FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

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

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of September 30, 2017:



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,183,369	$	—	$	2,183,369
Commercial mortgage-backed securities	—		1,892,053		—		1,892,053
Other asset-backed securities	—		637,518		553,149		1,190,667
U.S. government-related securities	1,009,225		283,608		—		1,292,833
State, municipalities, and political subdivisions	—		1,704,009		—		1,704,009
Other government-related securities	—		252,280		—		252,280
Corporate securities	—		28,658,554		624,553		29,283,107
Preferred stock	72,942		18,898		—		91,840
Total fixed maturity securities - available-for-sale	1,082,167		35,630,289		1,177,702		37,890,158
Fixed maturity securities - trading
Residential mortgage-backed securities	—		262,062		—		262,062
Commercial mortgage-backed securities	—		145,653		—		145,653
Other asset-backed securities	—		107,123		35,490		142,613
U.S. government-related securities	21,589		6,125		—		27,714
State, municipalities, and political subdivisions	—		321,001		—		321,001
Other government-related securities	—		64,067		—		64,067
Corporate securities	—		1,709,216		5,524		1,714,740
Preferred stock	3,229		—		—		3,229
Total fixed maturity securities - trading	24,818		2,615,247		41,014		2,681,079
Total fixed maturity securities	1,106,985		38,245,536		1,218,716		40,571,237
Equity securities	678,660		—		65,516		744,176
Other long-term investments⁽¹⁾	61,072		380,511		149,734		591,317
Short-term investments	316,914		105,771		—		422,685
Total investments	2,163,631		38,731,818		1,433,966		42,329,415
Cash	199,633		—		—		199,633
Assets related to separate accounts
Variable annuity	13,763,971		—		—		13,763,971
Variable universal life	996,375		—		—		996,375
Total assets measured at fair value on a recurring basis	$	17,123,610	$	38,731,818	$	1,433,966	$	57,289,394
Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	85,028	$	85,028
Other liabilities⁽¹⁾	23,775		256,829		561,296		841,900
Total liabilities measured at fair value on a recurring basis	$	23,775	$	256,829	$	646,324	$	926,928

(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,889,604	$	3	$	1,889,607
Commercial mortgage-backed securities	—		1,782,497		—		1,782,497
Other asset-backed securities	—		648,929		562,604		1,211,533
U.S. government-related securities	1,002,020		266,139		—		1,268,159
State, municipalities, and political subdivisions	—		1,656,503		—		1,656,503
Other government-related securities	—		237,926		—		237,926
Corporate securities	—		26,560,603		664,046		27,224,649
Preferred stock	66,781		19,062		—		85,843
Total fixed maturity securities - available-for-sale	1,068,801		33,061,263		1,226,653		35,356,717
Fixed maturity securities - trading
Residential mortgage-backed securities	—		255,027		—		255,027
Commercial mortgage-backed securities	—		149,683		—		149,683
Other asset-backed securities	—		115,521		84,563		200,084
U.S. government-related securities	22,424		4,537		—		26,961
State, municipalities, and political subdivisions	—		316,519		—		316,519
Other government-related securities	—		63,012		—		63,012
Corporate securities	—		1,619,097		5,492		1,624,589
Preferred stock	3,985		—		—		3,985
Total fixed maturity securities - trading	26,409		2,523,396		90,055		2,639,860
Total fixed maturity securities	1,095,210		35,584,659		1,316,708		37,996,577
Equity securities	650,231		—		65,786		716,017
Other long-term investments⁽¹⁾	82,420		335,497		115,516		533,433
Short-term investments	313,835		1,999		—		315,834
Total investments	2,141,696		35,922,155		1,498,010		39,561,861
Cash	214,439		—		—		214,439
Assets related to separate accounts
Variable annuity	13,244,252		—		—		13,244,252
Variable universal life	895,925		—		—		895,925
Total assets measured at fair value on a recurring basis	$	16,496,312	$	35,922,155	$	1,498,010	$	53,916,477
Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	87,616	$	87,616
Other liabilities⁽¹⁾	13,004		255,241		405,803		674,048
Total liabilities measured at fair value on a recurring basis	$	13,004	$	255,241	$	493,419	$	761,664

