FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30, 2018:



	Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	4	$	—	$	3,213,615	$	21,780	$	3,235,395
Commercial mortgage-backed securities	4	—		2,151,656		47,227		2,198,883
Other asset-backed securities	4	—		907,860		515,701		1,423,561
U.S. government-related securities	4	969,623		522,413		—		1,492,036
State, municipalities, and political subdivisions	4	—		3,633,803		—		3,633,803
Other government-related securities	4	—		399,772		—		399,772
Corporate securities	4	—		35,938,988		644,811		36,583,799
Redeemable preferred stock	4	71,292		18,284		—		89,576
Total fixed maturity securities - available-for-sale		1,040,915		46,786,391		1,229,519		49,056,825
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		259,755		—		259,755
Commercial mortgage-backed securities	3	—		141,469		—		141,469
Other asset-backed securities	3	—		89,655		24,852		114,507
U.S. government-related securities	3	30,761		5,814		—		36,575
State, municipalities, and political subdivisions	3	—		314,722		—		314,722
Other government-related securities	3	—		40,274		—		40,274
Corporate securities	3	—		1,580,036		5,254		1,585,290
Redeemable preferred stock	3	3,289		—		—		3,289
Total fixed maturity securities - trading		34,050		2,431,725		30,106		2,495,881
Total fixed maturity securities		1,074,965		49,218,116		1,259,625		51,552,706
Equity securities	3	576,707		—		65,553		642,260
Other long-term investments⁽¹⁾	3 & 4	63,220		316,833		170,594		550,647
Short-term investments	3	532,397		65,217		—		597,614
Total investments		2,247,289		49,600,166		1,495,772		53,343,227
Cash	3	164,232		—		—		164,232
Assets related to separate accounts	3
Variable annuity	3	13,414,407		—		—		13,414,407
Variable universal life	3	1,037,754		—		—		1,037,754
Total assets measured at fair value on a recurring basis		$	16,863,682	$	49,600,166	$	1,495,772	$	67,959,620
Liabilities:
Annuity account balances⁽²⁾	3	$	—	$	—	$	80,098	$	80,098
Other liabilities⁽¹⁾	3 & 4	5,172		248,864		457,008		711,044
Total liabilities measured at fair value on a recurring basis		$	5,172	$	248,864	$	537,106	$	791,142

(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
(3) Fair Value through Net Income
(4) Fair Value through Other Comprehensive Income

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, 2017:



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,318,493	$	—	$	2,318,493
Commercial mortgage-backed securities	—		1,860,488		—		1,860,488
Other asset-backed securities	—		745,184		504,365		1,249,549
U.S. government-related securities	958,775		264,477		—		1,223,252
State, municipalities, and political subdivisions	—		1,741,645		—		1,741,645
Other government-related securities	—		285,233		—		285,233
Corporate securities	—		28,910,645		626,901		29,537,546
Redeemable preferred stock	72,471		18,620		—		91,091
Total fixed maturity securities - available-for-sale	1,031,246		36,144,785		1,131,266		38,307,297
Fixed maturity securities - trading
Residential mortgage-backed securities	—		259,694		—		259,694
Commercial mortgage-backed securities	—		146,804		—		146,804
Other asset-backed securities	—		102,875		35,222		138,097
U.S. government-related securities	21,183		6,051		—		27,234
State, municipalities, and political subdivisions	—		326,925		—		326,925
Other government-related securities	—		63,925		—		63,925
Corporate securities	—		1,692,741		5,442		1,698,183
Redeemable preferred stock	3,327		—		—		3,327
Total fixed maturity securities - trading	24,510		2,599,015		40,664		2,664,189
Total fixed maturity securities	1,055,756		38,743,800		1,171,930		40,971,486
Equity securities	649,981		—		65,517		715,498
Other long-term investments⁽¹⁾	51,102		417,969		160,466		629,537
Short-term investments	394,394		132,750		—		527,144
Total investments	2,151,233		39,294,519		1,397,913		42,843,665
Cash	178,855		—		—		178,855
Assets related to separate accounts
Variable annuity	13,956,071		—		—		13,956,071
Variable universal life	1,035,202		—		—		1,035,202
Total assets measured at fair value on a recurring basis	$	17,321,361	$	39,294,519	$	1,397,913	$	58,013,793
Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	83,472	$	83,472
Other liabilities⁽¹⁾	5,755		302,656		597,562		905,973
Total liabilities measured at fair value on a recurring basis	$	5,755	$	302,656	$	681,034	$	989,445

