousands)

Debt securities, available-for-sale	$	9,068,946	—	8,741,984	326,962
Debt security, trading	1,077,438		—	1,002,616	74,822
Equity securities	28,217		23,795	4,422	—
Mortgage loans	8,469		—	—	8,469
Derivatives, index options	101,622		—	—	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.

Schedule of Assets 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:


	June 30, 2022
	Total			Level 1		Level 2		Level 3

	(In thousands)

Debt securities, available-for-sale:
Priced by third-party vendors	$	8,115,980		—		7,786,995		328,985
Priced internally	44,972			—		—		44,972
Subtotal	8,160,952			—		7,786,995		373,957

Debt securities, trading:
Priced by third-party vendors	909,647			—		809,878		99,769
Priced internally	—			—		—		—
Subtotal	909,647			—		809,878		99,769

Equity securities:
Priced by third-party vendors	22,121			18,433		3,688		—
Priced internally	—			—		—		—
Subtotal	22,121			18,433		3,688		—

Mortgage loans:
Priced by third-party vendors	—			—		—		—
Priced internally	18,738			—		—		18,738
Subtotal	18,738			—		—		18,738

Derivatives, index options:
Priced by third-party vendors	6,071			—		—		6,071
Priced internally	—			—		—		—
Subtotal	6,071			—		—		6,071






Total	$	9,117,529		18,433		8,600,561		498,535

Percent of total	100.0		%	0.2	%	94.3	%	5.5	%


	December 31, 2021
	Total			Level 1		Level 2		Level 3

	(In thousands)

Debt securities, available-for-sale:
Priced by third-party vendors	$	8,955,678		—		8,741,984		213,694
Priced internally	113,268			—		—		113,268
Subtotal	9,068,946			—		8,741,984		326,962

Debt securities, trading:
Priced by third-party vendors	1,077,438			—		1,002,616		74,822
Priced internally	—			—		—		—
Subtotal	1,077,438			—		1,002,616		74,822

Equity securities:
Priced by third-party vendors	28,217			23,795		4,422		—
Priced internally	—			—		—		—
Subtotal	28,217			23,795		4,422		—

Mortgage loans:
Priced by third-party vendors	—			—		—		—
Priced internally	8,469			—		—		8,469
Subtotal	8,469			—		—		8,469

Derivatives, index options:
Priced by third-party vendors	101,622			—		—		101,622
Priced internally	—			—		—		—
Subtotal	101,622			—		—		101,622






Total	$	10,284,692		23,795		9,749,022		511,875

Percent of total	100.0		%	0.2	%	94.8	%	5.0	%

Schedule of Significant Unobservable Inputs for Fair Value Measurements

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-Sale		Trading Securities	Derivatives, Index Options	Mortgage Loans	Total 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:
Purchases	57,979		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 Liability		Policyholder Account Balances	Share-based Comp	Total 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
	Assets		Other Liabilities
	Derivatives, Index Options		Mortgage Loans	Total Assets	Policyholder Account Balances	Stock Options	Total 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 earnings	40,166		35	40,201	48,819	(461)	48,358
Included in other comprehensive income	—		—	—	—	—	—
Purchases, sales, issuances and settlements, net:
Purchases	10,974		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-Sale		Trading Securities	Derivatives, Index Options	Mortgage Loans	Total 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:
Purchases	95,984		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 Liability		Policyholder Account Balances	Share-based Comp	Total 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 3		1,169		—	—	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
	Assets		Other Liabilities
	Derivatives, Index Options		Mortgage Loans	Total Assets	Policyholder Account Balances	Stock Options	Total 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 earnings	68,190		35	68,225	80,085	3,918	84,003
Included in other comprehensive income	—		—	—	—	—	—
Purchases, sales, issuances and settlements, net:
Purchases	22,183		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

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, 2022

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

(In thousands)

Assets:

Debt securities available-for-sale

44,972

Discounted cash flows

Discount rate

2.76% - 6.14% (4.58%)

Derivatives, index options

6,071

Broker prices

Implied volatility

12.07% - 18.40% (15.92%)

Mortgage loans

18,738

Discounted cash flows

Spread

175 - 275 bps

Total assets

69,781

Liabilities:

Policyholder account balances

45,342

Deterministic cash flow model

Projected option cost

0.00% - 4.63% (0.16%)

Share-based compensation

9,332

Black-Scholes model

Expected term

1.4 to 9.5 years

Expected volatility

34.85%

Total liabilities

54,674

December 31, 2021

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

(In thousands)

Assets:

Debt securities available-for-sale

113,268

Discounted cash flows

Discount rate

2.40% - 6.14% (4.06%)

Derivatives, index options

101,622

Broker prices

Implied volatility

11.76% - 16.54% (14.55%)

Mortgage loans

8,469

Discounted cash flows

Spread

100 - 250 bps

Total assets

223,359

Liabilities:

Policyholder account balances

142,761

Deterministic cash flow model

Projected option cost

0.03% - 14.49% (2.65%)

Share-based compensation

7,869

Black-Scholes model

Expected term

1.9 to 10.0 years

Expected volatility

35.05%

Total liabilities

150,630

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:


	June 30, 2022
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3

	(In thousands)
ASSETS

Debt securities, available-for-sale	$	8,160,952	8,160,952	—	7,786,995	373,957
Debt securities, trading	909,647		909,647	—	809,878	99,769
Cash and cash equivalents	530,559		530,559	530,559	—	—
Mortgage loans	511,936		483,367	—	—	483,367
Real estate	28,242		48,077	—	—	48,077
Policy loans	71,443		94,526	—	—	94,526
Other loans	21,652		22,688	—	—	22,688
Derivatives, index options	6,071		6,071	—	—	6,071
Equity securities	22,121		22,121	18,433	3,688	—

Life interest in Libbie Shearn Moody Trust	8,254		12,775	—	—	12,775
Other investments	4,513		26,192	—	—	26,192

LIABILITIES
Deferred annuity contracts	$	6,287,489	5,002,438	—	—	5,002,438
Immediate annuity and supplemental contracts	411,053		410,039	—	—	410,039


	December 31, 2021
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3

	(In thousands)
ASSETS

Debt securities, available-for-sale	$	9,068,946	9,068,946	—	8,741,984	326,962
Debt securities, trading	1,077,438		1,077,438	—	1,002,616	74,822
Cash and cash equivalents	714,624		714,624	702,632	11,992	—
Mortgage loans	487,304		513,246	—	—	513,246
Real estate	28,606		47,027	—	—	47,027
Policy loans	71,286		110,492	—	—	110,492
Other loans	24,266		25,085	—	—	25,085
Derivatives, index options	101,622		101,622	—	—	101,622
Equity securities	28,217		28,217	23,795	4,422	—
Life interest in Libbie Shearn Moody Trust	8,254		12,775	—	—	12,775
Other investments	4,537		24,876	—	—	24,876

LIABILITIES
Deferred annuity contracts	$	6,463,314	4,703,331	—	—	4,703,331
Immediate annuity and supplemental contracts	422,209		457,787	—	—	457,787