(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Schedule of Valuation Method for Material Financial Instruments Included in Level 3, as Well as the Unobservable Inputs Used in the Valuation of Those Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Fair Value As of September 30, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,005	Liquidation	Liquidation value	$90 - $97 ($95.02)
			Discounted cash flow	Liquidity premium	0.51% - 1.29% (0.96%)
				Paydown rate	10.75% - 12.75% (11.34%)
Corporate securities	615,576		Discounted cash flow	Spread over treasury	0.35% - 4.35% (1.57%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	20,336	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.12% - 0.86%
Embedded derivative - FIA	197,378		Actuarial cash flow model	Expenses	$146 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1.5% prior to age 70, 100% of the RMD for ages 70+
				Mortality	1994 MGDB table with company experience
				Lapse	1.0% - 30.0%, depending on duration/surrender charge period
				Nonperformance risk	0.12% - 0.86%
Embedded derivative - IUL	69,081		Actuarial cash flow model	Mortality	34% - 152% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.12% - 0.86%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Fair Value As of December 31, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,308	Liquidation	Liquidation value	$88 - $97.25 ($95.04)
Corporate securities	638,279		Discounted cash flow	Spread over treasury	0.31% - 4.50% (2.04%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	7,031	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - FIA	147,368		Actuarial cash flow model	Expenses	$126 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1% prior to age 70, 100% of the RMD for ages 70+
				Mortality	1994 MGDB table with company experience
				Lapse	2.0% - 40.0%, depending on duration/surrender charge period
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - IUL	46,051		Actuarial cash flow model	Mortality	38% - 153% of 2015 VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.18% - 1.09%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.