(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 June 30, 2018		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	515,379	Liquidation	Liquidation value	$90 - $97 ($94.91)
			Discounted cash flow	Liquidity premium	0.06% - 0.90% (0.38%)
				Paydown rate	11.18% - 12.98% (12.30%)
Corporate securities	637,479		Discounted cash flow	Spread over treasury	0.83% - 2.78% (1.53%)
Embedded derivatives - GLWB⁽²⁾	$	17,116	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	Ruark predictive model product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.13% - 0.93%
Liabilities:⁽¹⁾
Embedded derivative - FIA	283,569		Actuarial cash flow model	Expenses	$146 per policy
				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	0.13% - 0.93%
Embedded derivative - IUL	83,166		Actuarial cash flow model	Mortality	34% - 152% of 2015
					VBT Primary Tables
				Lapse	0.5% - 0.10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.13% - 0.93%

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

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, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	504,228	Liquidation	Liquidation value	$90 - $97 ($94.91)
			Discounted cash flow	Liquidity premium	0.06% - 1.17% (0.75%)
				Paydown Rate	11.31% - 11.97% (11.54%)
Corporate securities	617,770		Discounted cash flow	Spread over treasury	0.31% - 4.50% (1.06%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	15,554	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	1.0% - 30.0%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.11% - 0.79%
Embedded derivative - FIA	218,676		Actuarial cash flow model	Expenses	$146 per policy
				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	0.11% - 0.79%
Embedded derivative - IUL	80,212		Actuarial cash flow model	Mortality	34% - 152% of 2015 VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.11% - 0.79%

(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 three months ended June 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	$	—		$	—	$	—	$	—		$	—		$	11,862	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	556,936		—		—		—			(4,257		)	—		(12		)	—		—		—			296			552,963		—
Corporate securities	666,705		—		10,027		—			(260		)	43,492		(54,066		)	—		—		(2,220		)	(1,024		)	662,654		—
Total fixed maturity securities - available-for-sale	1,223,641		—		10,027		—			(4,517		)	55,354		(54,078		)	—		—		(2,220		)	(728		)	1,227,479		—
Fixed maturity securities - trading
Other asset-backed securities	68,752		205		—		(215		)	—			—		(14,020		)	—		—		—			201			54,923		196
Corporate securities	5,504		40		—		—			—			—		—			—		—		—			(24		)	5,520		40
Total fixed maturity securities - trading	74,256		245		—		(215		)	—			—		(14,020		)	—		—		—			177			60,443		236
Total fixed maturity securities	1,297,897		245		10,027		(215		)	(4,517		)	55,354		(68,098		)	—		—		(2,220		)	(551		)	1,287,922		236
Equity securities	65,788		—		—		—			—			—		(103		)	—		—		—			1			65,686		—
Other long-term investments⁽¹⁾	103,895		731		—		(11,381		)	—			—		—			—		—		—			—			93,245		(10,650		)
Total investments	1,467,580		976		10,027		(11,596		)	(4,517		)	55,354		(68,201		)	—		—		(2,220		)	(550		)	1,446,853		(10,414		)
Total assets measured at fair value on a recurring basis	$	1,467,580	$	976	$	10,027	$	(11,596	)	$	(4,517	)	$	55,354	$	(68,201	)	$	—	$	—	$	(2,220	)	$	(550	)	$	1,446,853	$	(10,414	)
Liabilities:
Annuity account balances⁽²⁾	$	86,415	$	—	$	—	$	(1,110	)	$	—		$	—	$	—		$	212	$	1,643	$	—		$	—		$	86,094	$	—
Other liabilities⁽¹⁾	438,801		—		—		(93,962		)	—			—		—			—		—		—			—			532,763		(93,962		)
Total liabilities measured at fair value on a recurring basis	$	525,216	$	—	$	—	$	(95,072	)	$	—		$	—	$	—		$	212	$	1,643	$	—		$	—		$	618,857	$	(93,962	)

(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 six months ended June 30, 2018, 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	$	—	$	—	$	—	$	—		$	(457	)	$	22,225	$	—		$	—	$	—		$	—		$	12		$	21,780	$	—
Commercial mortgage-backed securities	—		—		—		—			(1,284		)	48,621		(94		)	—		—			—			(16		)	47,227		—
Other asset-backed securities	504,365		—		11,867		—			(1,647		)	—		(23		)	—		—			222			917			515,701		—
Corporate securities	626,901		—		7,061		—			(18,929		)	78,491		(38,452		)	—		—			(7,895		)	(2,366		)	644,811		—
Total fixed maturity securities - available-for-sale	1,131,266		—		18,928		—			(22,317		)	149,337		(38,569		)	—		—			(7,673		)	(1,453		)	1,229,519		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		194		—		(3,598		)	—			4,600		(11,669		)	—		—			164			(61		)	24,852		(3,405		)
Corporate securities	5,442		—		—		(139		)	—			—		—			—		—			—			(49		)	5,254		(139		)
Total fixed maturity securities - trading	40,664		194		—		(3,737		)	—			4,600		(11,669		)	—		—			164			(110		)	30,106		(3,544		)
Total fixed maturity securities	1,171,930		194		18,928		(3,737		)	(22,317		)	153,937		(50,238		)	—		—			(7,509		)	(1,563		)	1,259,625		(3,544		)
Equity securities	65,518		1		—		(1		)	—			36		—			—		—			—			(1		)	65,553		(63		)
Other long-term investments⁽¹⁾	160,466		22,404		—		(11,649		)	—			—		—			—		(627		)	—			—			170,594		10,128
Short-term investments	—		—		—		—			—			—		—			—		—			—			—			—		—
Total investments	1,397,914		22,599		18,928		(15,387		)	(22,317		)	153,973		(50,238		)	—		(627		)	(7,509		)	(1,564		)	1,495,772		6,521
Total assets measured at fair value on a recurring basis	$	1,397,914	$	22,599	$	18,928	$	(15,387	)	$	(22,317	)	$	153,973	$	(50,238	)	$	—	$	(627	)	$	(7,509	)	$	(1,564	)	$	1,495,772	$	6,521
Liabilities:
Annuity account balances⁽²⁾	$	83,472	$	—	$	—	$	(1,853	)	$	—		$	—	$	—		$	530	$	5,757		—			$	—		$	80,098	$	—
Other liabilities⁽¹⁾	597,562		188,110		—		(47,556		)	—			—		—			—		—			—			—			457,008		140,554
Total liabilities measured at fair value on a recurring basis	$	681,034	$	188,110	$	—	$	(49,409	)	$	—		$	—	$	—		$	530	$	5,757		$	—		$	—		$	537,106	$	140,554

(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 June 30, 2018, 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	$	—	$	—	$	—	$	—		$	(457	)	$	22,225	$	—		$	—	$	—		$	—		$	12		$	21,780	$	—
Commercial mortgage-backed securities	—		—		—		—			(1,284		)	48,621		(94		)	—		—			—			(16		)	47,227		—
Other asset-backed securities	503,789		—		11,353		—			(13		)	—		(9		)	—		—			222			359			515,701		—
Corporate securities	626,409		—		5,662		—			(6,828		)	43,491		(14,817		)	—		—			(7,895		)	(1,211		)	644,811		—
Total fixed maturity securities - available-for-sale	1,130,198		—		17,015		—			(8,582		)	114,337		(14,920		)	—		—			(7,673		)	(856		)	1,229,519		—
Fixed maturity securities - trading
Other asset-backed securities	34,958		—		—		(3,570		)	—			4,600		(11,273		)	—		—			164			(27		)	24,852		(3,570		)
Corporate securities	5,324		—		—		(45		)	—			—		—			—		—			—			(25		)	5,254		(45		)
Total fixed maturity securities - trading	40,282		—		—		(3,615		)	—			4,600		(11,273		)	—		—			164			(52		)	30,106		(3,615		)
Total fixed maturity securities	1,170,480		—		17,015		(3,615		)	(8,582		)	118,937		(26,193		)	—		—			(7,509		)	(908		)	1,259,625		(3,615		)
Equity securities	65,516		1		—		—			—			36		—			—		—			—			—			65,553		(14		)
Other long-term investments⁽¹⁾	176,359		5,995		—		(11,133		)	—			—		—			—		(627		)	—			—			170,594		(5,765		)
Total investments	1,412,355		5,996		17,015		(14,748		)	(8,582		)	118,973		(26,193		)	—		(627		)	(7,509		)	(908		)	1,495,772		(9,394		)
Total assets measured at fair value on a recurring basis	$	1,412,355	$	5,996	$	17,015	$	(14,748	)	$	(8,582	)	$	118,973	$	(26,193	)	$	—	$	(627	)	$	(7,509	)	$	(908	)	$	1,495,772	$	(9,394	)
Liabilities:
Annuity account balances⁽²⁾	$	81,399	$	—	$	—	$	(1,059	)	$	—		$	—	$	—		$	89	$	2,449		—			$	—		$	80,098	$	—
Other liabilities⁽¹⁾	488,596		68,621		—		(37,033		)	—			—		—			—		—			—			—			457,008		31,588
Total liabilities measured at fair value on a recurring basis	$	569,995	$	68,621	$	—	$	(38,092	)	$	—		$	—	$	—		$	89	$	2,449		$	—		$	—		$	537,106	$	31,588