Schedule of Reconciliation of the Beginning and Ending Balances for Fair Value Measurements, for Which the Company Has Used Significant Unobservable Inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2016, for which the Company has used significant unobservable inputs (Level3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		6		—			—			23,559		—			—		—		—			(6		)	23,559		—
Other asset-backed securities	587,031		6,859		24,119		—			(21,426		)	9,597		(58,461		)	—		—		7,457			(1,947		)	553,229		—
Corporate securities	902,119		925		40,435		(4,135		)	(10,316		)	53,885		(107,866		)	—		—		(114,189		)	(7,462		)	753,396		—
Total fixed maturity securities - available-for-sale	1,489,153		7,784		64,560		(4,135		)	(31,742		)	87,041		(166,327		)	—		—		(106,732		)	(9,415		)	1,330,187		—
Fixed maturity securities - trading
Other asset-backed securities	152,912		5,310		—		(1,013		)	—			—		(11,578		)	—		—		172			30			145,833		4,294
Corporate securities	18,225		713		—		(259		)	—			10,908		(4,071		)	—		—		(19,722		)	(95		)	5,699		283
Total fixed maturity securities - trading	171,137		6,023		—		(1,272		)	—			10,908		(15,649		)	—		—		(19,550		)	(65		)	151,532		4,577
Total fixed maturity securities	1,660,290		13,807		64,560		(5,407		)	(31,742		)	97,949		(181,976		)	—		—		(126,282		)	(9,480		)	1,481,719		4,577
Equity securities	66,504		—		—		—			—			22		—			—		—		—			—			66,526		—
Other long-term investments⁽¹⁾	68,384		46,166		—		(28,830		)	—			1,429		—			—		—		—			—			87,149		17,336
Total investments	1,795,178		59,973		64,560		(34,237		)	(31,742		)	99,400		(181,976		)	—		—		(126,282		)	(9,480		)	1,635,394		21,913
Total assets measured at fair value on a recurring basis	$	1,795,178	$	59,973	$	64,560	$	(34,237	)	$	(31,742	)	$	99,400	$	(181,976	)	$	—	$	—	$	(126,282	)	$	(9,480	)	$	1,635,394	$	21,913
Liabilities:
Annuity account balances⁽²⁾	$	92,512	$	—	$	—	$	(1,831	)	$	—		$	—	$	—		$	529	$	7,264	$	—		$	1,249		$	88,857	$	—
Other liabilities⁽¹⁾	375,848		37,860		—		(266,839		)	—			—		—			—		—		—			—			604,827		(228,979		)
Total liabilities measured at fair value on a recurring basis	$	468,360	$	37,860	$	—	$	(268,670	)	$	—		$	—	$	—		$	529	$	7,264	$	—		$	1,249		$	693,684	$	(228,979	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2017, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	11,862	$	—	$	83	$	—		$	—		$	—	$	—		$	—	$	—	$	(11,944	)	$	(1	)	$	—	$	—
Commercial mortgage-backed securities	—		—		—		—						—		—			—		—		—			—			—		—
Other asset-backed securities	552,963		—		1,682		—			(2,285		)	100		(109		)	—		—		—			798			553,149		—
Corporate securities	662,654		—		8,301		—			(2,222		)	5,071		(42,242		)	—		—		(5,486		)	(1,523		)	624,553		—
Total fixed maturity securities - available-for-sale	1,227,479		—		10,066		—			(4,507		)	5,171		(42,351		)	—		—		(17,430		)	(726		)	1,177,702		—
Fixed maturity securities - trading
Other asset-backed securities	54,923		—		—		(353		)	—			—		(19,188		)	—		—		—			108			35,490		(209		)
Corporate securities	5,520		27		—		—			—			—		—			—		—		—			(23		)	5,524		27
Total fixed maturity securities - trading	60,443		27		—		(353		)	—			—		(19,188		)	—		—		—			85			41,014		(182		)
Total fixed maturity securities	1,287,922		27		10,066		(353		)	(4,507		)	5,171		(61,539		)	—		—		(17,430		)	(641		)	1,218,716		(182		)
Equity securities	65,686		—		—		—			—			—		(170		)	—		—		—			—			65,516		—
Other long-term investments⁽¹⁾	93,245		56,491		—		(2		)	—			—		—			—		—		—			—			149,734		56,489
Total investments	1,446,853		56,518		10,066		(355		)	(4,507		)	5,171		(61,709		)	—		—		(17,430		)	(641		)	1,433,966		56,307
Total assets measured at fair value on a recurring basis	$	1,446,853	$	56,518	$	10,066	$	(355	)	$	(4,507	)	$	5,171	$	(61,709	)	$	—	$	—	$	(17,430	)	$	(641	)	$	1,433,966	$	56,307
Liabilities:
Annuity account balances⁽²⁾	$	86,094	$	—	$	—	$	(977	)	$	—		$	—	$	—		$	9	$	2,052	—			$	—		$	85,028	$	—
Other liabilities⁽¹⁾	532,763		6,702		—		(35,235		)	—			—		—			—		—		—			—			561,296		(28,533		)
Total liabilities measured at fair value on a recurring basis	$	618,857	$	6,702	$	—	$	(36,212	)	$	—		$	—	$	—		$	9	$	2,052	$	—		$	—		$	646,324	$	(28,533	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2017, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	83	$	—		$	—		$	11,862	$	(3	)	$	—	$	—	$	(11,944	)	$	(1	)	$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	562,604		—		5,212		—			(7,374		)	100		(2,135		)	—		—		(6,643		)	1,385			553,149		—
Corporate securities	664,046		—		26,099		—			(2,764		)	85,822		(135,192		)	—		—		(10,353		)	(3,105		)	624,553		—
Total fixed maturity securities - available-for-sale	1,226,653		—		31,394		—			(10,138		)	97,784		(137,330		)	—		—		(28,940		)	(1,721		)	1,177,702		—
Fixed maturity securities - trading
Other asset-backed securities	84,563		3,679		—		(1,154		)	—			—		(52,516		)	—		—		—			918			35,490		3,397
Corporate securities	5,492		101		—		—			—			—		—			—		—		—			(69		)	5,524		101
Total fixed maturity securities - trading	90,055		3,780		—		(1,154		)	—			—		(52,516		)	—		—		—			849			41,014		3,498
Total fixed maturity securities	1,316,708		3,780		31,394		(1,154		)	(10,138		)	97,784		(189,846		)	—		—		(28,940		)	(872		)	1,218,716		3,498
Equity securities	65,786		1		—		—			—			—		(274		)	—		—		3			—			65,516		2
Other long-term investments⁽¹⁾	115,516		62,467		—		(28,249		)	—			—		—			—		—		—			—			149,734		34,218
Total investments	1,498,010		66,248		31,394		(29,403		)	(10,138		)	97,784		(190,120		)	—		—		(28,937		)	(872		)	1,433,966		37,718
Total assets measured at fair value on a recurring basis	$	1,498,010	$	66,248	$	31,394	$	(29,403	)	$	(10,138	)	$	97,784	$	(190,120	)	$	—	$	—	$	(28,937	)	$	(872	)	$	1,433,966	$	37,718
Liabilities:
Annuity account balances⁽²⁾	$	87,616	$	—	$	—	$	(2,973	)	$	—		$	—	$	—		$	402	$	5,963	—			$	—		$	85,028	$	—
Other liabilities⁽¹⁾	405,803		21,982		—		(177,475		)	—			—		—			—		—		—			—			561,296		(155,493		)
Total liabilities measured at fair value on a recurring basis	$	493,419	$	21,982	$	—	$	(180,448	)	$	—		$	—	$	—		$	402	$	5,963	$	—		$	—		$	646,324	$	(155,493	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2016, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		6		—			—			23,559		—			—		—		—			(6		)	23,559		—
Other asset-backed securities	533,141		—		23,350		—			(19		)	—		(12		)	—		—		—			(3,231		)	553,229		—
Corporate securities	783,143		—		9,324		—			(3,335		)	28,327		(26,001		)	—		—		(36,237		)	(1,825		)	753,396		—
Total fixed maturity securities - available-for-sale	1,316,287		—		32,680		—			(3,354		)	51,886		(26,013		)	—		—		(36,237		)	(5,062		)	1,330,187		—
Fixed maturity securities - trading
Other asset-backed securities	151,964		3,260		—		(71		)	—			—		(9,366		)	—		—		—			46			145,833		3,189
Corporate securities	16,587		381		—		—			—			—		—			—		—		(11,243		)	(26		)	5,699		42
Total fixed maturity securities - trading	168,551		3,641		—		(71		)	—			—		(9,366		)	—		—		(11,243		)	20			151,532		3,231
Total fixed maturity securities	1,484,838		3,641		32,680		(71		)	(3,354		)	51,886		(35,379		)	—		—		(47,480		)	(5,042		)	1,481,719		3,231
Equity securities	66,526		—		—		—			—			—		—			—		—		—			—			66,526		—
Other long-term investments⁽¹⁾	62,920		25,674		—		(1,445		)	—			—		—			—		—		—			—			87,149		24,229
Total investments	1,614,284		29,315		32,680		(1,516		)	(3,354		)	51,886		(35,379		)	—		—		(47,480		)	(5,042		)	1,635,394		27,460
Total assets measured at fair value on a recurring basis	$	1,614,284	$	29,315	$	32,680	$	(1,516	)	$	(3,354	)	$	51,886	$	(35,379	)	$	—	$	—	$	(47,480	)	$	(5,042	)	$	1,635,394	$	27,460
Liabilities:
Annuity account balances⁽²⁾	$	88,820	$	—	$	—	$	(735	)	$	—		$	—	$	—		$	279	$	2,226	$	—		$	1,249		$	88,857	$	—
Other liabilities⁽¹⁾	581,046		22,275		—		(46,056		)	—			—		—			—		—		—			—			604,827		(23,781		)
Total liabilities measured at fair value on a recurring basis	$	669,866	$	22,275	$	—	$	(46,791	)	$	—		$	—	$	—		$	279	$	2,226	$	—		$	1,249		$	693,684	$	(23,781	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Schedule of the Carrying Amounts and Estimated Fair Value of the Company's Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:



		As of
		September 30, 2017				December 31, 2016
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	6,528,890	$	6,486,449	$	6,132,125	$	5,930,992
Policy loans	3	1,625,960		1,625,960		1,650,240		1,650,240
Fixed maturities, held-to-maturity⁽¹⁾	3	2,730,995		2,796,603		2,770,177		2,733,340
Liabilities:
Stable value product account balances	3	$	4,793,890	$	4,816,919	$	3,501,636	$	3,488,877
Future policy benefits and claims⁽²⁾	3	222,079		222,079		221,634		221,658
Other policyholders' funds⁽³⁾	3	132,565		133,347		135,367		136,127

Debt:⁽⁴⁾
Non-recourse funding obligations⁽⁵⁾	3	$	2,938,005	$	3,000,293	$	2,973,829	$	2,939,387

Except as noted below, fair values were estimated using quoted market prices.
(1) Securities purchased from unconsolidated affiliates, Red Mountain LLC and Steel City LLC.
(2) Single premium immediate annuity without life contingencies.
(3) Supplementary contracts without life contingencies.
(4) Excludes capital lease obligations of $1.5 million.
(5) As of September 30, 2017, $2.7 billion in carrying amount and fair value related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2016, $2.7 billion in carrying amount and fair value related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.