(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 six months ended June 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	$	—	$	—	$	—		$	—		$	11,862	$	(3	)	$	—	$	—	$	—		$	—		$	11,862	$	—
Other asset-backed securities	562,604		—		3,530		—			(5,088		)	—		(2,027		)	—		—		(6,643		)	587			552,963		—
Corporate securities	664,046		—		17,798		—			(542		)	80,751		(92,950		)	—		—		(4,867		)	(1,582		)	662,654		—
Total fixed maturity securities - available-for-sale	1,226,653		—		21,328		—			(5,630		)	92,613		(94,980		)	—		—		(11,510		)	(995		)	1,227,479		—
Fixed maturity securities - trading
Other asset-backed securities	84,563		3,679		—		(801		)	—			—		(33,328		)	—		—		—			810			54,923		3,598
Corporate securities	5,492		74		—		—			—			—		—			—		—		—			(46		)	5,520		74
Total fixed maturity securities - trading	90,055		3,753		—		(801		)	—			—		(33,328		)	—		—		—			764			60,443		3,672
Total fixed maturity securities	1,316,708		3,753		21,328		(801		)	(5,630		)	92,613		(128,308		)	—		—		(11,510		)	(231		)	1,287,922		3,672
Equity securities	65,786		—		—		—			—			—		(103		)	—		—		3			—			65,686		—
Other long-term investments⁽¹⁾	115,516		5,976		—		(28,247		)	—			—		—			—		—		—			—			93,245		—
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		(22,271		)
Total investments	1,498,010		9,729		21,328		(29,048		)	(5,630		)	92,613		(128,411		)	—		—		(11,507		)	(231		)	1,446,853		(18,599		)
Total assets measured at fair value on a recurring basis	$	1,498,010	$	9,729	$	21,328	$	(29,048	)	$	(5,630	)	$	92,613	$	(128,411	)	$	—	$	—	$	(11,507	)	$	(231	)	$	1,446,853	$	(18,599	)
Liabilities:
Annuity account balances⁽²⁾	$	87,616	$	—	$	—	$	(1,997	)	$	—		$	—	$	—		$	392	$	3,911	$	—		$	—		$	86,094	$	—
Other liabilities⁽¹⁾	405,803		15,280		—		(142,240		)	—			—		—			—		—		—			—			532,763		(126,960		)
Total liabilities measured at fair value on a recurring basis	$	493,419	$	15,280	$	—	$	(144,237	)	$	—		$	—	$	—		$	392	$	3,911	$	—		$	—		$	618,857	$	(126,960	)

(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
		June 30, 2018				December 31, 2017
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	7,516,192	$	7,330,137	$	6,817,723	$	6,740,177
Policy loans	3	1,721,743		1,721,743		1,615,615		1,615,615
Fixed maturities, held-to-maturity⁽¹⁾	3	2,677,726		2,582,938		2,718,904		2,776,327
Liabilities:
Stable value product account balances	3	$	5,025,930	$	4,978,498	$	4,698,371	$	4,698,868
Future policy benefits and claims⁽²⁾	3	224,249		244,249		220,498		220,498
Other policyholders' funds⁽³⁾	3	134,976		135,631		133,508		134,253
Debt:⁽⁴⁾
Non-recourse funding obligations⁽⁵⁾	3	$	2,913,621	$	2,820,229	$	2,952,822	$	2,980,495
Subordinated funding obligations	3	110,000		98,775		—		—

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 $1.6 million.
(5) As of June 30, 2018, carrying amount of $2.7 billion and a fair value of $2.6 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2017, carrying amount of $2.7 billion and a fair value of $2.8 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.